TMI Tax Updates - e-Newsletter
January 17, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
FEMA
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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GST:
Classification of services - rate of GST - project management consultancy services - t the services provided by the Appellant are neither covered under Si. No. 24(ii) nor under SI. No. 21(ia) of the Rate Notification. As regards the classification of the impugned services, it is held that the impugned services of project management consultancy services provided the Appellant would merit classification under the SAC 998349 bearing description “Other technical and scientific services nowhere else classified, attracting GST at the rate of 18% (CGST @9%+SGST @9%). - AAAR
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GST:
Classification of supply - rate of GST - Government entity - execution of works contract service at Kudankulam Nuclear Power Project - The condition that the services so procured by the Government entity, in this case, NPCIL, is in relation to the work entrusted to it and therefore, the appellant are/were eligible for the concessional rate of tax @6% of CGST plus 6%of SGST for the period upto 31.12.2021. - AAAR
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Income Tax:
Levy of surcharge u/s 113 - Block assessment u/s 158BD - the intention of the legislature was to make it prospective in nature. This proviso cannot be treated as declaratory/statutory or curative in nature. - the rate at which the tax is to be imposed is an essential component of tax and where the rate is not stipulated or it cannot be applied with precision, it would be difficult to tax a person. - SC
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Income Tax:
Levy of Interest u/s 158BFA(1) - Block assessment u/s 158BD - in case of the person other than searched person the notice under Section 158BD would be required/sufficient and in case of late filing of the return under Section 158BC, the interest will be leviable under Section 158BFA. Any other interpretation would lead to Section 158BD nugatory. - SC
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Income Tax:
Constitutional validity of the the proviso to Clause (26AAA) - A proviso cannot over arch a provision. - But in the instant case, the proviso is overriding the provision as well as the Explanation in respect of those categories of married Sikkimese women referred to in the proviso which is impermissible. Thus, the proviso is inherently arbitrary and discriminatory against a particular category of Sikkimese women. - SC
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Income Tax:
Constitutional validity the Explanation to Clause (26AAA) - three categories of individuals entitled to the benefit - the Explanation has to be saved from being in violation of Articles 14 or 15 of the Constitution of India as there is rationale in the three clauses of the Explanation which is a reasonable classification which has a nexus to the object sought to be achieved, which is to grant of exemption from payment of income tax only to those individuals who would qualify as ‘Sikkimese’ in terms of the Explanation to clause (26AAA) of Section 10 of the I.T. Act, 1961. - It has to be directed that till such amendment is made to the down the Explanation to Section 10(26AAA) of the I.T. Act, 1961, all individuals domiciled in Sikkim up to 26th April, 1975 shall be entitled to the exemption under the said provision from the current financial year i.e., 1st April, 2022 onwards. - SC
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Income Tax:
Constitutional validity of the the proviso to Clause (26AAA) - Proviso excludes from the exempted category, “Sikkimese women” who marries a non-Sikkimese after 01.04.2008 - Scope of the definition of “Sikkimese” in Section 10 (26AAA) - the proviso is inherently arbitrary and discriminatory against a particular category of Sikkimese women. In other words, the Explanation to Section 10 (26AAA) of the I.T. Act, 1961 includes both Sikkimese men as well as women. Such being the interpretation, in my view, the proviso is antithetical to the Explanation and the Section as well. - The proviso to Clause (26AAA) of Section 10 of the I.T. Act, 1961 is struck down as being in violation of Articles 14 and 15 of the Constitution of India. - SC
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Income Tax:
Benefit of exemption claimed u/s 10(37) - compulsory acquisition of agricultural land - Since the land of the assessee is situated in the municipality as per the certificate and population is more than 10,000, then it is not an agricultural land referred to in Section 10(37) of the Act for the simple reason that it is situated in a municipality/cantonment where it is not considered as agricultural land as per provisions of section 2(14) (iiia) of the Act. - AT
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Income Tax:
MAT applicability u/s 115JB - Deemed company - that definition includes the corporation but provision of section 115JB deals only charge of tax of a company and it refers the section 129 of the Companies Act only. - The charge of tax being a separate code and the section clearly cover the type of company under the tax net the same cannot be widened based on the definition given in the Act for the other purposes. - AT
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Income Tax:
Penalty u/s 271D read with section 269SS and Penalty u/s 271E read with section 269D - cash transaction - Merely on the regular balance interest paid the transaction recorded by the cashier to settle the deficit in the cash between the two company is not a loan as it is construed with purpose for which the provisions are enacted in the law. The transfer of money from one company to another with a specific intention is a mere book adjustment and cannot be considered as loan or deposit. - There exist a reasonable cause and plausible reason - No penalty - AT
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Income Tax:
Penalty u/s 271(1)(C) - the revenue may be technically correct in not considering the later return of income as a revised return but it cannot be denied that additional income was shown by the assessee himself and it is not the case of the revenue that they unearthed the additional income by carrying out investigations. - AO directed to delete the penalty imposed u/s 271(1)(c) under challenge - AT
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Income Tax:
Levy of penalty u/s 271(1)(b) - non-compliance of the notices issued u/s. 142(1) of the Act, neither by filing reply nor seeking time to file Reply - the assessee has not justified why he has not complied to the notices issued u/s. 142(1) by the Assessing Officer. Thus, we do not find any merits in the grounds raised by the assessee. - AT
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Income Tax:
Unexplained cash credit u/s 68 - the assessee furnished all such details of the lenders/ depositors. There is no allegation of assessing officer that any of such lenders/ creditors are part of syndicate of accommodation entry provider. There is no evidence that credit/ advance in the books of assessee was result of some circular transactions. - AT
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Income Tax:
Addition of loan creditors u/s. 68 - undisclosed income of the assessee - It is a clear-cut case that somebody else is operating on behalf of the assessee by using his bank account and of course, assessee cannot also be stated to be ignorant of the situation. Therefore, the assessee as well as the person who are trading with the assessee is entering into purchase and sales of gold and silver with some ulterior motive. - This apparently seems to be a case of accommodation entry provider. But deeper and complete investigation leading to beneficiary of the transaction is required. - AT
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Income Tax:
Exemption u/s 11 - letting-out auditorium was a commercial activity - proviso to Sec.2(15) - Once the assessee falls under the category of education in term of section 2(15) of the Act, assessee is eligible for exemption u/s.11 of the Act because letting out of auditorium is incidental to fulfilment of the object of the trust i.e., education. Hence, we allow the appeal of assessee. - AT
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Income Tax:
Unexplained cash - assessee had deposited a huge amount of cash in its bank account - the Tribunal also directed the assessee to produce the parties as may be required by the AO. However, as is evident from the findings recorded by the lower authorities, in the 2nd round of proceedings, the assessee failed to furnish all the details as sought by the AO. - Additions confirmed - AT
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Income Tax:
Reopening of assessment u/s.147 - there is absolutely no tangible material available with the ld. AO having live link to form a belief that income of the assessee had escaped assessment. Hence, reopening of the assessment fails on this count itself. - AT
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Income Tax:
Addition u/s. 56(2)(viib) - Computation of the fair market value of the shares - AO found that the audited balance sheet of 31.03.2013 was approved by the shareholders in the Annual General Meeting and, accordingly, computed the fair market value of the shares as per the balance sheet as on 31.03.2013 which, in our considered opinion, is as per the provisions of the Act read with the relevant rules of the IT Rules and cannot be faulted with. - AT
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Income Tax:
Deduction u/s 80P(2)(a) - return of income filed belatedly u/s 139(4) - The assessee has claimed deduction U/s 80P(2)(a)(i) on profits earned during the year and filed return of income on 31.12.2018, which is beyond the due date as prescribed as per section 139(1) of the Act, accordingly the assessee is not complying with the condition which are prescribed by section 80AC(ii) of the Act. - The assessee is not eligible to claim deduction - AT
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Income Tax:
Deduction u/s 80IA - merely because in the agreement for development of infrastructure facility, assessee is referred to as contractor or because if some basic specifications are laid down, it does not detract the assessee from the position of being a developer, nor will deprive the assessee from claiming deduction u/s.80IA(4) - As such, looking to the overall aspects of work undertaken by the assessee we can safely come to the conclusion that the assessee is engaged in development of the infrastructure facility and therefore, a developer, which entails the assessee to claim benefits under section 80IA(4) - AT
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Income Tax:
Scope of assessment under limited scrutiny - The issue in the present appeal is with respect to addition on account of capital gains from sale of immovable property. In our view, the AO was within his right to examine the issue before us and we do not find any fault on the part of Assessing Officer to deny the deduction in the case selected for limited scrutiny. - AT
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Customs:
Denial of rightful claim of refund of service tax being the Petitioner is an exporter - Under Section 2(20) of Customs Act the term ‘exporter’ would include any owner or any person holding himself out to be the exporter. In other words, the person holding out to be the exporter need not be the exporter. - it was in fact the Assessee which was the real exporter of the goods for the purpose of Section 2(20) of the Act - the Court is unable to concur with the view of the Tribunal that in the present case the Assessee was not entitled to the refunds since it was not the exporter. - HC
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Customs:
Determination of criteria for allocation of imported Raw Pet Coke - Even though the public notice dated 17.04.2020 is not under challenge but this Court cannot be a party to any interpretation that will have the effect of upsetting the rationale of the Apex Court in fixing 1.4 Million Metric Tonnes of raw petroleum coke which, as stated earlier, was based on the permissible capacity as on 09.10.2018. - The learned Single Judge has, therefore, erred in coming to a conclusion that inter se allocation could have been changed by the DGFT more so because the DGFT has in its previous Minutes of Meetings rejected the claim of various applicants including Respondent No.3 for increasing their share of allocation as per their production capacities. - HC
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Customs:
Rejection of refund of cash security deposit - Period of limitation - it is very much clear that refund claim of the security deposit is not governed by the provisions of Section 27 of the Customs Act and consequently, the lower authorities have clearly erred in rejecting and confirming the rejection of refund claimed of the security deposit by invoking the provisions of Section 27(1) ibid. - AT
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FEMA:
Prohibition to accept foreign contribution - misuse of the Foreign Contribution (Regulation) Act [FCRA] by the political party - Setting up of such Tribunals/Authorities/Committee is purely a policy decision, taken by the Legislature. A direction for setting up a Committee or Tribunal would effectively be an amendment of the FCRA, which is beyond the scope of judicial review by this Court. Hence, an attempt by a judicial body to set up a tribunal is directly in the teeth of the doctrine of separation of powers. - HC
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PMLA:
Money Laundering - provisional attachment order - Seeking permission to cross-examine the three person - The Petitioner is relegated to the Appellate Tribunal under PMLA for agitating the challenge to the impugned order. - In the present case, though not spelt out, during the course of hearing before this Court, one of the reasons for seeking cross examination is due to the alleged retraction by one particular witness of the statements made by him to the Income Tax Department. This submission shall be considered by the Tribunal. - HC
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Service Tax:
Condonation of delay in filing appeal - The presumption of proof of service of notice is a rebuttable piece of evidence and the track consignment report having an incomplete address of the petitioner valid service of notice of the order in original cannot be presumed. Section 27 of the General Clauses Act as quoted at paragraph 6 of the impugned appellate order also provides that service shall be deemed to be effected by properly addressing, prepaying and posting it be registered post. - HC
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Central Excise:
Valuation of goods - confectionary items - related party transaction - The cost of ITC in so far as it relates to provision of mould on discounted rate to the appellant needs to be apportioned to the value of goods depending on the actual period of use of the said mould and the total production. The fact regarding payment of duty under the head “Cost of production not included by Leamak” needs to be ascertained. If duty has already been paid, duty may not be demanded again. - AT
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Central Excise:
Method of Valuation - to be valued u/s 4 or u/s 4A - MRP based value or Transaction value - supply of medicaments to Government Institutions such as BHEL, Railway, Government Hospitals, etc. wherein, on the package it is mentioned ‘NOT FOR SALE’ and no retail price was printed - the appellant’s case value of goods is clearly governed by Section 4 of Central Excise Act and not under Section 4A - AT
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VAT:
Levy of tax - transfer of right to use the bus - by the agreement reached between the bus owner and the UPSRTC, it is clear that transfer of right to use the buses by the bus owners to UPSRTC through which the UPSRTC has effective control over the buses - HC
Articles
Notifications
News
Case Laws:
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GST
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2023 (1) TMI 633
Seeking grant of mandamus commanding to respondents authorities to not to compel the petitioner from depositing further amount in pursuance to the allotment letter - seeking grant of mandamus commanding to respondents authorities to issue fresh allotment letter after removing the discrepancy in the allotment letter dated 277.2021 and further direction be issued to Mandi Samiti NOIDA to accept the premium amount in easy installment - HELD THAT:- It is not disputed that the shop in question has been allotted in favour of the petitioner in an open auction wherein Rs.78.78/- lacs has been offered by the petitioner on its own. After acceptance of the bid of the petitioner as highest bid in the open auction, it is not permissible for the petitioner to challenge the premium, which is 50% to the total bid amount. The consequential charges of 18% GST on the premium amount (which is 50% of the total bid amount as per the offer of the petitioner) also cannot be challenged. As regard the user charges, the same has been demanded as per the terms of the same agreement signed by the petitioner. It is not open for the petitioner to challenge the terms and conditions of the agreement signed by it - Even otherwise, the agreement signed by the petitioner has not been brought on record.
This not a fit case for grant of mandamus - petition dismissed.
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2023 (1) TMI 632
Classification of services - rate of GST - project management consultancy services - classifiable under SI No. 24(ii) of heading 9986 of the Rate Notification as Support services to exploration, mining or drilling of petroleum crude or natural gas or both under SAC 998621 and attracts GST @ 12% in terms of Si. No. 24(ii) of Rate Notification or classifiable under SI No. 21(ia) of heading 9983 of the Rate Notification as Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both and attracts GST @ 12% in terms of SI. No. 21 (ia) of Rate Notification?
HELD THAT:- On perusal of the meaning of the term “mining”, it is observed that, in common parlance, mining is construed as digging up of earth for extracting something valuables. It is further observed from the notification entry under SI. No. 24 (ii) that the phrase support services and the phrase mining of petroleum crude or natural gas or both have been connected with the word “to”, which has been interpreted and elaborated by the Appellant under their submissions made. In this regard, the Appellant have interpreted that the meaning of the term “to” should be construed as “towards” or “concerned”. Here also, we tend to agree with the interpretation and meaning drawn in respect of the word “to” on the basis of the dictionary meaning of the said word. Now, after having drawn the interpretation and meaning of the aforesaid words and phrases, we proceed to interpret the scope of the pertinent entry, i.e., entry under SI. No. 24 (ii) of the Rate Notification. On bare perusal of the said entry and on application of the fundamental principle of literal rule of interpretation, it is observed that the said entry covers only such activities or services which are used directly in the mining operations as understood by the dictionary meaning of the term “mining” which essentially entails the excavation of the land or sea to extract the valuable substances therefrom - it is the services provided by the EPC company who are undertaking the actual infrastructural work for increasing the production capacity of their client, VL, would be classified under the entry at SI. No. 24(ii) of the Rate Notification, and not the Project Management Consultancy services provided by the Appellant which are not directly concerned with the mining operation.
The services covered under the SAC 998341 are essentially related to the survey and exploration of the mineral deposits and the study of their properties, which is certainly not the case with the impugned services which are in the nature of project management and supervision, and hence the contention put forth by the Appellant are devoid of any merit and cannot be accepted. It is also pertinent to mention that the CBIC Circular No. 114/33/2019-GST dated October 11, 2019 clearly specified that the scope of the entry at Sr. No. 21 (ia) under heading 9983 of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 inserted with effect from 1st October 2019 vide Notification No. 20/2019- CT(R) dated 30.09 .2019 shall be governed by the explanatory notes to service codes 998341 and 998343 of the Scheme of Classification of Services. Thus, it is concluded that as per the explanatory note, the impugned services do not merit classification under SAC 998341.
The impugned services provided by the Appellant through their professionals are in the nature of professional and technical services as the said impugned services provided by them in deed require technically qualified and trained professionals and staffs. Thus, the impugned services provided by the Appellant will merit classification under SAC 998349 bearing description “Other technical and scientific services nowhere else classified, and accordingly merit entry at item (ii) of SI. No. 21 of the Rate Notification bearing the description Other professional; technical and business services other than (i) and (ia) above and serial number 38 below, attracting GST at the rate of 18% (CGST @9%+SGST @9%).
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2023 (1) TMI 631
Classification of supply - rate of GST - execution of works contract service at Kudankulam Nuclear Power Project - Applicability of S.No vi (or) vii of Notification No.24/2017 dated 21.09.2017 attracting GST@12% or 18%? - HELD THAT:- From a joint reading of the MOA of NPCIL and the certificate dt.21.07.2022, it is evident that the works relating to construction of residential quarters are exclusively meant for use of the employees of NPCIL at Kundankulam Project and acquiring such buildings are objectives incidental or ancillary to attainment of the main object of NPCIL, a government entity - the AAR had held that in the absence of substantiation with regard to the fulfillment of the condition that the services were procured by NPCIL, a Government Entity, in relation to the work entrusted to them by the Central government, the concessional rate provided was not available to them. The appellant, through the MOA and the certification from NPCIL has established that the residential quarters constructed at Anuvijay township were meant exclusively for the employees and that as per the MOA, one of the Objects incidental to attainment of the main objects, provide NPCIL to acquire apartments as seen expedient, necessary or convenient to the Company for the purposes of its main object/business.
The condition that the services so procured by the Government entity, in this case, NPCIL, is in relation to the work entrusted to it and therefore, the appellant are/were eligible for the concessional rate of tax @6% of CGST plus 6%of SGST as per entry 3(vi) of Notification No. 11/2017-C.T.(Rate) dated 28.06.2017 (as amended) read with the corresponding Notification under TNGSTA for the period upto 31.12.2021.
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2023 (1) TMI 630
Benefit of concessional rate of GST - works contract service rendered in relation to laying of pipelines for water projects supplied to PHED Rajasthan - amendment carried out vide Notification 15/2021 dated on 18.11.2021 - HELD THAT:- The applicant was awarded a work contract in relating to laying of pipelines for water projects. The contract price was inclusive of all taxes (service tax/VAT/CST etc). With the implementation of GST from 1st July 2017, the cost of all materials and service increased drastically due to applicability of GST on the works contract service in relation to water projects. The same projects were executing since introduction of GST i.e. w.e.f 01.7.2017 and paying GST/ submitting GST returns since 1.7.2017 on these supply.
As per Section 95 of CGST Act, 2017; this authority shall decide on matters or on questions specified in sub-section (2) of Section 97, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken, by the applicant and “Authority” means the Authority for Advance Ruling, constituted under Section 96. Thus Section 95 allows this authority only to decide on matters or on questions in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant i.e. in the subject case this application can be entertained only if the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant - this authority is constituted to decide on matters or questions specified in sub-section (2) of Section 97, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant.
It is very much clear that the scope of the ruling for Authority for Advance Ruling (AAR) is limited to the transactions being undertaken or proposed to be undertaken on the matters which are not sorted out. In the instant case, as already narrated, the application seeking advance ruling was filed on 11.03.2022 before the RAAR with respect to supplies already being undertaken, GST being paid and Monthly returns already being submitted.
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Income Tax
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2023 (1) TMI 629
Denial of refund to DTC Employees Superannuation Pension Trust - delay in filing the return - TDS was not claimed in the original return but subsequently, TDS was claimed by a revised return - as argued assessee did file their return with original TDS certificate and has been claiming for refund for assessment year 1999-2000, 2000-2001 and 2001-2002 since 2002 - whether assessee entitled to refund for the year 1999-2000 for which revised return was admittedly filed with the original certificate? - HELD THAT:- It is only the delay of approximately 8/9 months that has not been condoned and, hence, the assessee’s plea for refund was not examined by the authorities below. As a matter of fact, CIT(A), in his order, has not even bothered to mention the date of filing of the return, revision thereof and the quantum of delay which he has found to be fatal.
In our considered opinion, on the facts and circumstances, the authorities below have not properly applied their mind. In our considered opinion, on the facts and circumstances of the case and in the interest of justice, 8/9 months delay in filing the return cannot be said to be fatal to the claim of the refund by the assessee.
Hence, we condone the delay and remand the issue to the file of the AO. AO shall factually verify the amount of refund and pass an order as per law. We reiterate that the delay in filing the revised return has already been condoned by us. Needless to add, the assessee should be granted adequate opportunity of being heard. Appeal filed by the assessee stands allowed for statistical purposes only.
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2023 (1) TMI 628
Penalty levied u/s 271(1)(c) - bogus LTCG - exemption under section 10(38) denied - HELD THAT:- In this case, AO assessed the tax as offered by the assessee. AO has not made any independent investigation in respect of the assessee that the company in which shares were purchased. AO came a conclusion through general enquiry that the company in which the shares were purchased by the assessee is a bogus company. In this case, we find that the assessee has neither concealed the income nor furnished inaccurate particulars of income. The assessee filed all the details before the AO. Once it came to the notice of the assessee that the company in which shares purchased is bogus company, she offered the entire income for taxation.
Thus, in our considered opinion, it is not amount to concealment of income or furnishing of inaccurate particulars warranting levy of penalty under section 271(1)(c) - CIT(A) has rightly directed the AO to delete the penalty levied under section 271(1)(c) of the Act and we find no infirmity in the order passed by the ld. CIT(A). Appeal filed by the Revenue is dismissed.
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2023 (1) TMI 627
Reopening of assessment u/s 147 - assessee had taken specific ground that it had not received any notice and the notice u/s 148 of the Act was served upon its Chartered Accountant and not upon the assessee - HELD THAT:- We find that the original assessment was framed u/s 143(3) of the Act when a pointed query regarding objection that no notice u/s 148 of the Act was served upon the assessee, was raised by him. Assessee could not point out to any evidence regarding the assessment being framed u/s 147 of the Act except the contents of the Remand Report filed before Ld.CIT(A) - The material placed before us, does not support the claim that the assessment was re-opened under the provision of section 147 of the Act. Even there is no such fact is recorded by the AO in the body of the assessment order. Moreover, the Revenue has also not placed any such material before us. Therefore, Ground raised by the assessee are dismissed since they are not backed by any material evidence.
Addition representing 5% of the assessed income of the wife of the assessee without appreciating that no income of the wife could be added in the hands of the assessee - rate of commission applied by the authority below - HELD THAT:- So far the decision of CIT(A) for applying 5% of the total addition as income of the assessee is backed by binding precedents. CIT DR could not controvert the finding of Ld.CIT(A) by bringing any other binding precedents to our notice. Therefore, the decision of CIT(A) for estimating commission income cannot be faulted. However, under the identical facts, the Co-ordinate Bench of the Tribunal in various decisions, has taken the rate of earning of commission varying from 0.55% to 1.25%. Therefore, looking to the facts of the present case, it would sub-serve the interest of justice if the rate of earning of commission is adopted at the rate prevalent in the same line of business. Therefore, the addition is restricted to 1.25 % of the total amount.
Disallowance of expenditure incurred claimed by the assessee on surmises, conjecture and suspicion -assessee submitted that CIT(A) was justified in granting part relief as the expenditure was incurred for business purposes. The entire expenditure should have been allowed by Ld.CIT(A) - HELD THAT:- No details as to number of the companies or operations of the companies are emerging from either the order of assessment or other material on record. In light of the above it is necessary to estimate the disallowance and keeping in view the fact that genuineness of the expenditure has not been disputed, considered it reasonable to sustain disallowance of 20% of the expenditure claimed by the appellant.
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2023 (1) TMI 626
Unexplained investment - statement recorded on oath u/s 132(4) - document was found and seized from the premises of the husband of the assessee - HELD THAT:- When at the very first moment of search proceedings the assessee has categorically admitted that payment was done by her husband and on the very same moment, the husband also admitted that he has made the payment, then it can be safely concluded that the wife, i.e. the assessee, has successfully discharged the onus cast upon her to explain the source of investment of Rs. 68 lakhs.
In so far as the husband of the assessee is concerned, the Revenue was/is free to take any action as per the provisions of law. Considering the facts of the case in totality, addition of Rs. 68 lakhs is not sustainable in the hands of the assessee and the Assessing Officer is directed to delete the same. - Decided in favour of assessee.
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2023 (1) TMI 625
Benefit of exemption claimed u/s 10(37) - compulsory acquisition of agricultural land of the assessee under the Land Acquisition Act - population of Village - understanding the language “not less than 10,000” - AO was of the opinion that the said land bearing address at Village Jasola, Delhi was situated within the jurisdiction of municipality, therefore, as per section 2(14) (iii) of the Act, exemption u/s 10(37) of the Act is not applicable in this case - HELD THAT:- It is true that what is mentioned in the provisions of section 2(14) (iii) of the Act is that the population of the municipality should be more than 10,000. But what is important is the context in which clause (a) is inserted. Provisions define ‘agricultural land’ in India as not being a land situated in any Municipality/Cantonment having population of 10,000 and above.
Since the land of the assessee is situated in the municipality as per the certificate and population is more than 10,000, then it is not an agricultural land referred to in Section 10(37) of the Act for the simple reason that it is situated in a municipality/cantonment where it is not considered as agricultural land as per provisions of section 2(14) (iiia) of the Act.
In our considered opinion, interpretation given by the ld. counsel for the assessee is erroneous and not acceptable.
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2023 (1) TMI 584
Levy of Interest u/s 158BFA(1) - Block assessment u/s 158BD - levy of interest for belatedly filing the return of income for the block period and also the levy of surcharge under Section 113 of the Income Tax Act. - it is prayed to hold that in absence of the notice u/s 158BC, served upon the assessee - “other person”, the Assessing Officer was not justified in levying the interest under Section 158BFA. - HELD THAT:- with respect to assessment of undisclosed income for the block period including the filing of the return etc., the normal assessment proceedings including under Section 140 of the Income Tax Act shall not be applicable. Therefore, the submission on behalf of the assessee that interest under Section 158BFA for the period prior to 01.06.1999 in view of insertion of the words “Section 158BC” in Section 140A w.e.f. 01.06.1999, shall not be chargeable, cannot be accepted.
It requires to be noted that neither Section 158BC nor Section 158BFA required the assessee to pay tax along with the return. Liability to deposit the tax along with return arises only under Section 140A.
The memorandum explaining the provisions of the Finance Bill further makes it clear that the existing provisions of Section 140A were not applicable to Chapter XIVB relating to assessment of income of the block period in search and seizure cases. It further recognizes that the admitted tax declared in the return cannot be collected till the assessment is completed. Therefore, the Legislature intended to amend Section 140A by incorporating Section 158BC so as to make liable those persons who are filing return under Section 158BC also.
Thus, by virtue of the amendment, a new class of assessee was brought onto the statutebook whose income are subject to be assessed under Chapter XIVB, in section 140A compelling them to pay selfassessment tax. Thus, the interest under Section 158BFA is leviable on standalone basis for late or nonfiling of return, which ceases on the day return is filed. In the impugned judgment and order, the High Court has elaborately and comprehensively explained the rationale behind introduction of Section 158BC in Section 140A and has specifically observed and held that the liability of payment of interest does not stop merely on filing of the return but is attracted in terms of Section 140A till payment of tax in terms of the section and even now the provisions of Section 158BFA(1) and Section 140A operate independently. We are in complete agreement with the view taken by the High Court.
Levy of Interest u/s 158BFA(1) - in the Absence of Notice u/s 158BC upon the assessee - HELD THAT:- It is required to be noted that prior to amendment in Section 158BD vide Finance Act, 2002 and even thereafter, the provisions of Section 158BC would be applicable in case of “searched persons”. Section 158BD would be applicable in case of persons “other than searched persons”. Therefore, in case of a person “other than searched person”, no notice under Section 158BC which is required to be issued in case of “searched persons” was required to be issued. For a person “other than searched person”, notice under Section 158BD is sufficient.
Levy of Interest u/s 158BFA(1) - scope of the amendment - prospective or restorative - HELD THAT:- in case of the person other than searched person the notice under Section 158BD would be required/sufficient and in case of late filing of the return under Section 158BC, the interest will be leviable under Section 158BFA. Any other interpretation would lead to Section 158BD nugatory. It can be seen that by inserting the words “under Section 158BC” in Section 158BD, the Parliament intended to clarify that the assessment for the block period in case of the persons other than searched persons would also be as per the procedure under Section 158BC of the Income Tax Act.
The amendment is clarificatory in nature.
the submission on behalf of the assessee that in absence of any notice under Section 158BC served upon the assessee – persons other than searched persons for the period prior to the amendment in Section 158BD vide Finance Act, 2002, there shall not be any liability to pay interest under Section 158BFA, has no substance and the same is required to be rejected and the said question is required to be answered in favour of the revenue and against the assessee.
Levy of surcharge u/s 113 - HC has held the issue in favor of Revenue - HELD THAT:- While passing the impugned judgment and order, the High Court has relied upon earlier decision of this Court in the case of Suresh N. Gupta [2008 (1) TMI 396 - SUPREME COURT]. However, the said decision has been specifically overruled by this Court in the case of Vatika Township Private Limited [2014 (9) TMI 576 - SUPREME COURT].
The question of law with respect to levy of the surcharge under proviso to Section 113 of the Income Tax is held in favour of the assessee and against the revenue. It is observed and held that in the present case the assessee is not liable to pay the surcharge under proviso to Section 113 of the Income Tax Act.
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2023 (1) TMI 583
Constitutional validity of the the proviso to Clause (26AAA) - Constitutional validity the Explanation - Scope of the definition of “Sikkimese” in Section 10 (26AAA) - it excludes Indians who have settled in Sikkim prior to the merger of Sikkim with India on 26.04.1975 - Proviso excludes from the exempted category, “Sikkimese women” who marries a non-Sikkimese after 01.04.2008 - discrimination on the basis of marriage against Sikkimese women with reference to an arbitrary date i.e., 1st April, 2008.
HELD THAT:- when a benefit is being given to a Sikkimese individual which would include all genders under the provision, by way of the Explanation being added, which is in the nature of a definition, the proviso cannot exclude a certain category of married Sikkimese women from the said Explanation and thereby, deprive them of the said benefit of exemption from payment of income tax on the basis of to whom they are married to. When the Explanation refers to an “individual”, it includes both Sikkimese men and women, in fact, all genders; it cannot have a restrictive or myopic reference to only Sikkimese men and exclude those Sikkimese women covered under the proviso.
A proviso cannot over arch a provision.
But in the instant case, the proviso is overriding the provision as well as the Explanation in respect of those categories of married Sikkimese women referred to in the proviso which is impermissible. Thus, the proviso is inherently arbitrary and discriminatory against a particular category of Sikkimese women. In other words, the Explanation to Section 10 (26AAA) of the I.T. Act, 1961 includes both Sikkimese men as well as women. Such being the interpretation, in my view, the proviso is antithetical to the Explanation and the Section as well.
On a conspectus consideration of the 1961 Regulation in light of the Government Orders passed subsequent to the merger of Sikkim with India by which Sikkim became a State in India and by which the Sikkim Subjects domiciled in Sikkim had their names included in the Register of Sikkim Subjects, the proviso should not have discriminated against Sikkimese women in the manner analysed above, only because a Sikkimese woman who, though, may have had her name registered in the Register of Sikkim Subjects, married a non-Sikkimese, that too, only on or after, 1st April, 2008, would be excluded from the exemption clause. Such a category of women cannot be deprived of the benefit of the provision under Section 10 (26AAA) of the I.T. Act, 1961
The proviso to Clause (26AAA) of Section 10 of the I.T. Act, 1961 is struck down as being in violation of Articles 14 and 15 of the Constitution of India.
Constitutional validity the Explanation - three categories of individuals entitled to the benefit. - HELD THAT:- If the criterion of domicile has been the basis for registration of persons in the Register under the 1961 Regulations, then by the very same basis, individuals such as the petitioners and all similarly situated persons domiciled in Sikkim on or before 26th April, 1975 which is the day on which Sikkim merged with India must be given the benefit of the exemption even if their names are presently not registered in the Register of Sikkim Subjects in order to remove the vice of discrimination vis-a-vis such individuals.
Hence, persons such as the petitioners and other similarly situated persons who have not been registered under the Register of Sikkim Subjects can now seek registration in view of the aforesaid discussion as registration under the said Register is the basis for extending the exemption under Section 10 (26AAA) of the I.T. Act, 1961. Hence, directions have been issued so as to include persons such as the petitioners and other similarly situated persons.
All Indian nationals who have become domiciled in Sikkim till 26th April, 1975 must be given the benefit of the exemption clause under the I.T. Act, 1961. This is in order to eliminate the disparity amongst the individuals who are all now citizens of India settled/domiciled in Sikkim prior to 26th April, 1975.
Therefore, directions have been issued in this regard so as to save the Explanation from the vice of being ultra vires under Articles 14 and 15 of the Constitution of India.
In view of the above interpretation, in my view, the Explanation has to be saved from being in violation of Articles 14 or 15 of the Constitution of India as there is rationale in the three clauses of the Explanation which is a reasonable classification which has a nexus to the object sought to be achieved, which is to grant of exemption from payment of income tax only to those individuals who would qualify as ‘Sikkimese’ in terms of the Explanation to clause (26AAA) of Section 10 of the I.T. Act, 1961.
Hence, directions in that regard have to be issued to fill the Legislative vacuum and amendment to the Explanation is necessary. However, those individuals who have been domiciled in Sikkim subsequent to 26th April, 1975 shall not be entitled to the benefit of exemption from payment of income tax.
It has to be directed that till such amendment is made to the down the Explanation to Section 10(26AAA) of the I.T. Act, 1961, all individuals domiciled in Sikkim up to 26th April, 1975 shall be entitled to the exemption under the said provision from the current financial year i.e., 1st April, 2022 onwards. This direction is being issued in exercise of powers under Article 142 of the Constitution
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2023 (1) TMI 624
Exemption u/s 10(23C)(iiiab) - donations were received have to nexus with admissions of students in institutions, it cannot be treated as “corpus funds” qualifying for exemption - AR submits that the eligibility of an institution for exemption u/s 10(23C)(iiiab) has to be examined as whole, not institution-wise - Whether CIT(A) is justified in holding that the exemption u/s 10(23C)(iiiab) is available to the respondent-assessee as whole or whether there is any evidence of receipt of capitation fees, disentitling the respondent-assessee from exemption u/s 10(23C)(iiiab)? - HELD THAT:- AO gave a finding that the respondent-assessee was not wholly or substantially financed by the Government of India.
CIT(A) without adverting the facts of the case, had merely relied upon the legal proposition, granted exemption u/s 10(23C)((iiiab) - CIT(A) without dealing with the issue, whether the respondent-assessee was in receipt of donations having nexus with admissions of students or not, simply held that the donations received by the respondent-assessee form part of the corpus funds.
It is pertinent to note that if the donations received had direct nexus with admissions of students in the institutions run by society, such donations does not qualify for exemption as held in the case of Sinhagad Technical Education Society [2022 (4) TMI 1173 - ITAT PUNE] wherein, the Tribunal following the decision of the Hon’ble Supreme Court in the case of Islamic Academy of Education vs. State of Karnataka [2003 (8) TMI 469 - SUPREME COURT] Even recently, the Madras High Court in the case of CIT vs. MAC Public Charitable Trust & Other Trust [2022 (11) TMI 137 - MADRAS HIGH COURT] also held to the same effect. Thus, it is apparent from the order of the ld. CIT(A) that the ld. CIT(A) had decided the issue in appeal in perfunctory manner. In the circumstances, we are of the considered opinion that the interest of justice would be met if the matter is restored to the file of the ld. CIT(A) to decide the issue in appeal afresh after adverting to the facts of the case in the light of legal proposition discussed
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2023 (1) TMI 623
MAT applicability u/s 115JB - Deemed company - “Rajasthan Financial Corporation” which is a Corporation registered under State financial Corporation Act, 1951 - HELD THAT:- We have gone through the definition of company as given in Section 2(17) which defines company and it includes Indian Company. We have also gone through the provision of section 2(26) which defines Indian company and thereby Section 2(26)(ia) includes a corporation established by or under a Central, State or Provisional Act as argued by the ld. DR. We have also considered the plea of the ld. DR that section 115 JB section it self is a code for charging tax for a company and considering the definition of company as given in section 2(17) and 2(26) assessee is subjected to this special tax on companies.
As it is evident that section 115JB being a special provision and it a code itself defines the coverage of the assessee covered in sub-section 2 of section 115JB. This section neither deal with the company or Indian company it deals with the assessee being company and provision of the sub-section (2) very well defines it coverage. Thus, we consider the arguments of the ld. DR but considering the provision of section 11JB(2) and the decision of the jurisdictional high court in the case of the assessee we do not find any force whether the Honourable Jurisdictional High Court has considered the provision of section 2(17), 2(18) or 2(26) dealt with or not
Here the charging section deals and considered only those companies which are registered under the Companies Act and not deemed company as per provision of section 2(17) or 2 (26). Therefore, we are of the considered view that even though revenue has revised its ground to substantiate its case in accordance with the definition of the company we do not agree with the contention of the ld. DR that the since that definition includes the corporation but provision of section 115JB deals only charge of tax of a company and it refers the section 129 of the Companies Act only.
The charge of tax being a separate code and the section clearly cover the type of company under the tax net the same cannot be widened based on the definition given in the Act for the other purposes. To substantiate this view, we have also gone through the memorandum explaining the definitions of company as amended in 1971. The purpose of including the corporation under this definition as it is evident from the following extract is to give the benefit of a company and not to tax them as company. Appeal of the revenue is dismissed.
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2023 (1) TMI 622
Penalty u/s 271D read with section 269SS and Penalty u/s 271E read with section 269D - cash transaction undertaken for day to day cash adjustment of receipt of cash and payment in cash between two companies i.e., assessee and M/s Rajasthan Lok Vikas Finance Resources Ltd. - HELD THAT:- Both the companies are regularly assessed to tax. There is no dispute by the parties that the transactions between them are not genuine and unrecorded transaction in either of the assessee company. The source of cash already explained and there is no adverse observation on these aspects of cash recorded as paid and received from each other. The revenue has not controverted to the factual position that both the companies were operating from same premises and source of cash were out of the disclosed sources.
As the cashier was operating for both the company used the cash of the either company and passed necessary entry to complete the books and record the correct state of affairs and there is no doubt about genuineness of the transactions recorded. The bench noted that cashier makes payment on behalf of both the company, i.e. assessee and M/s. Rajasthan Lok Vikas Finance Resources Ltd. The cashier made the payment without ascertaining the cash balance of each company. Based on this action it has happen that in one company there is excess cash and in another it is in short and vice versa.
Cashier has completed the cash book and this excess cash receipt or paid to each company is accounted in cash as per the availability of cash in each company. There is no question about the source of cash in each company by the revenue. Merely, the amount paid or received is in cash and interest is paid the same is considered as advances in violation of section 269SS/T and consequent thereupon considered it for levy of penalty u/s. 271D/E of the Act. These transactions are made during the course of business and just to avoid the deficit of cash which is arisen on account of the common cashier.
This regular transaction out of the disclosed sources and is not recorded with an intent to considered it as loan or deposit. Merely on the regular balance interest paid the transaction recorded by the cashier to settle the deficit in the cash between the two company is not a loan as it is construed with purpose for which the provisions are enacted in the law. The transfer of money from one company to another with a specific intention is a mere book adjustment and cannot be considered as loan or deposit. This regular, bonafide and genuine transaction recorded as book adjustment cannot be termed considered as loan or deposit and it is not in violation of provision of section 269SS/T. See MAHESHWARI NIRMAN UDYOG [2007 (7) TMI 216 - RAJASTHAN HIGH COURT]
There exist a reasonable cause and plausible reason. The transactions are duly recorded in the books of the both companies and considering the explanation given the assessee and the judicial precedent of jurisdictional High Court we direct to delete the levy of penalty u/s. 271D and 271E of the Act in this case. Accordingly, the grounds of appeal raised by the assessee is allowed.
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2023 (1) TMI 621
Deduction u/s 54F - AO denied the claim of deduction of payment made for purchase of property beyond the period of 3 years from the date of the sale of the original property - HELD THAT:- As submitted that the delay in investment beyond the period of 3 years was beyond control of the assessee and mainly due to the delay on account of the builder not being able to complete the construction as per the time frame agreed initially.
During the course of hearing, assessee was asked to submit necessary documents in support of the contention that delay in investment by the assessee was due to the delay on the part of the builder in not completing the construction as per the time frame. However, no such evidences were furnished before us. In such circumstances, the ratio of the decisions relied upon by assessee cannot be applied over the facts of the instant case. As noted by the Ld.CIT(A) that the provisions claiming exemption has to be interpreted strictly.
In view of the above facts and circumstances and the binding precedent followed by the Ld.CIT(A) on the issue in dispute, we do not find any error in the order of the Ld.CIT(A) on the issue and accordingly, we uphold the same. Ground 2 of the appeal of the assessee is accordingly dismissed.
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2023 (1) TMI 620
Penalty u/s 271(1)(C) - revised return of income was filed declaring total income wherein additional income was declared being income from house property, interest from FDRs and consultancy fee - As per department it was not a case of voluntary disclosure but it was only after issuance of notice u/s 143(2), the assessee came forward and declared the additional income - HELD THAT:- We did not find ourselves in agreement with such contentions raised by the department in as much as the notice u/s 142(1) along with query letters were issued on 06.09.2011 whereas the revised return was already filed on 31.03.2011,showing the additional income. The notice u/s 143(2) is normally a formal notice showing the selection of the case for scrutiny and to comply with the limitation provision. Nothing was brought on record by the revenue if the assessee was specifically asked or investigation was made with reference to all the three items of income additionally declared. Otherwise also, the revenue may be technically correct in not considering the later return of income as a revised return but it cannot be denied that additional income was shown by the assessee himself and it is not the case of the revenue that they unearthed the additional income by carrying out investigations. In addition, we find force in the contention by the Ld. AR that there were justified reasons behind delayed declaration of additional income from these sources.
The contention of the revenue that additional income suffered TDS and, therefore, the assessee should have declared for the income in the original return itself, is far from the ground realities which prevailed at the relevant point of time. It was a quite usual practice for the deductor to issue certificate in form 16A or to upload the same in form 26AS lately. It cannot be denied that the assessee must have been under a bona fide impression that all such incomes were subjected to TDS and therefore, he is not concealing any income from the department. The decisions cited in the penalty order do not help the revenue being rendered in different factual context. In the past also, the income from all the three sources have never been to this extent. The consultancy income was for the first time.
Also it is evident that there as chances of incorrect reporting by the deductor and therefore, the assessee cannot be held responsible for not showing income correctly and timely. There is no difference between the assessed income and the income declared in the revised return. It is not denied that the additional income from all the three sources, was subjected to TDS and we find force in the contention of the ld. AR that once the additional income has suffered TDS it cannot be said to be undisclosed income of the assessee. We have gone through the decisions cited by the ld. AR and find that they support the case of the assessee. A cumulative consideration of all the facts and circumstances clearly establish that it was not a case of concealment of income with respect to the declaration of the additional income - It is well settled principle of interpretation of penal provisions that the same has to be construed strictly and no penalty cannot be imposed unless the case strictly fall within the legal parameters. We, therefore, direct the AO to delete the penalty imposed u/s 271(1)(c) under challenge. Decided in favour of assessee.
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2023 (1) TMI 619
Disallowing the claim of deduction u/s 36(1)(ii) - Denial of natural justice - Commissioner (Appeals) did not consider that the amount of Bonus mentioned in Form 3CB - CIT(A) did not provide adequate opportunity to the assessee and further submitted that the CIT(A) failed to appreciate the fact that the amount of bonus mentioned in form no. 3CB to the tune was by mistake - HELD THAT:- Revised audit report was submitted on 8.8.2022. The impugned order was passed on 4.8.2022. Looking to the totality of the facts and to sub-serve the interest of principles of natural justice, this ground is restored to the file of AO who would verify the correctness of the claim of the that the audit report has been revised and a correct figure has now been mentioned in the audit report relating to payment of bonus. AO would therefore decide the issue as per law. Ground nos. 1 & 2 are allowed for statistical purposes.
Disallowance of deduction claimed u/s 80-TTA regarding interest earned on savings bank account - HELD THAT:- Disallowance was made purely on the ground that no evidence was furnished. However, it is the contention of the assessee that the interest was in fact earned and the assessee was also having the bank pass book, which duly reflected the interest from savings bank account. Considering the totality of the facts, this ground is also restored to the file of AO who will verify the correctness of the claim of the assessee and in the event the interest is found to have been reflected in the bank statement of the assessee, the AO would grant deduction as per law.
Appeal of the assessee is allowed for statistical purposes.
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2023 (1) TMI 618
Levy of penalty u/s 271(1)(b) - non-compliance of hearing notices - assessee has not submitted any explanation regarding non-compliance of the notices issued u/s. 142(1) of the Act, neither by filing reply nor seeking time to file Reply - HELD THAT:- The case is adjourned to 09/01/2023, however none appeared on behalf of the assessee and no authorization given to Advocate or Chartered Accountant and no Paper Books is filed before us. Thus it clearly shows that the assessee is not interested in pursuing the appeal both before this Appellate Forum as well as before the Lower Authorities.
We find from the Ld. CIT(A)’s order that the assessee has not justified for non-compliance to the 142(1) notices issued by the Assessing Officer. We further find from ground no. 3 copy of the adjournment letters said to be enclosed with the appeal papers, but we do not find any such adjournment letters filed before us. Further the assessee has not justified why he has not complied to the notices issued u/s. 142(1) by the Assessing Officer. Thus, we do not find any merits in the grounds raised by the assessee.
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2023 (1) TMI 617
Unexplained cash credit u/s 68 - assessee has failed to prove the bona fide of the transactions in terms of identity, creditworthiness and genuineness of such transaction - money received by assessee shown in Form 3CD as unsecured loan - HELD THAT:- The assessee has refunded the entire deposits either within in a day or in a week in respect of seven transactions. It was refunded in a maximum period of five months in respect of six transactions. Thus, no amount was left at the end of financial year. It is also matter or record that the repayment is not doubted by the assessing officer.
As in case of CIT Vs Ranchod Jivabhai Nakhava [2012 (5) TMI 186 - GUJARAT HIGH COURT] the Hon’ble jurisdictional high court held that where the lenders of the assessee are income tax assessee whose PAN have been disclosed, the assessing officer cannot not ask assessee to further prove genuineness of the transaction without first verifying such facts from income tax returns of lenders. We also find that the assessee furnished all such details of the lenders/ depositors. There is no allegation of assessing officer that any of such lenders/ creditors are part of syndicate of accommodation entry provider. There is no evidence that credit/ advance in the books of assessee was result of some circular transactions. We find that before granting relief to the assessee, the ld CIT(A) cross checked all such details, including the proof of repayment. - Decided in favour of assessee.
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2023 (1) TMI 616
Addition of loan creditors u/s. 68 - undisclosed income of the assessee - assessee has shown unsecured loans HELD THAT:- In the present case, the assessee himself on an affidavit stated that he is a person of no means and did not carry on of such huge business. He on an affidavit has stated that his purchases from M/s. Riddhi Siddhi Bullion Ltd. are bogus and his cheque book is also in the custody of Mr. Dinesh Jani of M/s. Riddhi Siddhi Bullion Ltd. Therefore, the finding of the learned CIT (A) falls flat.
The sale consideration received by the assessee is also in cash. There is no address of the parties who purchase the gold and silver from the assessee. Therefore, the whole transaction of purchase and sales shown by the assessee is merely a façade. The learned CIT (A) deleting the addition on account of sales and simultaneously accepting sales made by the assessee as also genuine is absolutely incorrect.
When the assessee himself says that he is a person of no means, the loss incurred by the assessee on MCX platform of ₹1,32,28,014/- is also not allowable. The margin paid by the assessee of ₹1.15 crores could not have been deposited by the assessee.
Similar is the case with respect to unsecured creditors appearing in the books of assessee cannot be accepted as genuine as sales and purchases both are not genuine.
It is a clear-cut case that somebody else is operating on behalf of the assessee by using his bank account and of course, assessee cannot also be stated to be ignorant of the situation. Therefore, the assessee as well as the person who are trading with the assessee such as M/s. Riddhi Siddhi Bullion Ltd. is entering into purchase and sales of gold and silver with some ulterior motive.
We set aside the whole appeal filed by the learned Assessing Officer as well as the assessee back to the file of AO to re-investigate the whole aspect of the huge transactions of purchases and sales of Gold and silver and to find out who are the real beneficiaries of these transactions.
Prime facie it seems that Riddhi Sidhi Bullion and Hundia Exports have booked huge bogus sales in the name of this assessee. The proper examination of operation of bank account of the assessee by finding out who opened bank account, who operated it , who is beneficiary of the entries in bank account of assessee, who deposited the cash in bank accounts, in whose accounts the money is credited from the same account. This apparently seems to be a case of accommodation entry provider. But deeper and complete investigation leading to beneficiary of the transaction is required. It is also to be inquired whether the bankers have made any report of suspicious transaction or not. Appeals are allowed for statistical purposes.
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2023 (1) TMI 615
Short grant of refund - Refund issued is to be segregated into tax refund and interest refund and be adjusted accordingly - whether the assessee can claim the recovery of the interest amount first out of the refund granted by the revenue or the same should be adjusted towards the principal amount of tax refund? - Whether CIT(Appeals) has grossly erred in dismissing the appellant’s ground in segregating the refund issued into tax refund and interest refund and adjusting the tax refund from tax refund due and interest refund from interest refund due instead of adjusting the entire refund granted first against the interest refund due and thereafter against the tax refund due? - HELD THAT:- There was identical issue in case of Karsanbhai Kachrabhai Patel HUF [2022 (12) TMI 1083 - ITAT AHMEDABAD] where decided the issue in favour of the assessee.
Before us, no material has been placed on record by the Revenue to demonstrate any contrary decision of the Higher Judicial Authorities. Before me, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of the case cited above nor has placed any contrary binding decision in its support. Thus respectfully following the above allow the ground of appeal of the assessee.
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2023 (1) TMI 614
Deduction u/s 80P - assessee is a Co-operative Credit Society and is engaged in the business of accepting and lending money to its members only in the normal course of its activities - AO came to the conclusion that the assessee is a co-operative bank and therefore is covered under the provisions of section 80P(4) and thus the deduction provided under section 80P of the Act would not be available to it from the assessment year 2007-08 onwards - HELD THAT:- We find that similar findings were rendered by the coordinate bench of the Tribunal in assessee’s own case in ITO vs Maharashtra Mantraliya Va Sanlagana Shaskiya Karamchari Co-op. Credit Society Ltd.[2014 (10) TMI 1063 - ITAT MUMBAI] while deciding a similar issue in favour of the assessee - We find that this issue is recurring in nature and has been decided in favour of the assessee by the decision of the coordinate bench of the Tribunal for the preceding assessment years.
DR could not show us any reason to deviate from the aforesaid decisions and no change in facts and law was alleged in the relevant assessment year. Thus, respectfully following the orders passed by the coordinate bench of the Tribunal in assessee’s own case cited supra, we find no infirmity in the impugned order passed by the learned CIT(A), which has rightly followed the judicial precedents in assessee’s own case. As a result, grounds raised by the Revenue are dismissed.
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2023 (1) TMI 613
Bogus LTCG - Disallowance of exemption claimed u/s. 10(38) - SEBI order in the case of the scrip traded in by the assessee - CIT-A deleted addition - HELD THAT:- ITAT, Jaipur Bench SH. PRAKASH CHAND SHARMA, SMT. KALAWATI SHARMA [2020 (11) TMI 902 - ITAT JAIPUR] in an identical case of addition made of bogus long term capital gains arising in trading of shares of the same scrip as in the present case, i.e “MFTL”, wherein ITAT deleted the addition on the basis of the final order of the SEBI. The facts and circumstances of the caseare identical to the present case. DR was unable to point out any distinguishing fact, and therefore, the said decision is squarely applicable to the present case. CIT(A) ‘s order deleting the addition in the present case is fortified by the said decision of the ITAT.
As for the decision of the Hon’ble Calcutta High court in the case of Swati Bajaj [2022 (6) TMI 670 - CALCUTTA HIGH COURT] assessee has rightly distinguished the same on facts pointing out that in those case there was no reference to any order of SEBI in the scrips traded in. That accordingly the Hon’ble High Court had dealt with the issue on merits referring to the financials of the scrips not supporting the high prices at which it were sold and accordingly holding that the assessee in such circumstances was required to establish the genuineness of the transactions.
DR was unable to controvert the factual distinction pointed out by the Ld.Counsel for the assessee as above. We agree therefore, in the light of the factual distinction, that the decision of the Hon’ble Calcutta high court is not applicable in the present case.
No infirmity in the order of the Ld.CIT(A) deleting the addition made on account of alleged bogus long term capital gains - Appeal of the Revenue is dismissed.
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2023 (1) TMI 612
Disallowance u/s. 80P - Interest income - quantification of amount of deduction from eligible activities - the disallowance exceeding the deduction claimed - assesssee-society extends credits to it’s Members, an activity specified u/s. 80P(2)(a)(i), earning interest thereon - HELD THAT:- Sure, the assessee has despite claiming the entire net profit as deductible, returned a net income of rs. 2060. The same may perhaps be on account of a suo motu disallowance/s, and which remains undisturbed in assessment, nor dilated upon at any stage. That is, the deduction could not possibly be claimed in a sum higher than the income earned, which is, by definition, net of expenses claimed toward the same, and which is also the purport of s. 80AB. The disallowance u/s. 80P (for rs. 749.41 lacs) is, thus, without any basis on facts or in law.
We are unable to understand the said disallowance, sought to be justified by the Revenue per its Grounds of Appeal in terms of mutuality, even as there is no reference thereto in the orders by the Revenue authorities, nor were any pleadings toward the same made during hearing and, per contra, not responded to by the assessee. The same is directed for deletion.
Disallowance of the deduction claimed, i.e., rs. 13.76 lacs - assessee is entitled thereto at the full amount, i.e., as claimed by it, or at a lower sum? - HELD THAT:- The question arising in the instant case, on the contrary, is the extent of income arising to the assessee-society on the provision of credit to it’s members, the sole qualifying activity u/s. 80P(2). The same cannot be stretched to the income on placement of investible surplus with the assessee, i.e., not required for the said eligible activity for the time being, in other investment avenues deemed by law, concerned as it is with the safety of public funds, as low risk and, thus, ‘safe’. And which would be so independent and irrespective of the nature of activity being pursued.
In principle, we find no difference between the investible surplus arising to the assessee-society in Totgars CSS Ltd. [2010 (2) TMI 3 - SUPREME COURT], wherein the qualifying activity/s was, as in the instant case, the provision for credit facilities to members, as also marketing their agricultural produce. The said decision, in ratio, provides for deduction u/s. 80P only on operational income.
For computing the income from the activity specified u/s. 80P(2)(a)(i), to which the deduction u/s. 80P(1) is to be restricted, the net income, being the gross total income (GTI), is to be proportioned between the gross interest arising from the members and from deployment in specified modes of investment u/s. 44. The same, as apparent, is being taken as a surrogate for the funds deployed on an average during the year on the two activities, i.e., the provision of credit to the members and the said investment/s. A more refined approach is though proposed as the rate of interest on different investments, which include saving deposit accounts as well, could vary significantly.
The borrowing cost as well as the administrative cost is to be applied uniformly. The net interest income from a particular source could thus be easily worked out on the basis of the proportion of the total funds invested therein. The interest income on provision of credit to members, thus worked, would be liable to be allowed, and the balance, disallowed. No other disallowance could be made. We are conscious that interest income on investment in other cooperative societies is also liable to be deducted u/s. 80P(1) r/w s. 80P(2)(d).
There is, however, no claim in its respect nor anything on record to so suggest. Rather, District or State co-operative banks, though registered as co-operative societies, operate under licence from the RBI under the BR Act, so that income on deposits therewith would not qualify for deduction u/s. 80P(2)(d). Reference for the purpose stands also made to ss. 5 & 7 of the BR Act.
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2023 (1) TMI 611
Exemption u/s 11 - letting-out auditorium was a commercial activity, attracting proviso to Sec.2(15) of the Income-tax Act - as submitted auditorium is used only for educational purposes for the students during school hours and it was let-out, beyond school hours for educational purposes and promotion of fine-arts, etc., in order to augment the income to be used for educational purposes - HELD THAT:- The assessee trust exist for the purpose of education and the auditorium which is within the school complex for the purpose of conducting guest lectures or topics to address the students in connection with the curriculum and this is incidental and to earn rental from conducting conferences, music, dance and letting out to general public for conference meetings etc., is incidental to education and even from the facts it is clear that it is let out only for 134 days in assessment year 2010-11, for 144 days in assessment year 11-12, for 140 days in assessment year 2012-13 and 141 days in assessment year 2013-14.
Even the rental earned from renting out of auditorium in relevant AY 2010-11 is Rs.40,84,433/- minus expenditure of Rs.15,77,851/- and the net income receipts is declared at Rs.25,06,582/- as against gross total income from educational activity at Rs.2,03,13,541/-, which is only to the extent of 12.5% of total receipts. Once the assessee falls under the category of education in term of section 2(15) of the Act, assessee is eligible for exemption u/s.11 of the Act because letting out of auditorium is incidental to fulfilment of the object of the trust i.e., education. Hence, we allow the appeal of assessee.
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2023 (1) TMI 610
Disallowance of fictitious losses - loss claimed by assessee which was treated as bogus in nature - allegation that the appellant created artificial transactions in the form of purchase and sale of silver to create fictitious losses - HELD THAT:- Sales shown by the M/s Paragati Traders to the appellant assessee has been duly accepted by the Revenue as genuine transaction. Before us no material brought on record by the DR to suggest that the said assessment order has been revised under any provision of the Act where genuineness of such sale has not been accepted. Likewise, the income declared by M/s Gayatri Trading Co who was alleged to be the part of circular transaction was also accepted by the Revenue with minor adjustment in amount of depreciation in the assessment order dated 29-11-2010.
Considering the fact that the sale shown by the supplier (M/s Pargati Traaders) of impugned silver to the assessee and purchases shown by the customer (M/s Harshad Jeweller) has been accepted genuine in their respective assessment orders, we hold that the transaction of purchase of sale of silver the by the assessee are genuine transaction and in the process loss incurred by the assessee cannot be disallowed. Hence we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him. Thus, the ground of appeal of the assessee is allowed.
Disallowances of interest expenses on account of diversion of interest bearing fund - HELD THAT:- Admittedly the own fund of the assessee exceeds the amount of loans and advances given to various parties. This fact can be verified from the submission made by the assessee before the authorities below. Accordingly, we are of the view that a presumption can be drawn to hold that the interest free advances has been given by the assessee out of his own interest free fund. Accordingly, the question of making the disallowance of interest expense does not arise. Hence, the ground of appeal of the assessee is hereby allowed.
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2023 (1) TMI 609
Unexplained cash - assessee had deposited a huge amount of cash in its bank account - assessee failed to discharge the onus cast on him by not filing confirmations, other documentary evidence, and not producing the parties in support of his claim that he received cash from the parties and that the cash doesn’t belong to him - HELD THAT:- Lower authorities had already treated the cash deposited in the bank accounts of the assessee as unexplained and only on the basis of submission of the assessee, the coordinate bench of the Tribunal [2014 (10) TMI 1062 - ITAT MUMBAI] in the interest of justice, granted one more opportunity to the assessee to prove the source of cash deposited in his bank account.
Coordinate bench of the Tribunal specifically directed the assessee to fully cooperate with the AO in completing the assessment by furnishing all the details as may be called for. We further find that the Tribunal also directed the assessee to produce the parties as may be required by the AO. However, as is evident from the findings recorded by the lower authorities, in the 2nd round of proceedings, the assessee failed to furnish all the details as sought by the AO.
Even in the proceedings before us, the assessee has merely placed reliance upon the documents, which were already considered during the 1st round proceedings. Thus, due to the failure of the assessee in not complying with the directions issued by the coordinate bench of the Tribunal [2014 (10) TMI 1062 - ITAT MUMBAI] we find no infirmity in the impugned order passed by the learned CIT(A). Accordingly, the addition made by the AO is upheld. As a result, grounds raised by the assessee are dismissed.
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2023 (1) TMI 608
Reopening of assessment u/s.147 - addition made on account of CENVAT credit and consequently reduction in claim of deduction u/s.80IA - whether reopening could be made to examine another facet of the same claim of deduction? - HELD THAT:- There is absolutely no failure on the part of the assessee in making full and true disclosure of material facts in the original scrutiny assessment proceedings that are relevant for the purpose of framing the assessment.
There is absolutely no basis for the ld. AO to come to the conclusion that income of the assessee had escaped assessment by way of excess claim of deduction u/s.80IA of the Act in the instant case. The ld. DR vehemently argued that the information sought for u/s. 133(6) of the Act constitute tangible material to the ld. AO which enabled him to form belief that income of the assessee had escaped assessment. As stated earlier, the said information was no new information provided by the assessee to the ld. AO as the assessee had only re-furnished the very same information that is already available with the ld. AO in the assessment record. Hence, it could be safely concluded that there is absolutely no tangible material available with the ld. AO having live link to form a belief that income of the assessee had escaped assessment. Hence, reopening of the assessment fails on this count itself.
Reopening could be made to examine another facet of the same claim of deduction - This was subject matter of adjudication by the Hon’ble Gujarat High Court as rightly pointed by the ld. AR before us in the case of QX KPO Services (P.) Ltd.[2018 (3) TMI 1664 - GUJARAT HIGH COURT] wherein as settled legal position that when a particular claim has been scrutinized by the Assessing Officer at the time of original assessment, as such, the Assessing Officer cannot reopen such assessed case in order to examine another facet of the same claim.
The assumption of jurisdiction under Section 147 of the Act by the Assessing Officer of issuing notice under Section 148 of the Act is without the authority of law and cannot be sustained. Also confirmed by SC [2018 (11) TMI 1185 - SC ORDER]
As assessee had furnished all the relevant details in the return of income and also elaborated those details during the course of original scrutiny assessment proceedings itself. In fact, the ld. AO in the assessment framed u/s.143(3) of the Act had even resorted to disturb the claim of deduction u/s.80IA of the Act by making additions thereon, which got ultimately deleted by the ld. CIT(A) and by this Tribunal. Hence, the entire gamut of the issue of claim of deduction u/s.80IA of the Act was already subject matter of examination in the original scrutiny assessment proceedings and an opinion has already been framed by the ld.AO. The Revenue seeking to reopen the assessment in this scenario only tantamount to change of opinion, which is not permissible in law.
Even on merits, we find that the main grievance of the Revenue is that the assessee had not debited certain expenses in the eligible unit i.e. 80IA units and thereby had claimed excess deduction u/s.80IA of the Act in the return of income. We find that this aspect has been addressed elaborately by the ld.CIT(A) and the ld. CIT(A) had deleted the said disallowances by placing reliance on various decisions of Tribunals, High Courts and Supreme Court and granted relief to the assessee - Decided in favour of assessee.
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2023 (1) TMI 607
Addition u/s. 56(2)(viib) - Computation of the fair market value of the shares - whether the assessee has valued the shares as per the balance sheet of the valuation date 31.03.2014 in consonance with Rule 11U/11UA of the IT Rules? - HELD THAT:- Balance Sheet should be drawn on the valuation date, which is 31.03.2014 in the present case, which has been audited by the auditor of the company and if these two conditions are not satisfied, then the balance sheet drawn up as on the date immediately preceding the valuation date which has been approved and adopted in the Annual General Meeting of the share holders of the company, which would be 31.03.2013 in the present case.
For a company, it is impossible to get it accounts audited on 31st March and present the same for approval in the Annual General Meeting on March 31st.
In the case in hand, when the Bench asked the ld. counsel for the assessee about the unaudited balance sheet as on 31.03.2014, the ld. counsel for the assessee could not reply and instead, referred to the certificate of the auditors wherein nowhere says that the valuer has considered the audited balance sheet as on 31.03.2014 which was approved and adopted in the Annual General meeting by the shareholders for the simple reason that it is practically impossible for any company to present the audited balance sheet of the F.Y. before the Annual General Meeting on the date of closing of the F.Y. i.e. 31st March. The certificate of the auditors is based on the statement and documents furnished by the company which is neither audited nor certified by the auditors.
Even the Legislators put the onus of proof on the companies and in the case in hand, the assessee has miserably failed in discharging the onus.
AO found that the audited balance sheet of 31.03.2013 was approved by the shareholders in the Annual General Meeting and, accordingly, computed the fair market value of the shares as per the balance sheet as on 31.03.2013 which, in our considered opinion, is as per the provisions of the Act read with the relevant rules of the IT Rules and cannot be faulted with. Appeal of assessee dismissed.
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2023 (1) TMI 606
Deduction u/s 80P(2)(a) - return of income filed belatedly u/s 139(4) - adjustment u/s 143(1) - assessee is a co-operative society and it filed return of income after the due date, accordingly, as per section 80AC(ii) of the Act, the assessee is not eligible to claim deduction as per the amended provisions - HELD THAT:- On going through the inserted clause (ii) in section 80AC assessee has to comply the section 80AC of the Act, if it wants to claim deduction under Chapter VIA under the heading “C-Deductions in respect of certain incomes”. The assessee has claimed deduction U/s 80P(2)(a)(i) on profits earned during the year and filed return of income on 31.12.2018, which is beyond the due date as prescribed as per section 139(1) of the Act, accordingly the assessee is not complying with the condition which are prescribed by section 80AC(ii) of the Act. The Hon'ble Apex Court in the recent decision , settled the law in case of an exemption / deduction clause in a tax statute in the case of Checkmate Services (P.) Ltd 2022 (10) TMI 617 - SUPREME COURT
The assessee was required to file its return of income for claiming the deduction u/s 80P(2)(a)(i) of the Act within the due date as per amendment made in the section 80AC of the Act., whereas the assessee has filed return of income on 31.12.2018, which is beyond the due date, therefore the assessee is not eligible for claiming benefit of deduction u/s 80P(2)(a)(i) - The assessee has relied on judgments, which have been quoted in its grounds of appeal, which are not applicable in the present facts of the case.
Our view is supported by the judgment of Veerappampalayam Primary Agricultural Cooperative Credit Society Ltd. 2021 (4) TMI 1169 - MADRAS HIGH COURT in which it has been observed that the adjustment can be made u/s 143(1) of the Act. while processing the return of income and the provisions of section 80AC(ii) make it clear that any deduction that is claimed under Part C of Chapter VI-A would be admissible only if the return of income in that case were filed within the prescribed due date. Thus, no claim under any of the provisions of Part C of Chapter VIA would be admissible in the case of a belated return.
Thus we hold that the assessee is not eligible to claim deduction as per section 80P(2)(a)(i) of the Act. Accordingly, the grounds raised by the assessee in this regard is dismissed.
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2023 (1) TMI 605
Deduction u/s 80IA - Denial of claim by treating the assessee as a ‘work contractor’ and not ‘developer’ by the Revenue - whether the assessee is a developer or a contractor as the assessee merely executed the contract for the various sites awarded by the various entities as of the ultimate view of the Revenue? - HELD THAT:- We have carefully considered the different clauses prescribed in the tender notice in respect of the project of construction of Bridge with Approaches Across Damanganga River connecting Nani-Daman & Moti- Daman, U.T. of Daman from National Highway Division, Bharuch-A.Y. 2007-08.
It appears that the Contractor must have necessary experience, facilities, ability, financial resources, specified turnover, specific experience in construction of Bridges, Qualified Key personnel, plant & machinery & equipments etc. to perform the work.
The general specifications are given by the respective Authorities. However, the specific drawings & designs are recommended by the Contractor which shall be approved by the Competent Authority and shall form part of the accepted Tender.The assessee has appointed Shah Associates, an experienced designer in the field for designing this project.
The assessee has to arrange the necessary requirement of Water, Electricity Connection, Cement and other required qualitative materials, labour, supervision, erection, maintenance, insurance, at its own cost. It is evident from Clause 3 of Tender ( Bill of Quantities)
The tender clause further stipulates that the Retention money shall be deducted @ 10% from current bills and shall be released 50% on completion of the Works and remaining 50% after the end of the Defect liability period.
As to whether the assessee can be termed as “developer” or a “contractor” as contended by the Revenue in its written submissions, we find, in fact, it only attempts to give a general meaning of the term “contractor” and “developer”. In the cases in hand, we find that in terms of tender documents, audited accounts and facts on record suggest that the assessee has fully undertaken the work of development of various infrastructure projects as a whole by undertaking the risk & responsibility, arranged own finances, materials, personnel, labour, machinery, other equipments etc. and thereby fulfilled the test of being a “developer” as per the principles laid down by Hon’ble Gujarat High Court in the case of Radhe Developers, [2011 (12) TMI 248 - GUJARAT HIGH COURT]
The tender work under consideration are not for a specific work, rather they are for development facility as a whole. The responsibility is fully assigned to the developer for execution and completion of the work. Various stipulations contained in the Tender documents demonstrate various risks undertaken by the assessee for execution of the project work awarded by the competent authority in terms of financial resources, manpower deployment, both technical and administrative expertise, drawing and designing of the project specifications and getting approval from the competent authority, safety and security of project and human resources, compliances of various statutory rules and laws.
Therefore, merely because in the agreement for development of infrastructure facility, assessee is referred to as contractor or because if some basic specifications are laid down, it does not detract the assessee from the position of being a developer, nor will deprive the assessee from claiming deduction u/s.80IA(4) - As such, looking to the overall aspects of work undertaken by the assessee we can safely come to the conclusion that the assessee is engaged in development of the infrastructure facility and therefore, a developer, which entails the assessee to claim benefits under section 80IA(4) - the issue of claim of deduction under section 80IA(4) of the Act is allowed in favour of the assessee and against the Revenue.
Denial of claim of the assessee u/s 80IA including the claim in respect of other income - bank interest on bank guarantee - HELD THAT:- This issue covered in favour of the assessee by the judgment passed in case of Rajkamal Builders Infrastructure P. Ltd.[2022 (5) TMI 773 - ITAT AHMEDABAD] allow this bank interest on bank guarantee for the deduction made under Section 80IA.
Sale of scrap of business items - This issue is found to be covered in the case of DCIT vs. Harjivandas Juthabhai Saveri & Anr.[1999 (12) TMI 5 - GUJARAT HIGH COURT] granting relief to the assessee.
Profit on sale of Assets, VAT Refund - Jabalpur Bridge Site, release of Retained Income - Sabarmati Bridge, refund from Sales Tax, Arbitration Claim - Anantpur ROB Kota Site and recovery against stolen Steel at site are found to have direct nexus with the appellant’s business and hence, these are eligible income under Section 80IA(4) of the Act as claimed by the appellant. These are also applied mutatis mutandis in the respective appeals filed by the appellant.
Penalty u/s 271(1)(c) - We upheld the order passed by the CIT(A) in holding that the penalty is not sustainable as the claim made by the assessee was a bonafide one. Moreso, the appeal preferred by the assessee in the year under consideration has been allowed by us. Therefore, the penalty proceeding automatically becomes infructuous. Thus, the appeal preferred by the Revenue is found to be devoid of any merit and, thus, dismissed
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2023 (1) TMI 604
Addition u/s 68 - Assessee did not file supporting evidence to explain the source of deposits made in the bank statement - Commissioner (Appeals) granted relief to the assessee to the extent, the assessee was able to explain the source of deposits in the bank account - HELD THAT:- Decision of Commissioner (Appeals) to be based on facts and material placed before him. The assessee has not furnished any other evidence or material before me to establish the source of deposits in the bank account. That being the case, no interference with the decision of learned Commissioner (Appeals) is called for.
Rental income unexplained - Admittedly, as per the material available on record the assessee had received rental income from two parties. Whereas, the assessee has not offered them to tax. That being the factual position emerging on record, the AO was justified in bringing to tax the rental income. The deficiency in the order of the AO due to non grant of statutory deduction of repairs and maintenance under section 24 of the Act has been removed by learned Commissioner (Appeals).
No reason to interfere with the decision of learned Commissioner (Appeals) on the issue. As regards, the allegation of the assessee that learned Commissioner (Appeals) has violated the norms of natural justice, we are not convinced.
Perusal of the impugned order of learned Commissioner (Appeals) would reveal that he has granted full opportunity to the assessee to explain its case. In fact, the evidences furnished by the assessee were forwarded to the AO and after taking note of the remand report, submissions of the assessee and evidences placed on record, Commissioner (Appeals) has decided the appeal. Therefore, no merit in the allegation of the assessee that rules of natural justice has been violated. Accordingly, grounds are dismissed.
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2023 (1) TMI 603
Scope of assessment by converting limited scrutiny to complete scrutiny while completing the assessment u/s 143(3) - cash deposits in his bank account during demonetization period - Deduction u/s 54F - assessee had purchased the property in the name of his son - HELD THAT:- On perusal of the order of AO, we found that Assessing Officer had restricted the case to limited scrutiny under CASS for verification of cash deposits into the bank account of assessee and the other issue of claim of deduction by the assessee u/s 54F was interlinked with the core issue. While doing so, AO had sought various details besides the source for the cash deposits. The issue in the present appeal is with respect to addition on account of capital gains from sale of immovable property. In our view, the AO was within his right to examine the issue before us and we do not find any fault on the part of Assessing Officer to deny the deduction in the case selected for limited scrutiny.
From the perusal of the order of ld.CIT(A) and the grounds raised before him, it is clear that the issue raised before the ld.CIT(A) was restricted to the deduction claimed and the assessee has not stated that the agricultural land sold by the assessee is not a capital asset within the meaning of Income Tax Act.
In our view, the order of ld.CIT(A) is in accordance with the authoritative pronouncement of Ganta Vijaya Lakshmi [2014 (4) TMI 1226 - ANDHRA PRADESH HIGH COURT] and therefore, we do not find any reason to interfere with the order of ld.CIT(A). Accordingly, the appeal of the assessee is dismissed.
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2023 (1) TMI 602
Addition of deposits made in ICICI Bank - CIT(A) has estimated the past reasonable savings of the assessee as only Rs. 5,00,000/- and disallowed the remaining Rs. 3,87,700/- - HELD THAT:- While making such an estimation, the Ld. CIT(A) has not shown on what basis such the disallowance were being made. The assessee had shown an opening cash balance of Rs. 7,20,000/- as on 01/04/2008.
Therefore the estimation made by the Assessing Officer is not supported with any valid material therefore the disallowance is not justified. Similarly, the gift of Rs. 1,75,000/- received by the assessee from his wife is also disallowed without assigning any reasons thereon. Such a disallowance is not justifiable in law. Therefore we hereby delete both the disallowance of Rs. 3,87,700/- and Rs. 1,75,000/- and allow the assessee’s appeal.
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Customs
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2023 (1) TMI 599
Rejection of refund of cash security deposit - rejection of refund on the ground that the appellant’s claim was barred by limitation in terms of Section 27(1) of the Customs Act, 1962 - HELD THAT:- It is not the case of the Revenue that what the appellant claimed was the refund of the duty paid and there is also no dispute that the appellant claimed only the security deposit made.
The Hon’ble jurisdictional High Court in the case of COMMISSIONER OF CUSTOMS (EXPORT), CHENNAI-1 VERSUS CABLE CORPORATION OF INDIA LTD. [2008 (6) TMI 210 - HIGH COURT OF JUDICATURE AT MADRAS] has considered a similar issue and has held that Section 27 which speaks about the refund of the duty cannot be pressed into service to deny refund of the amount covered under the bank guarantee which has been negotiated by the department.
Thus, it is very much clear that refund claim of the security deposit is not governed by the provisions of Section 27 of the Customs Act and consequently, the lower authorities have clearly erred in rejecting and confirming the rejection of refund claimed of the security deposit by invoking the provisions of Section 27(1) ibid.
The impugned order is not sustainable and hence, the same is set aside - Appeal allowed.
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2023 (1) TMI 601
Denial of rightful claim of refund of service tax being the Petitioner is an exporter coming under the Customs Act on the ground of hyper technicality when export have taken place actually - denial of statutory right of the Petitioner for mere procedural lapse - denial of just claim of the Petitioner in deviation of doctrine of precedent which is a fundamental constraint on judicial decision-making.
HELD THAT:- Under Section 2(20) of Customs Act the term ‘exporter’ would include any owner or any person holding himself out to be the exporter. In other words, the person holding out to be the exporter (in this case M/s. Liberty and M/s. RIPL) need not be the exporter. It could well include an entity like the present Assessee which in fact entered into the agreement pursuant to which the export took place.
Added to this fact is the finding of the Commissioner (Appeals), that for the limited purposes of facilitating the export, separate agreements were entered into by the Appellant with M/s. Liberty and M/s. RIPL whose limited role was to file the shipping bills for the purposes of export in their names. It has been being factually further found by the Commissioner (Appeals) that the entire cost of effecting the export was borne by the Appellant. It ran the risk of penalties if the goods were not exported or if there was delay in export or the goods were below the specifications. Importantly “the LC had been opened with the Bank by the Appellant”. The invoices of sale of goods was raised by the Appellant-Assessee on the buyers and it is the Assessee which had remittances in its own name pursuant to the exports made.
All the above factors go to show that it was in fact the Assessee which was the real exporter of the goods for the purpose of Section 2(20) of the Act - the Court is unable to concur with the view of the Tribunal that in the present case the Assessee was not entitled to the refunds since it was not the exporter.
The questions framed are answered in favour of the Assessee and against the Department.
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2023 (1) TMI 600
Determination of criteria for allocation of imported Raw Pet Coke - allocation of such imported RPC among various entities engaged in the business of using the imported RPC to produce Calcine Pet Coke - Appellant is aggrieved by the alleged excess allocation of RPC to Respondent No. 3, which the Appellant contends, has been made in excess of stipulated parameters - whether there was any actual change in the public notices on the basis of which the allocation was made? - HELD THAT:- Under the first Public Notice dated 26.11.2018, the importer had to apply for the import license to the DGFT along with the capacity of the unit and a valid consent certificate from the SPCB/PCC in the name of user industrial units indicating the quantity permitted for import and its usage on a monthly and yearly basis. It is pertinent to mention here that when Respondent No.3 made an attempt to seek for increase in their import on the basis of their increase in production capacity, the same was rejected by the competent authority. This Public Notice has to be read in consonance with the Judgment of the Apex Court and cannot be permitted to do violence with the Orders of the Apex Court in M.C. MEHTA VERSUS UNION OF INDIA & ORS. [2018 (11) TMI 1352 - SUPREME COURT].
On 22.03.2019, as per the second Public Notice, the eligible quantity desiring to avail quota of the total import of raw pet coke were to apply for the import license along with their capacity of the unit and a valid consent certificate from SPCB/PCC in the name of user industrial units indicating the quantity permitted for import and its usage on a monthly and yearly basis. This notice is more or less identical to the first Public Notice dated 22.11.2018 - The Appellant attempted to move the DGFT for the increase in their quota based on the increase in their production capacity which was rejected by the DGFT by Order dated 22.04.2019 on the ground that any change in the quota would be violative of the order of the Apex Court.
The reasoning of the learned Single Judge that the public notice dated 17.04.2020 makes a distinction between the certificate in the first part and the consent to operate in the second part and if both, the certificate and the consent to operate, were of the same document then there was no necessity to mention both in two parts of the public notice and, therefore, the certificate, granted by the Andhra Pradesh Pollution Control Board, stating that the Respondent No.3 had, as on 09.10.2018, the installed capacity for manufacture of calcined petroleum coke of 3.3 Million Metric Tonnes is reasonable, is contrary to the entire scheme as envisaged by the Apex Court - The certificate dated 04.05.2020 issued by the State Pollution Control Board only certifies that the installed capacity of Respondent No.3, as on 09.10.2018, for manufacture of calcined petroleum coke, was 3.3 Million Metric Tonnes per annum and is obviously immaterial. Even though the public notice dated 17.04.2020 is not under challenge but this Court cannot be a party to any interpretation that will have the effect of upsetting the rationale of the Apex Court in fixing 1.4 Million Metric Tonnes of raw petroleum coke which, as stated earlier, was based on the permissible capacity as on 09.10.2018.
In case, now, the production capacity has increased and its proportionate share has been increased, the DGFT has to bring this fact to the knowledge of the Apex Court and only the Apex Court can alter the figures. The learned Single Judge has, therefore, erred in coming to a conclusion that inter se allocation could have been changed by the DGFT more so because the DGFT has in its previous Minutes of Meetings rejected the claim of various applicants including Respondent No.3 for increasing their share of allocation as per their production capacities. Even though the capacity may have been increased by the order dated 29.11.2018, the permission to produce more than 2 Lakh Metric Tonne was not there on 09.10.2018, which is evident from the order dated 22.04.2017, which restricted Respondent No.3 from producing more than 2 Lakh Metric Tonnes of calcine pet coke.
The Respondents are directed to re-draw the allocation of Raw Petroleum Coke to the various calciners - Application allowed.
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2023 (1) TMI 582
Maintainability of petition - availability of alternative remedy - levy of penalty u/s 114 (iii) of the Customs Act, 1962 - appealable order under Section 128 of Customs Act, 1962 or not - HELD THAT:- In Hameed Kunju vs. Nizam [2017 (7) TMI 1414 - SUPREME COURT] the Apex Court held that any petition under Article 227 of Constitution of India should be dismissed in limine when there is statutory provision of appeal. In another case Ansal Housing and Construction Limited vs. State of Uttar Pradesh and others [2016 (3) TMI 1435 - SUPREME COURT] it is held that when there statutory appeal is provided, then the said remedy has to be availed.
Looking to the fact of availability of an efficatious alternative remedy, it is not found proper to entertain these petitions - petition dismissed.
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Insolvency & Bankruptcy
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2023 (1) TMI 598
Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - whether the debt meets the threshold limits of Rs. 1 crore or not - HELD THAT:- This Appellate Tribunal, observed that remuneration of Rs. 60,00,000/- p.a. has been clearly mentioned and the Resolutions further mentioned that this shall be the minimum remuneration payable to him in any financial year during his tenure where the company has no profits or its profits are inadequate, makes the position abundantly clear that the ₹ 2nd Respondent / Company, intended to pay Rs. 60,00,000/- p.a., to the ₹ 1st Respondent, without any conditionality, and was minimum payment per annum, even when the Company did not earn any Profit during the year.
These Resolutions are, therefore, crystal clear and leave no ambiguity, in establishing the fact, that the Appellant’s contention that, it was only ₹ 50% of the salary payment fixed to be paid, and the remaining 50% of the salary, as variable salary linked to his performance, is untenable and this fact is also corroborated from Form MR1, filed with RoC, where also Rs.60,00,000/-, has been indicated as minimum remuneration, payable to the ₹ 1st Respondent, in any Financial Year, during the tenure even when the ₹ 2nd Respondent / Company, does not have any profit.
This Appellate Tribunal also observed that proper demand notice under Section 8 of the I & B Code, 2016 was issued dated 11.05.2021 with all facts and figures including amount due and not paid which was not replied admittedly by the 2nd Respondent within 10 days. The Reply indeed was sent much later on 10.06.2021. Issue regarding pre-existing disputes was not established.
The documents filed with RoC, Board Resolution of the Appointment of the 1st Respondent, evidence from the Balance Sheet, issue of the Demand Notice not replied within 10 days, this Appellate Tribunal do not find any error, in the impugned order - application dismissed.
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FEMA
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2023 (1) TMI 597
Prohibition to accept foreign contribution - misuse of the Foreign Contribution (Regulation) Act [FCRA ] by the political party - Association for Democratic Reforms seeking directions to constitute an independent tribunal or committee to oversee the enforcement of the Foreign Contribution (Regulation) Act, 2010 (‘FCRA Act’) - Petitioners have stated that that there have been several instances of political parties and legislators accepting contributions and hospitality from foreign sources which is, prima facie, in violation of the FCRA - HELD THAT:- The Petitioner has failed to place on record any data indicating the number of political parties which have availed of foreign contribution, and have failed to be penalised under the FCRA. The apprehension of the Petitioner that the FCRA may be misused for oblique motives is a bald averment and is entirely unfounded. Courts cannot pass a direction only on hypothesis. Nothing has been placed on record to show that the FCRA is being used selectively against NGOs and other independent organisations as well.
The entire case of the Petitioner is premised on the possibility of a political party, who is also at the helm of affairs at the Centre, abusing the provisions of the FCRA to suppress dissent and receive foreign contributions in its own favour. The instant Writ Petition is entirely built on surmises and conjectures.
There exists a basic difference between legislative and judicial functions, elucidated by the basic structure doctrine, which states that while the legislature makes laws, the executive enforces and administers it, and the judiciary tests the validity of legislation formulated by the Legislature.
It has been laid down in a catena of judgments the courts cannot direct the legislature to frame or enact a law and in a particular manner. It cannot amend a statute or add provisions to the statute, as that too would be tantamount to judicial legislation. The role of the judiciary is initiated only after a law is enacted to test the legality of a statue on the known principles of judicial review
Setting up of such Tribunals/Authorities/Committee is purely a policy decision, taken by the Legislature. A direction for setting up a Committee or Tribunal would effectively be an amendment of the FCRA, which is beyond the scope of judicial review by this Court. Hence, an attempt by a judicial body to set up a tribunal is directly in the teeth of the doctrine of separation of powers.
Recently, the Hon’ble Supreme Court vide Judgment in John Paily v. The State of Kerala,[2021 (4) TMI 1349 - SUPREME COURT] has held that Courts do not possess the power to set up an adjudicatory committee or a tribunal by way of issuing a writ of mandamus. In light of this, the direction sought by the Petitioner to set up a Committee or Tribunal to oversee the functioning of the FCRA is unsustainable. This Court cannot direct setting up of a Committee or a Tribunal, simply due to the possibility of misuse of the FCRA.
The entire case of the Petitioner rests on the possibility of misuse of the FCRA by the political party at the helm of affairs. This misuse, it is apprehended, may be directed towards hindering the independence of judicial officers, targeting NGOs and stifling dissent. Further, the Petitioner apprehends that due to a conflict of interest, the FCRA may not be effective to curb political parties from accepting foreign contributions. The mere possibility that a statute will not be administered adequately is not ground for the statute to be invalidated or for this Court to supplement its wisdom with the Legislature’s. To set up a committee or tribunal is a purely policy decision. The legislature alone has the power to set up a tribunal or committee, under the requisite statute, to adjudicate disputes arising from it. If the prayer sought by the Petitioner is allowed, it would essentially be an exercise in judicial legislation, and would be beyond the power of judicial review accorded to this Court. Due to the aforementioned reasons, this Court is not inclined to allow the present petition. Writ Petition is dismissed,
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PMLA
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2023 (1) TMI 596
Money Laundering - Seeking grant of Regular Bail - objection taken in the affidavit is that prior to the arrest, two times non-bailable warrants were issued to which the petitioner did not respond and during the custody period, he has not cooperated with the investigation - apprehension that if the petitioner is enlarged on bail, he may misuse the concession of bail or evade the process of law or may not face the trial - twin conditions under Section 45 of the PMLA Act not fulfilled - HELD THAT:- It is not disputed that the petitioner when released on interim bail has undergone about 06 months of custody. Since the petitioner is seeking parity with the co-accused, who has already been granted the concession of regular bail vide order dated 01.07.2022 wherein it was observed that the co-accused qualifies the triple test under Section 45 of the PMLA Act.
Considering the fact that the petitioner is in long custody and his co-accused has already been released on bail and no amount was recovered from the petitioner, the present petition is allowed and the interim order dated 26.12.2022, is made absolute and the petitioner is directed to be released on regular bail.
Application disposed off.
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2023 (1) TMI 595
Money Laundering - provisional attachment order - Seeking permission to cross-examine the three person - As per the Petitioner, an order passed in an application seeking cross-examination is merely a procedural order, and not one under either of the provisions specified in Section 26 - HELD THAT:- The powers of the Adjudicating Authority, under Section 8 of PMLA, are quite vast. The said provision stipulates the various steps to be taken, prior to the passing of the final order by the Adjudicating Authority. The Adjudicating Authority has to consider the show cause notice, the reply of the notice/s, hear the aggrieved person, as also, the Director or any officer authorised on his behalf, take into account all relevant materials placed before it, and thereafter, by an order record a finding whether any or all of the property is involved in money laundering under Section 8(2) of the Act. After arriving at a conclusion under Section 8(2), the Adjudicating Authority is to decide the question as to whether the attachment has to be confirmed or modified or detached under Section 8(3) of the PMLA.
The entire process has to be concluded within 180 days from the date of issuance of the show cause notice, provisional attachment order under Section 5 of the PMLA. Thus, the proceedings before the Adjudicating Authority have to proceed in a speedy manner and go through the various steps provided under Section 8 of PMLA - An application for cross-examination filed before the Adjudicating Authority would be an integral part of the process of adjudication and would not be alien to Section 8 proceedings, when considered in this above statutory scheme and context.
In view of the scheme of the PMLA and the provisions of Section 26 of the Act as also the decision of the ld. Division Bench in ARUN KUMAR MISHRA AND M/S AJANTA MERCHANTS PVT LTD VERSUS UNION OF INDIA & ANR AND THE DIRECTORATE OF ENFORCEMENT [2014 (3) TMI 137 - DELHI HIGH COURT], this Court is of the opinion that the Petitioner ought to be relegated to the Appellate Tribunal for assailing the impugned order dated 13th December 2022.
Cross-examination under PMLA - HELD THAT:- The right to cross-examination may be invoked by any person who wishes to cross-examine a witness. There has to be a reasonable basis for seeking the said right which would have to be seriously considered by the Adjudicating Authority and not merely in a routine or an indignant manner. The powers of the Adjudicating Authority are spelt out in Section 11 of PMLA, which are the ‘same powers’ as those of a civil court trying a suit, in respect of certain aspects such as discovery and inspection, enforcing attendance of persons, directing production of records, receiving evidence on affidavits, etc. - while the Adjudicating Authority has all the powers of a civil court, it is free to regulate its own procedure. Cross-examination need not be permitted in every case. At the stage of Section 8 proceedings, if cross examination is permitted in every case, it may result in delay and defeat the purpose of the said adjudication However, whenever deemed necessary, the opportunity of cross-examination ought to be afforded. It cannot be presumed that the said request is to delay or scuttle. The request for cross examination must be examined seriously and not in a routine manner. The language used by the Adjudicating Authority, in the impugned order, leaves a lot to be desired.
The Petitioner is relegated to the Appellate Tribunal under PMLA for agitating the challenge to the impugned order. Since the entire process of adjudication is to be concluded within 180 days, the present writ petition is directed to be transmitted by the Registry to the Appellate Tribunal, so that the same can be taken up in an expeditious manner. Considering that it is a short application seeking permission to cross examine, the Appellate Tribunal shall decide the challenge to the said order or the application for cross-examination, within a period of two weeks from the date of first listing - In the present case, though not spelt out, during the course of hearing before this Court, one of the reasons for seeking cross examination is due to the alleged retraction by one particular witness of the statements made by him to the Income Tax Department. This submission shall be considered by the Tribunal.
Petition disposed off.
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Service Tax
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2023 (1) TMI 593
Levy of service tax - GTA Service - Business Auxiliary Service (Commission received) - denial of Cenvat credit on account of documents defects of not mentioning the service tax registration number.
CENVAT Credit - input services - GTA Services - From the order it is noticed that the adjudicating authority has rejected the CA Certificate for the reason that the supporting document has not been given by the appellant. The purpose of getting the service from the CA is that a summary of the findings can be obtained. In case the adjudicating authority had any doubt regarding the CA certificate he could have asked for the supporting document or any other explanation - it is found that no such documents have been sought by the adjudicating authority. In these circumstances summary rejection of chartered accountant certificate is not right.
Learned counsel argued that the situation is revenue neutral as the appellant would have been entitled to cenvat credit on the tax paid on the GTA services. It is not entirely correct argument as part of the GTA services could have been availed for the purpose of clearance of finished goods and the admissibility of cenvat credit on such service tax depends on many factors. In this circumstance the argument of revenue neutrality does not survive - the order confirming demand on service tax on GTA services is set aside and the matter is remanded back to the Original Adjudicating Authority to decide a fresh. The doubt raised on the CA certificate may be highlighted and if the necessary supporting need document can be called.
Demand of service tax has been made under the category of Business Auxiliary service on the commission received by the appellant - HELD THAT:- The demand has been made without examining the nature of commission received. The show cause notice does not mention the nature of the commission received by the appellant. The SCN merely picks up the head of commission in the balance sheet and compares it with the ST- 3 return. The Order-In –Original also makes the vague reference to commission received in respect of repairs and attending to customers complaints. It is not understood how the services would become taxable under the business auxiliary service. The appellant has also not produced any documents to show the exact nature of the services provided by them - matter remanded back to the Original Adjudicating Authority to decide a fresh after examining the actual contract under which such payment has been received and specifically examine the nature of services provided an its taxability. The appeal is allowed by way of remand.
Denial of cenvat credit on account of certain defects in the documents on the strength of which the credit was taken - HELD THAT:- The revenue has placed on record letter dated 21.01.2013 of Commissioner of Service Tax Ahmedabad - It is noticed that this report has been obtained after adjudication of the case by the adjudicating authority and the same was not available at the time of adjudication. Since this report was not available with the adjudicating authority the decision could not have been taken after examining complete facts. Consequently the demand on this issue is also set aside and the matter is remanded back to the original Adjudicating Authority.
The appeals are allowed by way of remand.
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2023 (1) TMI 594
Condonation of delay in filing appeal - Proper service of order - appeal has been dismissed on grounds of limitation as being beyond the statutory limit of 60 days prescribed under Section 85 of the Finance Act, 1994 and also beyond the condonable period of 30 days under Section 85(3A) of the Finance Act, 1994 - HELD THAT:- Under Section 85 of the Finance Act, 1994 the statutory limit of 60 days is prescribed for preferring an appeal. The delay if any is condonable up to 30 days beyond the period of 60 days under Section 85(3A) of the Act.
Two facts emerge from the pleadings on records which cannot be ignored: first that the certified copy of the impugned order was provided to the appellant on 19th December 2020 by the Adjudication Branch of Central Goods & Services Tax and Central Excise, Ranchi which means that by that time the relaxation of limitation period as per the directions of the Apex Court in IN RE : COGNIZANCE FOR EXTENSION OF LIMITATION [2020 (5) TMI 418 - SC ORDER] had commenced due to the COVID lockdown. The other fact which emerges from the information obtained under RTI vide Annexure 11 from the office of the Principal Commissioner, Central Goods & Services Tax and Central Excise, Ranchi dated 24th January 2022 is that the booking journal or the track consignment report of the speed post does not contain the complete address of the petitioner.
The presumption of proof of service of notice is a rebuttable piece of evidence and the track consignment report having an incomplete address of the petitioner valid service of notice of the order in original cannot be presumed. Section 27 of the General Clauses Act as quoted at paragraph 6 of the impugned appellate order also provides that service shall be deemed to be effected by properly addressing, prepaying and posting it be registered post. Petitioner s have therefore rightly contended that it could not have approached the appellate authority earlier.
The grounds of rejection of the memo of appeal are not tenable on facts - matter is remanded to the appellate authority to consider afresh in accordance with law - Petition allowed.
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2023 (1) TMI 592
Classification of services - scientific and technical consultancy services or not - appellant is a semi-autonomous organisation created to promote the productivity in industry, agriculture and other sectors of economy - Includability of expenses claimed by the appellant as reimbursable expenses in the gross value - time limitation - penalty - HELD THAT:- The scientific and technical consultancy means an advice, consultancy or scientific or technical assistance rendered in any manner either directly or indirectly by scientists or a technocrat or in his or technical institutions or organisation. The training programmes conducted by the appellant squarely fall in this category and there are no reason to deviate from the previous decision of this Tribunal in the appellant’s own case M/S NATIONAL PRODUCTIVITY COUNCIL VERSUS CCE, CHANDIGARH [2008 (8) TMI 26 - CESTAT, NEW DELHI] where it was held that thrust of the Appellant’s activity is conducting scientific research related to productivity and undertaking technical study in this regard for their clients and tendering advice to them for optimizing their productivity, hence appellant is more appropriately covered under “Scientific or Technical Consultancy Service” than “Management Consultancy”.
Includability of expenses claimed by the appellant as reimbursable expenses in the gross value - HELD THAT:- In the impugned order, the Commissioner (Appeals) has already held that the board and lodging facilities provided for training would not form part of the gross value whereas expenses in other heads such as printing, stationery and miscellaneous expenses will be part of the gross amount. There are no good reason to deviate from this decision.
Time Limitation - HELD THAT:- The Commissioner (Appeals) held that the demand from the period July, 2001 to March 2004 was time barred as the extended period of limitation could not be invoked. The Commissioner (Appeals) has also accepted the appellant’s contention that amounts received by it for service should be treated as cum-tax receipts and the service tax should be calculated backwards. There is no appeal against this part of the order.
Penalty - HELD THAT:- The penalty under section 78 which requires fraud or collision or wilful mis-statement or suppression of facts or violation of any provisions or Act or Rules with intent to evade the payment of service tax was also set aside by the Commissioner (Appeals) - The penalty under section 76 is a simple penalty for failure to pay service tax where none of the aforesaid elements are present. This penalty has been upheld by the Commissioner (Appeals). The Commissioner (Appeals) has also upheld the mandatory interest under section 75.
Appeal dismissed.
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Central Excise
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2023 (1) TMI 591
Quantification of penalties - levy of composite penalties under Section 11 AC of the Central Excise Act, 1944 read with 173 Q of the Central Excise Rules, 1944 - Clandestine removal - hank yarn - HELD THAT:- Reliance placed in the case of PUNJAB RECORDER LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH [2001 (5) TMI 86 - CEGAT, COURT NO. IV, NEW DELHI] - the facts in the of Punjab Recorders are significantly different. In the said case the period in dispute was 20.03.1992 to 13.07.1995. Section 11 AC came into statute book with effect from 28.09.1996 i.e. after the disputed period. In this circumstance it was held that no penalty could have been imposed under section 11 AC. In this back ground it was held that since joint penalty under section 11 AC and Rule 173 Q has been imposed and penalty under section 11 AC could not have been imposed therefore, joint imposition of penalties under section 11 AC read with Rule 173 Q could not be sustain - In the instant case the period involved is both before the introduction of section 11 AC after introduction of section 11 AC in the statute book. Therefore, the facts in the present case are different from the facts in the case relied upon by the appellant.
In the case of COLLECTOR OF CUSTOMS VERSUS TELEVISION & COMPONENTS LTD. [2000 (2) TMI 90 - SUPREME COURT] also the matter was remanded to the lower authorities because the joint penalty for 2 offences was imposed and in the final order only one offence was upheld. Thus the facts in the case of Television & Components Ltd are also different.
There are no error in imposition of composite penalty under Rule 173 Q read with Section 11 AC as in the instant case all the charges have been confirmed and the charges pertains to both the period prior to introduction of Section 11 AC and thereafter. Therefore, penalty under both the provision could have been rightly imposed. In view of the above, I do not find any merit in the appeals filed by the Appellant.
Appeal dismissed.
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2023 (1) TMI 590
Valuation of goods - confectionary items - related party transaction - inclusion of cost of moulds / dies / machinery supplied by the buyer - Valuation to be governed by Rule 9 of Central Excise Valuation (Determination of Price of Excisable goods) Rules, 2000 or not - demand alongwith interest and penalty - HELD THAT:- The issue involved in the instant case is the valuation of the goods manufactured by LHL on behalf of ITC wherein, the ITC has provided certain inputs, machineries and funds to LHL.
The LHL and ITC have contended that the payment made towards 50% of the cost of moulds was made in the year 2003-04 i.e. prior to dispute period of 2005-06. He pointed out that during the period 2003-04, the agreement of manufacture dated 24.01.2003 was on “Buy-sell‟ model. The said transaction of 50% of cost of mould was part of the agreement dated 24.01.2003. Since the said agreement was more than two years before the disputed period, there is no link shown by revenue between the said cost of mould by the appellant and the goods cleared during the disputed period. However, the cost of moulds needs to be apportioned on the value of clearances from the period 24.01.2003 to the time the said mould were used to manufacture goods for ITC - It is also noticed that the ITC has supplied gifts valued at Rs.1.5 Crores which are to be backed with the products manufactured by LHL is free gifts to be supplied to the customers.
The ITC has deputed certain employees by Leamak. The role of the employees was coordination of dispatches of material to various godowns, supervision of quality of raw material, packing material and finished goods - the staff deputed not for the purpose of manufacturing the goods but only for the purpose of inspection and supervision and quality control cannot be part of the assessable value of the goods.
M/s. LHL and ITC have contended that the amount of Rs.1,72,69,155/- which as been sought to be included in the assessable value is the value which the appellant have already included in the assessable value, fresh inclusion of the said in the assessable value amount to double taxation. The cost of production not included by Leamak has already suffered excise duty and the appellants have not contested the same. The contention of the appellant is that the duty has been sought to be recovered twice on this value. From the letter of the appellant dated 18.03.2015, it appears to be factually correct however this needs to be verified.
It is seen that revenue has filed appeal seeking assessment under Rule 7 of the CV Rules. It is seen that the order of tribunal dated 01.01.2014 has clearly laid down that assessment has to be done in terms of Rule 11 of the CV Rules. The revenue has not challenged the said order and therefore, the said order has become final. In this background, the assertion of the revenue that assessment needs to be done in terms of Rule 7 of the CV Rules cannot be accepted - The appeal of revenue is therefore dismissed.
The impugned order is also set aside in so far as it seeks to include the fixed cost of ITC in total to the assessable value. The cost of ITC in so far as it relates to provision of mould on discounted rate to the appellant needs to be apportioned to the value of goods depending on the actual period of use of the said mould and the total production. The fact regarding payment of duty under the head “Cost of production not included by Leamak” needs to be ascertained. If duty has already been paid, duty may not be demanded again.
Penalty - HELD THAT:- It has been argued that the order passed in the instant case is imposing penalty on M/s. ITC Ltd is without following the principles of natural justice and on that count as well the impugned order cannot be sustained. There are merit in the argument of M/s. ITC Ltd. that when the impugned order imposed penalty on the appellant, they should have been granted an opportunity of defend themselves.
The impugned order is set aside and matter is remanded to the Commissioner for fresh adjudication.
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2023 (1) TMI 589
CENVAT Credit - credit availed on the strength of purchase invoices received without receipts of the inputs in their factory premises - HELD THAT:- The issue involved in present case is decided in the case of SHAH FOILS LIMITED, SHRI KARTIK R SHAH, SHRI RAMESH M SHAH VERSUS C.C.E. & S.T. -SURAT-I, II, RAJKOT, AHMEDABAD-III [2019 (1) TMI 1162 - CESTAT AHMEDABAD] where it was held that The goods were handed over to the parties/ brokers from Vasai godwn by M/s SFPL and the Appellants had no role to play in such delivery of goods. There is no evidence at the Appellant’s end that they issued any invoice without delivery of goods, the contention of the revenue that the Appellant issued invoice without actual clearance of goods is not sustainable.
Reliance also placed in the case of SUNRISE STAINLESS P LTD VERSUS C.C.E. & S.T. -AHMEDABAD-III [2019 (12) TMI 280 - CESTAT AHMEDABAD] where it was held that In the facts of the present case there is no dispute that the documents/records recovered solely from third parties, statements of third parties whose cross examination was not allowed despite it is mandatory under section 9D of CEA, 1944, no incriminating documents recovered from the Appellant SSSPL, no excess/short stock of raw material or finished goods were found; no excess electricity consumption was proved, no evidence of any cash receipt or it’s seizure, no excess raw material consumption was found - thus, the clandestine removal without any evidence as narrated above cannot be established.
Thus, the entire matter needs to be re-considered in the light of above decisions - the impugned order is set aside - matter remanded to the adjudicating authority to pass a de novo order after considering the above judgments - appeals are allowed by way of remand to the adjudicating authority.
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2023 (1) TMI 588
Method of Valuation - to be valued u/s Section 4 or Section 4A of the Central Excise Act, 1944? - supply of medicaments to Government Institutions such as BHEL, Railway, Government Hospitals, etc. wherein, on the package it is mentioned ‘NOT FOR SALE’ and no retail price was printed - HELD THAT:- The fact is not under dispute that the medicaments have been supplied by the appellant to institutions such as BHEL, Railways and other government hospitals and on the package of the goods it is stated as ‘NOT FOR SALE’ and no MRP was printed. On this identical facts, this tribunal in the case of MEDLEY PHARMACEUTICALS LTD VERSUS C.C.E. & S.T. -DAMAN [2022 (11) TMI 41 - CESTAT AHMEDABAD], has held that the Medicament Supplies to Government Hospitals and Institutional Buyers shall be valued in terms of Section 4 and not Section 4 (A).
From the above decision of this tribunal, the issue is no longer res-integra and in the appellant’s case value of goods is clearly governed by Section 4 of Central Excise Act and not under Section 4A therefore, the impugned order is not sustainable - appeal allowed.
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CST, VAT & Sales Tax
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2023 (1) TMI 587
Refusal to grant concession under Section 4-AA UP VAT Act - non-submission of From-C against the transaction on inter-State sale - whether non-production of form 'C' could be taken to be a ground to deny set-off of such higher rate of tax than the payable rate of tax from the limit prescribed in the eligibility certificate under Section 4A of the Trade Tax Act? - HELD THAT:- The issue is no more res-integra as Division Bench in case of Yamaha Motor Escorts Limited [2010 (9) TMI 1243 - ALLAHABAD HIGH COURT] has settled the issue that non-production of form C/D, cannot be taken to be a mere ground to deny the setoff of higher rate of tax from the limits prescribed in the eligibility certificate under Section 4A of the Trade Tax Act, subject to other conditions, namely, the maximum limit for particular year or period and maximum amount for which such exemption is provided.
The order passed by the Tribunal dated 16.02.2010 is unsustainable in the eyes of law and the same is hereby set aside - revision allowed.
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2023 (1) TMI 586
Rejection of claim of set off in respect of raw material used in the manufacturing of M.S. Ingot for the relevant assessment year - year 2005-06 - whether the benefit of set off as envisaged under Section 4-BB of UP Trade Tax Act, 1948 could be passed upon the assessee/dealer or not? - HELD THAT:- Though the raw material has not been defined under the Act but the Section provides for giving the benefit of set off to a manufacturer using raw material and packaging material. The controversy relating to set off has been engaging the attention of this Court as well as Apex Court in various judgments. The Apex Court has considered on number of occasions the matter relating to the grant of set off for various states and in one of the matter M/s. Vam Organic Chemicals Ltd. Vs. State of U.P. & others [2003 (3) TMI 672 - ALLAHABAD HIGH COURT] where it was held that for use in manufacture of notified goods which finds place in Section 4-B (2) of the Act of 1948 it would take within its compass 'diesel oil' used by the manufacturer in generators installed in factory premises to produce electricity. The Division Bench had held the 'diesel oil' used in the generator to be one of the raw material and had extended the benefit to the assessee.
The explanation to Sub-section 2-A of Section 4-B defines the goods required for use in manufacture as well as the notified goods in Sub-clause (a) and (b) of the explanation to the aforesaid provision. From the reading of Section 4-B and Section 4-BB, it is clear that the intention of Legislature was clear to the extent of giving certain relief to the manufacturer while they were using raw material and packaging material in the manufacture of goods. Section 4-BB, in particular, provides for set off taxes paid on the raw material and packaging material - In the present case, the natural gas purchased by a dealer from GAIL whether comes under the purview of word 'raw material' or not.
In Shree Bhawani Paper Mills Ltd. [2015 (11) TMI 48 - ALLAHABAD HIGH COURT] the Division Bench had held the diesel oil to be raw material used for running the generator for production of electricity - In Rajasthan Taxchem Ltd. [2007 (1) TMI 187 - SUPREME COURT] the Apex Court while considering whether the diesel used in running of the generator was also a raw material or not, held that the assessee was entitled to the relief as provided under Rajasthan Sales Tax Act for concessional rate of taxes.
Iron steel has been notified by the State Government by notification dated 22.05.1998 to be notified goods under Section 4-BB of the Act of 1948. In the process of manufacture of M.S. Ingot the fuel which is used by the manufacturer is the natural gas which is a raw material. The fire which is ignited for making the M.S. Ingot is by the use of natural gas. Thus, the process of manufacture of M.S. Ingot requires certain raw materials and natural gas fits into the definition of raw material, as provided under Section 4-BB of the Act of 1948.
This Court finds that the gas used by the assessee in the manufacture of M.S. Ingot is one of the raw material, as mentioned in Section 4-BB of the Act - Revision allowed.
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2023 (1) TMI 585
Levy of tax - transfer of right to use the bus - Whether the Commercial Tax Tribunal was justified in imposing the tax upon the applicant under Section 3- F of the U.P. Trade Tax Act, for plying the vehicle on behalf of UPSRTC, when there is no transfer of right to use the bus? - HELD THAT:- It transpires that the question of law framed in the revisions has already been dealt with by co-ordinate Bench in case of Ashok Kumar Gupta[2009 (7) TMI 1381 - HIGH COURT OF ALLAHABAD], wherein this Court after taking into consideration the agreement entered between the assessee and UPSRTC had held that it was a case of transfer of right to use the bus by the bus owner to UPSRTC through which the UPSRTC had effective control over the bus. Thus, the provisions of Section 3-F was attracted.
Once the matter has been settled by co-ordinate Bench in Ashok Kumar Gupta, the controversy stands no more resintegra and the Tribunal had rightly held that by the agreement reached between the bus owner and the UPSRTC, it is clear that transfer of right to use the buses by the bus owners to UPSRTC through which the UPSRTC has effective control over the buses, and thus, provisions of Section 3-F is attracted. Hence, no interference is required in the order passed by the Tribunal.
The revisions fail and are hereby dismissed.
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