TMI Tax Updates - e-Newsletter
October 17, 2022

Case Laws in this Newsletter:

GST Income Tax Benami Property Customs Securities / SEBI Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax Wealth tax Indian Laws

Articles

1. Refund of IGST allowed on exported goods after deduction of drawback duty

   By: Bimal jain

2. INSPECTION OF GOODS IN MOVEMENT UNDER GST LAW (PART 3)

   By: Dr. Sanjiv Agarwal

3. DETERMINATION OF INCOME TAX UNDER SECTION 115BBE OF INCOME TAX ACT, 1961

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Anti-Evasion Team of Faridabad CGST officials “Green warriors” bust racket of illegal fire-crackers with 21 godowns, seize almost Rs 51 lakh

2. Union Finance Minister participates in Development Committee (DC) meeting in Washington DC

3. Union Finance Minister attends the International Monetary and Financial Committee in Washington DC

4. Union Finance Minister participates in a discussion on paper titled “Learning Losses: What to do about the Heavy Cost of COVID on Children, Youth, and Future Productivity” during Development Committee Dinner meeting of World Bank in Washington DC

5. India’s overall exports in September 2022 estimated to be USD 61.10 Billion, exhibiting a growth of 10.24 per cent over the same period last year

Notifications

Central Excise

1. 35/2022 - dated 15-10-2022 - CE

Exemption to the excisable goods - increase the Special Additional Excise Duty on Diesel - Seeks to further amend No. 04/2022-Central Excise, dated the 30th June, 2022.

2. 34/2022 - dated 15-10-2022 - CE

Special Additional Excise Duty on production of Petroleum Crude and export of Aviation Turbine Fuel - change in rates - Seeks to amend No. 18/2022-Central Excise, dated the 19th July, 2022 to

Customs

3. 89/2022 - dated 14-10-2022 - Cus (NT)

Fixation of Tariff Value of Edible Oils, Brass Scrap, Areca Nut, Gold and Silver

DGFT

4. 39/2015-2020 - dated 14-10-2022 - FTP

Amendment in Export Policy of items under HS code 1101

Income Tax

5. 115/2022 - dated 14-10-2022 - IT

Income of a specified person arising from an investment made in India - Sovereign wealth fund Norges Bank On Account Of The Government Pension Fund Global notfied as the specified person.

Circulars / Instructions / Orders

GST - States

1. TRADE CIRCULAR No. 08/2022 - dated 29-9-2022

Manner of filing refund of unutilized ITC on account of export of electricity

2. TRADE CIRCULAR No. 07/2022 - dated 29-9-2022

Prescribing manner of re-credit in electronic credit ledger using FORM GST PMT-03A

3. Trade Circular No. 06/2022 - dated 15-9-2022

New initiative to make the tax administration more accessible to the taxpayers

4. GST- 14/2022 - dated 12-9-2022

Guidelines for filing/revising TRAN-1/TRAN-2 in terms of order dated 22.07.2022 & 02.09.2022 of Hon'ble Supreme Court in the case of Union of India vs. Filco Trade Centre Pvt. Ltd.

5. 13/2022-TNGST - dated 2-9-2022

Withdrawal of Circular No. 78/2019-TNGST (Rc.No.26/2019/A1/P&P) dated 05.07.2019

DGFT

6. Trade Notice No. 19/2022-23 - dated 14-10-2022

Implementation of Notification No. 38/2015-2020 dated 12th October, 2022

Highlights / Catch Notes

GST

• Court Overturns Detention Orders; Time Limits Expired u/s 129 TNGST Act, Vehicle to Be Released Immediately.

  Case-Laws - HC : Detention order - time limitation for issuance of detention order expired - section 129 of TNGST Act - since the admitted dates clearly reveal the lapses in adhering to the statutory and stipulated timelines, the case of the petitioner merits acceptance - The impugned orders are set aside. The vehicle in question shall be released forthwith - HC
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• Court Orders Reassessment After Natural Justice Violation; Personal Hearing Required Within Three Weeks, New Orders in Two Weeks.

  Case-Laws - HC : Validity of reassessment orders - violation of principles of natural justice - The competent authority, respondent, will give opportunity of personal hearing to the petitioner within three weeks from today and pass in accordance with law, fresh orders within two weeks from the date of affording such personal hearing - HC
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Income Tax

• Notice u/s 143(2) Issued Timely; Section 153C Proceedings Not Initiated Due to Unmet Condition (b) Requirements.

  Case-Laws - HC : Assessment u/s 153A/153C - The three conditions operate on a stand-alone basis, separated by the conjunction 'or', and not concurrently and the satisfaction or otherwise of any one of the three conditions would suffice to decide the question of jurisdiction. - In the case of the petitioner the return has been filed on 26.09.2018 u/s 139(4), and is thus a valid return. Notice under Section 143(2) has been issued on 27.08.2019, also within time. Condition (b) is thus not satisfied and no proceedings may be initiated u/s 153C. - HC
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• Excise Refund and Interest Subsidy Excluded from Book Profits in MAT Computation u/s 115JB.

  Case-Laws - AT : MAT computation u/s 115JB - assessee has received excise refund and interest subsidy which have been claimed as capital receipts - But since a receipt is not in the nature of income at all, it cannot be included in book profit for the purpose of computation u/s 115JB and accordingly held that interest in power subsidy under the scheme have to be excluded while computing book profits u/s 115JB. - AT
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• Commissioner of Income Tax's Order on Bogus Share Capital Criticized for Lack of Detailed Reasoning u/s 68.

  Case-Laws - AT : Addition u/s 68 - Bogus share capital including share premium - The order of the CIT(A) is a non-speaking order. By simply reproducing the contents of the case laws without discussing about their application on the facts of the case, in our view, would not make the order of the ld. CIT(A) justifiable speaking order and hence, the same is not sustainable as per law.- AT
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• Section 153C Assessment Invalidated Due to Insufficient Satisfaction Note by AO, Rendering Actions Void.

  Case-Laws - AT : Validity of assessment/re-assessment u/s 153C - the satisfaction note prepared at the first stage by AO of the searched persons [DCIT-CC-2(1)] in respect of third party assessee for initiation of proceedings u/s 153C of the Act does not satisfy the requirement of the law and consequently all actions taken pursuant thereto by the AO of the assessee i.e. ITO, Ward (4)(3) also is void-ab-initio and we hold accordingly. - AT
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• Deduction Denied for Long-Term Finance: Court Rules Against Assessee u/s 36(1)(viii) for Dairy Cooperative Loans.

  Case-Laws - HC : Deduction u/s 36(1)(viii) - long term finance for agricultural and industrial development - AO declined to allow the deduction on the ground that notification declaring the assessee as a financial institution was issued on 23.02.2004, which fell in the subsequent year - Contention raised by assessee cannot be accepted. Hence, we are of the considered view that providing long term finance for industrial or agricultural development to various diary cooperations cannot be covered as long term finance extended for agricultural or industrial development. - HC
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• Reopening Tax Assessments u/s 148A(b) Requires Rs. 50L+ Escaped Income, Notice Within 3-10 Years Per Section 149(1)(b.

  Case-Laws - HC : Reopening of assessment - notice u/s 148 A(b) - if the provisions of Section 149(1)(b) of the Act of 1961 are considered, it is seen that only if the amount in question that is likely to have escaped assessment is Rs.50,00,000/- or more, the time limit for issuing notice to re-open the assessment is three years but less than ten years. - HC
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• Assessee Must Prove Unexplained Cash Deposits and Credits with Evidence to Avoid Disallowance Under Chapter-VIA Claims.

  Case-Laws - AT : Unexplained cash deposits, disallowance of claim made under Chapter-VIA and unexplained credits - the onus is on the assessee to appear before the Tribunal and substantiate its claim by producing the cogent material and documentary evidence - AT
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• Section 44AE: Deduction Allowed for Expenses on Hired Goods Carriages in Transport Business Activities.

  Case-Laws - AT : Applicability of provisions of section 44AE - deduction of business expenditure against the business receipts - AO is directed to give deduction of expenditure which related to the goods carriages which were not owned by the assessee but taken on hire from the open market for carrying out the transportation activities - AT
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• PCIT's revision u/s 263 on depreciation of goodwill from amalgamation ruled incorrect; Section 32(1) proviso inapplicable.

  Case-Laws - AT : Revision u/s 263 by CIT - depreciation on goodwill - the assessee has rightly claimed depreciation on goodwill arise out of amalgamation, because, 5th proviso to sec.32(1) has no application to the facts of the present case. Therefore, we are of the considered view that assumption of jurisdiction by the PCIT on this issue is fails. - AT
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• Section 68 IT Act: Unexplained Cash Credits for Share Capital and Premium Confirmed as Fictitious, Legitimizing Unaccounted Income.

  Case-Laws - AT : Addition u/s 68 - unexplained cash credits of share capital and security premium received - the assessee has routed its unaccounted income in the books of account in the form of share capital and security premium by arranging bogus share capital and share premium through accommodation entry provider. - Additions confirmed - AT
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• Section 2(22)(e) Review: Business funds in fluctuating account not deemed dividends, no permanent divestment of company funds.

  Case-Laws - AT : Deemed dividend addition u/s 2(22)(e) - monies advanced to the assessee - no funds of the company is divested; there exists a current account which keeps fluctuating as per requirement of the funds that arise in the ordinary course of business and hence cannot be treated as deemed dividend under section 2(22)(e). - AT
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Customs

• Gold Smuggling Case: Appeal Delayed by 10 Days, Petitioner Faces Rs. 25,000 Penalty; Case Restored for Review.

  Case-Laws - HC : Confiscation - penalty - smuggling of Gold bars - delay of ten days in preferring appeal - Since the petitioner, in a sense, too was responsible, partially, if not wholly, as regards the fate that the matter suffered both before the first appellate authority i.e., the Commissioner of Customs (Appeals) and the revisional authority, he should be, according to us, burdened with costs of Rs. 25,000/-. - Matter restored back. - HC
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• Sharp Professional LCD Monitors Confirmed as Non-Cathode Ray Under Sub-heading 8528 52 00; No Evidence Against Classification.

  Case-Laws - AAR : Classification of Sharp Professional LCD monitors - there is nothing on record to contest the submission of the applicant that these monitors are capable of directly connecting to and designed for use with an automatic data processing machine of Heading 84.71. Therefore, these monitors are correctly classifiable under Heading 8528; and being non-cathode ray monitor under sub-heading 8528 52 00. - AAR
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Direct Taxes

• Court Declines Intervention in Benami Transaction Case; Petitioner Cites Financial Hardship and Family Exigencies, Including Special Needs Child Care.

  Case-Laws - HC : Benami Prohibition transaction - We are not inclined to intervene in the matter - The petitioner would submit that his salary is the only source of income and that he does not have financial resources to meet any portion of the demand impugned before the Appellate authority. He would also cite family exigencies, including the upkeep of a special child and paucity of funds in this regard. - HC
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Indian Laws

• Court Upholds RBI's Direct Regulation of Payment Aggregators, Prioritizing Public Interest Over Petitioners' Concerns.

  Case-Laws - HC : Validity of circular of RBI - directions issued to online payment gateway services - non-banking entities which offer payment aggregation services - - The 2009 Directions involved an indirect regulation and supervision of PAs. However, after RBI had put its Discussion paper in the public domain, the responses received by it were examined internally by the Board. The result of such deliberation convinced the RBI, that it should work on the third option outlined in the Discussion paper i.e., that which involved RBI's direct regulation and supervision of PAs since they were handling funds of customers. - The public interest element, which is imbued in the framing of the Guidelines, trumps the concerns raised by the petitioners. - HC
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IBC

• Supreme Court Observes NCLAT Error in Pre-existing Dispute Analysis Under Insolvency Law; Considers Sales of Goods Act 1930.

  Case-Laws - SC : Existence of pre-existing dispute or not - Applicability of provision of Sales of Goods Act, 1930 - The delivery of the goods and the acceptance of the goods by use of the goods by the corporate debtor being not in dispute, the impact of Section 13(2) read with Section 59 cannot at least for the purpose of determining whether there is a pre-existing dispute be ignored. - The NCLAT has erred in its finding about the existence of a pre-existing dispute - SC
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• Tribunal Finds No Fraudulent Trading in Asset Transfers Among Group Companies Under Insolvency and Bankruptcy Code Section 66(1.

  Case-Laws - AT : Fraudulent Trading/Wrongful Trading - The stand taken by the respective parties, comes to a Resultant Conclusion that the Transfer of Assets among the Group Companies ex-facie is not a Fraudulent Trading, as per Section 66 (1) of the Insolvency & Bankruptcy Code, 2016. - the Plea of Fraudulent Trading as projected by the Appellant / Applicant is not proved, to the subjective satisfaction of this Tribunal, in a convincing manner. - AT
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SEBI

• Stock brokers must get separate SEBI registration for each exchange and pay fees per Regulation 10 and March 2002 Circular.

  Case-Laws - SC : Stock Broker - The conjoint reading of the expression “a certificate” as referred to in Section 12(1) of the Act read with the scheme of Rules, 1992 and Regulations 1992, leads to an inevitable conclusion that the stock broker not only has to obtain a certificate of registration from SEBI for each of the stock exchange where he operates, at the same time, has to pay ad valorem fee prescribed in terms of Part III annexed to Regulation 10 of the Regulations, 1992 in reference to each certificate of registration from SEBI in terms of the computation prescribed under Circular dated 28th March, 2002 and fee is to be paid as a guiding principle by the stock broker which is in conformity with the scheme of Regulations 1992. - SC
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Wealth-tax

• Valuation of Gifted Shares: Authority to Classify as Quoted or Unquoted Lies with Tax Authorities, Not Stock Exchange. (9.

  Case-Laws - SC : Valuation of gifted shares - Explanation to Rule 2(9) of Part A, Schedule III of the W.T. Act. The certificate from the concerned stock exchange is only to state whether an equity share, preference share or debenture, as the case may be, was quoted with the regularity from time to time and whether the quotations of such shares or debentures are based on current transactions made in the ordinary course of business. The explanation does not prohibit the authority, tribunal or the court from examining whether a particular share, be it equity or preference share, is a “quoted share” or an “unquoted share” in terms of sub-rules (9) and (11) of Rule 2 of Part A of Schedule III of the W.T. Act. This right which is conferred on the authorities under the W.T. Act or the G.T. Act is not delegated to the stock exchange. - SC
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Central Excise

• CENVAT Credit Approved for HR Sheets and MS Rods Used in Steel Formers Fabrication for Induction Furnace Operations.

  Case-Laws - AT : CENVAT Credit - inputs - HR Sheets, HR Plates and MS Rods used for fabrication of Steel Formers which is in the nature of a consumable in the Appellant’s induction furnace - the authorities below have categorically admitted that the impugned goods are used in the fabrication of Steel Former, which undisputedly gets consumed in the process of the Appellant’s manufacturing of finished goods. - Credit allowed - AT
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• Forfeited Security Deposit in Breach of Contract Not Recoverable as Sale Charge, Auction Context Considered, Demand Overturned.

  Case-Laws - AT : Recovery of amount of duty on the additional consideration to the extent of forfeiture of security deposit - breach of contract - earnest money deposit - Earnest money deposit and deductions made therefrom cannot be termed as an amount charged for the sale of the impugned goods, more-so-ever when it was against an auction sale. - Demand set aside - AT
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• CBEC Circular Cannot Override Exemption Notifications for Depreciation on Capital Goods in EOUs, Court Rules.

  Case-Laws - AT : 100% EOU - calculation of Central Excise duty and Customs duty on the depreciated value of the capital goods - the CBEC circular is an administrative order binding on the departmental officer but it cannot prevail over on delegated legislation in the form of an exemption notification. When the notification itself has allowed depreciation for the entire quarter the circular cannot restrict it to part of it. - AT
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Case Laws:

• GST

• 2022 (10) TMI 555
  Detention order - time limitation for issuance of detention order expired - section 129 of TNGST Act - HELD THAT:- Neither of the parties had argued the position of delay in the earlier round of proceedings and the direction to the officer in order dated 06.09.2022 is to consider the reply of the petitioner in accordance with law and thereafter pass an order. The petitioner in its reply filed on the same day has specifically made reference to the order in this case of D.K.Enterprises [ 2022 (9) TMI 314 - MADRAS HIGH COURT ] and has also referred to the statutory timeline under Section 129 of the Act. Thus, it was incumbent upon the authority to have taken note of the same. This has not been done. Specifically since the admitted dates clearly reveal the lapses in adhering to the statutory and stipulated timelines, the case of the petitioner merits acceptance - The impugned orders are set aside. The vehicle in question shall be released forthwith - Petition allowed.

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• 2022 (10) TMI 554
  Validity of reassessment orders - violation of principles of natural justice - opportunity of being heard not granted - HELD THAT:- There is no gainsaying that the impugned orders came to be passed without extending opportunity of personal hearing to the petitioner. In respect of the orders relating to three assessment years, the petitioner was not heard. While it is true that in reply in prescribed form given by the petitioner, in response to show-cause notice, the petitioner has indicated that he did not opt for personal hearing - Only on the ground of non-compliance of principles of natural justice in form of not giving opportunity of personal hearing and in order that the competent authority is enabled to decide afresh as per the statement of the learned AGP, the three impugned orders dated 19.04.2022 (Annexures-C-1 to C- 3 in the petition) issued by respondent no.2 are set aside. The competent authority, respondent, will give opportunity of personal hearing to the petitioner within three weeks from today and pass in accordance with law, fresh orders within two weeks from the date of affording such personal hearing - Petition is allowed.

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• 2022 (10) TMI 553
  Profiteering - purchase of flat - it is alleged that Respondent No. 1 had not passed on the benefit of ITC to him by way of commensurate reduction in prices - contravention of section 171 of CGST Act - interest - penalty - HELD THAT:- It is clear from the plain reading of Section 171 (1) that it deals with two situations: - one relating to the passing on the benefit of reduction in the rate of tax and the second pertaining to the passing on the benefit of the ITC. On the issue of reduction in the tax rate, it is apparent from the DGAP s Report that there has been no reduction in the rate of tax in the post GST period; hence the only issue to be examined is as to whether there was any net benefit of ITC with the introduction of GST. It is observed from the Report of the DGAP that the ITC, as a percentage of the turnover, that was available to the Respondent during the pre-GST period (April-2016 to June-2017) was 1.16%, whereas, during the post-GST period (July-2017 to September-2019), it was 6.85% for the project Siddha Eden Lakeview . This confirms that, post-GST, the Respondent No. 1 2 have been benefited from additional ITC to the tune of 5.69% (6.85% - 1.16%) of their turnover for the project Siddha Eden Lakeview and the same was required to be passed on to the customers/flat buyers/recipients - The Respondent No. 1 is required to pass on Rs. 96,857/- as the additional benefit of ITC to the Applicant No. 1 and Rs. 4,10,43,645/- to other 264 recipients. Further, the Respondent No. 2 is required to pass on Rs. 2,50,94,164/- to 270 other flat buyers/recipients in the project Siddha Eden Lakeview for the period from 1.07.2017 to 30.09.2019. The Authority finds no reason to differ from the above-detailed computation of profiteering in the DGAP s Report or the methodology adopted. The Authority finds that the Respondent No. 1 has profiteered by an amount of Rs. 4,11,40,502/- and the Respondent No. 2 has profiteered by an amount of Rs. 2,50,94,164/- during the period of investigation i.e. 01.07.2017 to 30.09.2019 - The amount profiteered is Rs. 96,857/-(including GST) in respect of the Applicant No.1. Since the Respondent No. 2 had availed the entire CENVAT/ITC for the project (including units pertaining to the Respondent No. 1), therefore the aforesaid profiteered amount of Rs. 4,11,40,502/-(inclusive of GST) has to be passed on/refunded/returned by the Respondent No. 2 to the Respondent No. 1, who in turn is required to pass on/return/refund the benefit to his recipients including the Applicant No. 1. Interest - HELD THAT:- The Respondent No. 1 2 are also liable to pay interest as applicable on the entire amount profiteered, i.e. Rs. 4,11,40,502/-(in respect of the Respondent No. 1) and Rs. 2,50,94,164/- (in respect of the Respondent No. 2), for the project Siddha Eden Lakeview . Hence the Respondent No. 1 2 are directed to also pass on interest @18% to the homebuyers/customers/recipients of supply on the entire amount profiteered, starting from the date from which the amount was profiteered till the date of passing on/ payment/return, as per provisions of Rule 133 (3) (b) of the CGST Rules, 2017. Penalty - HELD THAT:- It is evident from the narration of facts that the Respondent No. 1 2 have denied the benefit of ITC to the customers/ home buyers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and have thus committed an offence under Section 171 (3A) of the above Act and therefore, they are liable for imposition of penalty under the provisions of the above Section. However, since the provisions of Section 171 (3A) have come into force w.e.f. 01.01.2020, whereas, the period during which violation has occurred is w.e.f. 01.07.2017 to 30.09.2019, hence the penalty prescribed under the above Section cannot be imposed on Respondent retrospectively.

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• 2022 (10) TMI 507
  Initiation of new proceeding or take any action against the petitioner, when audit in respect of very same financial years have already been completed by another wing of the department of the CGST - HELD THAT:- The petitioners relies on a decision of this Court in IDEAL UNIQUE REALTORS PRIVATE LIMITED ANR. VERSUS THE UNION OF INDIA ORS. [ 2022 (4) TMI 1198 - CALCUTTA HIGH COURT] and on perusal of the said decision of the Hon ble Division Bench, it is found that the same is distinguishable and is not applicable to the present case both on facts and on law. It appears that the present case is not like the said case. In the said case none of the proceedings initiated by the department was shown by taking a logical end or that the proceedings were initiated without affording any due opportunity to the petitioners therein. The impugned notice is almost a show-cause notice and it is also found that the same is neither without jurisdiction nor there is any procedural irregularities in initiating the impugned proceeding nor the impugned proceeding has been initiated in contravention of any statutory provisions of the statute and such the investigation, need not be interfered, by initiation of impugned anti evasion proceeding at this stage. Petition dismissed.

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• 2022 (10) TMI 506
  Seeking permission to withdraw this Writ Petition with liberty to file a reply to show cause notice - HELD THAT:- This Writ Petition is dismissed as withdrawn granting liberty to the petitioner to file a reply to the show cause notice. Reply, if and when filed by the petitioner, shall be considered by the officer in accordance with law and proceedings disposed/closed, after hearing the petitioner, within a period of one (1) from date of receipt of reply.

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• Income Tax

• 2022 (10) TMI 572
  Revision u/s 263 by CIT - 1st Assessment Order was already cancelled by PCIT and a proceeding u/s 263 of the Act was again initiated for the second time and 2nd order under Section 263 was passed by PCIT again - as argued first Assessment Order was already cancelled by the order passed by PCIT under Section 263 but the second order under Section 263 was also passed again cancelling the non existent first assessment order - ITAT set aside revision proceedings - HELD THAT:- Tribunal has considered each and every facet of the matter and allowed the appeal of the Assessee holding the order passed by the PCIT under Section 263 is bad in law. PCIT by invoking his jurisdiction under Section 263 of the Act is giving another opportunity to the assessing officer which is not permissible. The law is now no more res integra that once the issue is considered by the Assessing Officer, the remedy of the revenue could not lie in invoking the jurisdiction under Section 263 of the Act especially when the entire books of accounts and documents were produced by the Assessee before the Assessing Officer. However, in the instant case the Assessee was directed to produce 3rd time the same books of accounts. In addition, interestingly the PCIT while passing the order under Section 263 for the 2nd time has quashed and set aside 1st Assessment Order passed under Section 153(A)/143(3) of the Act dated 28.12.2016, though the same was already cancelled by the first round of 263 which is not permissible in the eye of law and the second assessment order which was passed after the first round of 263 was never cancelled and is still in existence. Tribunal has taken notes of each and every feature of the case, both on facts and on law, especially the point of law that there cannot be any proceeding under Section 263 for change of opinion by subsequent officer Admittedly in the instant case the entire documents were produced in the original assessment proceeding as well as in the subsequent assessment proceeding which was conducted after the first 263 order as such again in the second round of 263, the direction made by the PCIT is erroneous and has no legs to stand in the eye of law. Since no error has been found in the order passed by the learned ITAT, thus the same is hereby confirmed and the appeal filed by the Revenue is dismissed at the admission stage itself as no substantial question is involved in this case.

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• 2022 (10) TMI 571
  Disallowance u/s 14A r.w.r. 8D - ITAT confirming the disallowance made under Rule 8D not restricting the disallowance to 0.5% of those investment only where the assessee had earned exempt income - HELD THAT:- While Section 14A is the charging Section, Rule 8D is a method/mechanism to determine the amount of expenditure incurred in relation to income, which does not form part of the total income of the assessee. By virtue of the charging Section, namely, Section 14A, the Assessing Officer has the power only to determine the amount of expenditure incurred in relation to such income which does not form part of the total income under the Act. This Court is further of the view that Rule 8D(2)(iii) clearly postulates that in the calculation of the disallowance amount, an amount equal to onehalf percent of the value of the investment, income from which does not or shall not form part of the total income should be taken into consideration. Thus, it is not all investment but only that which is expressly spelt out in Rule 8D(2)(iii) read with Section 14A and Rule 8D(i) which is to be reckoned for the purpose of calculation of average of half percent. Only those investments are to be considered for computing average value of investments which yielded exempt income during the relevant assessment year. The question of law is answered in favour of the appellant-assessee, as this Court is of the view that the ITAT has erred in confirming the disallowance made under Rule 8D by not restricting the disallowance to 0.5% of those investment only where the assessee had earned exempt income.

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• 2022 (10) TMI 570
  Reopening of assessment u/s 147 - Notice u/s 148A(d) - proceedings initiated by passing order u/s 148A(d) of the Act and issuing notice u/s 148 of the Act in the new regime - as argued procedure laid down under Section 148A of the Act has not been followed, which has rendered the impugned notice null and void - HELD THAT:- The writ petition stands disposed of in terms of the judgment of Ashish Agarwal [ 2022 (5) TMI 240 - SUPREME COURT] as held if it is determined by the AO that the impugned notice was handed over to the postal office on or after 1st of April, 2021, for despatch the said notice will be construed as notice under Section 148A(b).

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• 2022 (10) TMI 569
  Assessment u/s 153A/153C - time frame for framing of an assessment - Capital gains arising from a transaction of sale of property - HELD THAT:- The time frame for framing of an assessment in terms of Section 153C has been fixed bearing in mind the practical consideration that, assimilation of materials relating to the third person to whom those assessments relate, is bound to take some time. More often than not, it is only upon completion of the primary assessments (under S.153A) that the Assessing Officer even comes to a reasoned conclusion as to whether proceedings are to be initiated against such other person or not. Thus, the transmission of seized materials/books/financials relating to the third person could take place at some distance of time from the framing of the Section 153A assessments. It is for this reason that Section 153C(2) provides for the framing of the assessment in respect of the year of search as well, subject to the seized materials being received by the Assessing Officer after the due date for furnishing of the return of income for the year of search. The handing over of the materials is before the due date for filing of returns which, in both cases, is 31.08.2018. In addition, the applicability of the situations adumbrated under clauses (a), (b) and (c) must be tested. The three conditions operate on a stand-alone basis, separated by the conjunction or , and not concurrently and the satisfaction or otherwise of any one of the three conditions would suffice to decide the question of jurisdiction. The second and third conditions are inapplicable since both petitioners have filed returns of income and no assessments have been framed. Condition (b) reads as follows, (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired . In the case of the petitioner the return has been filed on 26.09.2018 under Section 139(4), and is thus a valid return. Notice under Section 143(2) has been issued on 27.08.2019, also within time. Condition (b) is thus not satisfied and no proceedings may be initiated under Section 153C. The impugned order of assessment is set aside and this Writ Petition is allowed.

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• 2022 (10) TMI 568
  Exemption of income u/s 11 12 - Availability of registration u/s 12AA - HELD THAT:- In the instant case, Hon ble Tribunal directed the Ld.CIT(A) to condone the delay in filing the applications for registration u/s 12AA of the Act and also grant registration with retrospective effect. Accordingly, registration u/s 12AA was granted to the assessee. Merely based on the fact that the revenue has preferred an appeal against the order of the Hon ble Tribunal cannot be a reason for rejecting the claim u/s 11 or 12 of the Act for the assessee for the impugned assessment year. Pending adjudication of the appeal by the Hon ble High Court, the assessee is entitled to exemption u/s 11 or 12 of the Act for the year 2006-07. We, therefore, remit the matter back to the file of the AO and direct the Ld.AO to grant exemption u/s 11 or 12 of the Act in accordance with law. Appeal of the assessee is allowed for statistical purpose.

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• 2022 (10) TMI 567
  Exemption u/s 11 - corpus donation receipts - whether the donation received by the assessee from SVVFUIP, USA is general donation or a corpus donation with a specific direction? - HELD THAT:- We see from the letter submitted by the Ld. AR there is a clear direction from the donor to treat the amount donated as a specific direction towards corpus donation in order to build the corpus fund for the running of VMSS activities in the long run. It is clear from the letter that the intention of the donor is to set up a corpus fund in long run. - Decided against revenue. Claim of carry forward of unabsorbed excess of expenditure over income and unabsorbed depreciation - CIT(A) placing reliance on the decision of FramjeeCawasjee Institute [ 1992 (7) TMI 331 - BOMBAY HIGH COURT] wherein it was held that the Tribunal, however, took the view that when the ITO stated that full expenditure had been allowed in the year of acquisition of assets, what he really meant was that the amounts spent on acquiring those assets had been treated as application of income of the trust in the year in which the income was spent in acquiring those assets. This did not mean that in computing the income from those assets in subsequent years, depreciation in respect of those assets cannot be taken into account. This view was confirmed by case of CIT vs. Rajasthan and Gujarathi Charitable Foundation Poona [ 2017 (12) TMI 1067 - SUPREME COURT] . The Hon ble Supreme Court in the referred case held that also follows that once assessee is allowed depreciation he shall be entitled to carry forward the depreciation as well . The facts of the present case are similar to the facts of the above referred case. Respectfully following the judicial discipline, the Ld. CIT(A) directed the AO to allow claim of unabsorbed depreciation of earlier years. Allowance of excess of expenditure over income in earlier years as carry forward loss - CIT (A) relying on the decision of Maharana of Mewar Charitable Foundation [ 1986 (7) TMI 56 - RAJASTHAN HIGH COURT] , case of CIT vs. Sri Plot Swetamber Murthy Pujak Jain Mandal [ 1993 (11) TMI 17 - GUJARAT HIGH COURT] , case of CIT vs. Institute of Banking Personal Selection [ 2003 (7) TMI 52 - BOMBAY HIGH COURT] has concluded that the assessee is eligible for claiming excess expenditure over income of earlier assessment years. We therefore are of the view that there is no error in the order of Ld CIT(A) - Decided against revenue.

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• 2022 (10) TMI 566
  Registration u/s 10(23C)(vi) - application in form no. 56D was filed belatedly by the assessee on 27.10.2018 for seeking registration u/s 10(23C)(vi) - HELD THAT:- For the financial year 2017-18, as the power vested only with CBDT u/s 119(2)(b) of the 1961 to condone the delay. There is one more aspect, the assessee has claimed that the application in Form No. 56D on 27.10.2018 was filed on 27.10.2018 for seeking registration u/s 10(23C)(vi) for not only financial year 2017-18 , but also for subsequent years too, while the ld. CIT(E) has observed that the aforesaid application was filed by assessee only for one financial year2018-19(sic. financial year 2017-18). The copy of application in Form No. 56D filed by the assessee on 27.10.2018 is not produced before us. Whether the application was filed merely for one year as contended by ld. CIT(E) in its order or for financial year 2017-18 and subsequent years too as contended by assessee, is again a disputed fact, which requires to be verified by ld. CIT(E). If that be so as contended by the assessee that the application in Form No. 56D was filed for financial year 2017-18 and subsequent years, then ld. CIT(E) was right in rejecting the same for financial year 2017-18 as the application being belated application, while the ld. CIT(E) ought to have dealt with application for the assessee for subsequent years, as per law. Thus, we are restoring the matter back to the file of ld. CIT(E) for fresh adjudication , in accordance with directions as per our order. The ld. CIT(E) will first verify two disputed facts as are referred to in this order, before proceeding to adjudicate the issues on merit in accordance with law.

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• 2022 (10) TMI 565
  Reopening of assessment u/s 147 - addition u/s 68 - bogus profit on sale of shares - long term capital gains earned by the assessee as from a penny stock transaction pursuant to reassessment proceedings - interim orders passed by the SEBI in case of First Financial Services Ltd. - Whether capital gains earned by the assessee is not due to any price manipulation in scrips of First Financial Services Ltd? HELD THAT:- Since, the very transaction of the assessee in the scrips of First Financial Services Ltd, which resulted in long term capital gains to the assessee, has been found to be not violative of provisions of relevant Act and Rules by the SEBI upon necessary investigation and even the initial restraint order was revoked vide interim order dated 06/09/2017, therefore, we find no basis in sustaining the impugned addition made by the AO by treating the said transaction to be a penny stock transaction resulting in bogus long term capital gains. Accordingly, we direct the AO to delete the impugned addition - Further, since the other addition by AO is also consequent to the aforesaid impugned addition, therefore, the said addition is also directed to be deleted. - Decided in favour of assessee.

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• 2022 (10) TMI 564
  MAT computation u/s 115JB - assessee has received excise refund and interest subsidy which have been claimed as capital receipts - AO held that the scheme of Section 115JB does not permit for exclusion of capital receipts (excise refund and interest subsidy) as done by the assessee while computing the book profits for the purpose of Section 115JB - HELD THAT:- As in the case in hand the issue revolves around the capital receipts of the nature excise duty refund and interests subsidy which without any doubt are receipts of capital nature. Hon ble Calcutta High Court in the case of Ankit Metal and Power Ltd. [ 2019 (7) TMI 878 - CALCUTTA HIGH COURT] was directly dealing with the question whether the incentives received from the Government for setting up power plant in the backward regions of West Bengal are to be included for the purpose of computation of book profits u/s 115JB and after taking into consideration the judgment of Hon ble Supreme Court in Appollo Tyres Ltd. [ 2002 (5) TMI 5 - SUPREME COURT] observed that the income in question, in that case was taxable but was exempt under specific provision of the Act, as such it was to be included as a part of book profit. But since a receipt is not in the nature of income at all, it cannot be included in book profit for the purpose of computation u/s 115JB and accordingly held that interest in power subsidy under the scheme have to be excluded while computing book profits u/s 115JB. The Co-ordinate Bench in M/s. Insecticides (India) Ltd. [ 2022 (9) TMI 653 - ITAT DELHI] while dealing with question and treatment of capital receipts in computation of profit u/s 115JB had relied judgment of Hon ble Calcutta High Court in Ankit Metal and Power Ltd. (supra) and Co-ordinate Bench decision in SRF Ltd. [ 2022 (2) TMI 758 - ITAT DELHI] ITAT Delhi judgment dated 07.02.2022, and had held that since the receipt is not in nature of income, then it cannot be considered in the book profits for the purpose of computation u/s 115JB of the Act. Thus held that Appellant company has rightly reduced Capital Receipts of the nature excise refund and interest subsidy for working out Book Profits. The appeal is allowed

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• 2022 (10) TMI 563
  Disallowance of refund - wrong quoting of PAN - due to clerical error while filing ITR assessee incorrectly mentioned the earlier PAN instead of new PAN allotted - appellant filed rectification application and the same was rejected by the AO - Assessee stated that the benefit of TDS has not been availed by assessee - TDS certificate was in the earlier name of the assessee company i.e. M/s. MHVS Finlease Pvt. Ltd. - assessee prayed that assessee never received the notice that it is a defective return. HELD THAT:- Upon careful consideration, in our considered opinion, when interest of substantial justice is pitted against technicalities, it is the interest of substantial justice that prevails. Furthermore, the assessee s plea that it has not received the defect notice has not been categorically rebutted. Moreover as fairly agreed by ld. DR for the Revenue that ld. CIT (A) has not answered the appeal on the issue of section 154 issue raised by the assessee before him. Hence, in the interest of justice, we remit this issue to the file of ld. CIT (A) to decide the issue afresh keeping in mind the observation herein above. Needless to add, assessee should be granted adequate opportunity of being heard.

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• 2022 (10) TMI 562
  Addition u/s 68 - Bogus share capital including share premium - HELD THAT:- AO in this case has not made any independent enquiry to verify the genuineness of the transactions. The assessee having furnished all the details and documents before the AO and AO has not pointed out any discrepancy or insufficiency in the said evidences and details furnished by the assessee before him. As observed above, the assessee having discharged initial burden upon him to furnish the evidences to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction, the burden shifted upon the AO to examine the evidences furnished and even made independent inquiries and thereafter to state that on what account he was not satisfied with the details and evidences furnished by the assessee and confronting with the same to the assessee. A perusal of the impugned order of the ld. CIT(A) shows that the ld. CIT(A) has not discussed anything about the material facts of the case. He has not pointed out any defect and discrepancy in the evidences and details furnished by the assessee but simply cited certain case laws even without pointing out as to how these case laws were applicable to the facts and circumstances of this case. The order of the CIT(A) is a non-speaking order. By simply reproducing the contents of the case laws without discussing about their application on the facts of the case, in our view, would not make the order of the ld. CIT(A) justifiable speaking order and hence, the same is not sustainable as per law. No justification on the part of the lower authorities in making the impugned additions and the same are accordingly ordered to be deleted. - Appeal of assessee allowed.

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• 2022 (10) TMI 561
  Disallowance u/s 57(iii) - AO observed that while giving interest the assessee has consistently paid the interest @12% per annum in majority of the cases, whereas while charging interest, the maximum rate of 9% per annum has been charged by the assessee - AO held that interest expenses claimed by the assessee under Section 57(iii) are not allowable to the extent they are attributable to the lower interest charged by the assessee i.e. lesser than 12% per annum on the advanced made - HELD THAT:- CIT(A) has taken a reasonable approach by disallowing 1/4th of interest expenses in the instant facts. The assessee has not brought on record any commercial expediency why the assessee took loans at such high interest rates from related parties to give loans. Notably, the assessee has consistently taken loans at the interest rate of 12% per annum in the majority of the cases, whereas while charging interest, maximum rate of 9% per annum has been charged. The assessee has paid interest at the rate of 12% per annum to a son s HUF but has not charged any interest from the son in his individual capacity against whom there was a closing balance of Rs. 3, 94, 82,000/-. In the instant facts, the assessee took unsecured loans from several parties at rates ranging from 6%, 8%, 8.5% and 12% (totaling to rupees 22,67,99,016/-) and the assessee gave loans amounting to Rs. 22,48,00,614/- at rates ranging from 8-9%. In the instant facts, the assessee has not been able to establish the commercial expediency for taking loans at higher rates and giving the same at lower rates. Accordingly, CIT(A) has not erred in facts and in law in restricting the disallowance to 1/4th of such interest paid at the rate of 12% as being excessive and unreasonable under section 58(2) rws 40 A (2) of the Act. Appeal of the assessee is dismissed.

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• 2022 (10) TMI 560
  Addition on account of share application/ premium received - assessee received the amount as share application money/share premium from a venture capital fund investing in start-up companies - HELD THAT:- It is not in dispute that the amount received by the assessee is duly reflected in the Balance Sheet of IL FS as investment. There is also no dispute that the transaction between the assessee and IL FS received clean chit in internal report of Income Tax Department . Also not in dispute that no adverse view was taken by the Assessing Officer in respect of aforesaid fresh amount received by the assessee from IL FS. It is furthermore not in dispute that IL FS is registered with SEBI as a Venture Capital Fund. Impliedly, the transactions of IL FS with the assessee were in the normal course of business of IL FS as a Venture Capital Fund. Furthermore, it is not in dispute that shares have been allotted by the assessee to IL FS. Sr. DR for Revenue did not dispute that issue was squarely covered in favour of assessee and against Revenue, by aforesaid order of CIT vs. Vrindavan Farms (P) Ltd. . [ 2015 (11) TMI 279 - DELHI HIGH COURT] and in the case of Hindon Forge (P) Ltd. [ 2020 (12) TMI 124 - ITAT DELHI] . Sr. DR for Revenue also did not dispute the legal contention of Ld. Counsel for the assessee, that proviso to section 68 of IT Act inserted by Finance Act, 2012 w.e.f. 01/04/2013 had no application for Asst. Year 2012-13 to which this appeal pertains. Further, loss in the hands of IL FS is duly explained by the contention made from the assessee s side that IL FS, as a Venture Capital Fund, did not sell investments in sufficient quantities in Asst. Year 2012-13 and 2013-14; which was not disputed by Ld. Sr. DR for Revenue. Thus we are of the view that the Ld. CIT(A) and the AO erred in taking an adverse view regarding creditworthiness of IL FS and regarding genuineness of transaction of the assessee with IL FS. Accordingly, we direct the Assessing Officer to delete the aforesaid addition.

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• 2022 (10) TMI 559
  Validity of assessment/re-assessment u/s 153C - Necessity of Satisfaction Note regarding initiation of proceedings - HELD THAT:- In the case in hand, pre-amended law u/s 153C of the Act needs to be applied [since the date of search was on 27.10.2014, that has to be considered to be relevant date for the purpose of applying the provision of section 153C(1) of the Act, even though the satisfaction note was handed over to AO of assessee on 15.03.2017]. The essential jurisdictional fact for initiation of assessment u/s 153C of the Act as per the pre-amended section 153C of the Act is that AO of the searched person should be able to return a finding of fact that the seized material belongs to assessee and thereby rebutting the presumption that documents seized belongs to searched party. Whether the satisfaction note recorded by the AO of the searched person (M/s. Navjeevan Trust) i.e. DCIT-CC-2(1), Mumbai satisfies the requirement of law as prescribed under the pre-amended section 153C ? - Jurisdictional fact [seized material from M/s Navjeevan belongs to third party the assessee] does not exist, and the DCIT/AO of searched person wrongly assumed that the documents seized during searched on 27.10.2014 at the premises of M/s. Navjeevan Trust belongs to the assessee which was on wrong assumption of facts and therefore the foundational fact recorded by DCIT in his satisfaction note itself is bad in law. Therefore, we are of the considered opinion that the satisfaction note prepared at the first stage by AO of the searched persons [DCIT-CC-2(1)] in respect of third party assessee for initiation of proceedings u/s 153C of the Act does not satisfy the requirement of the law and consequently all actions taken pursuant thereto by the AO of the assessee i.e. ITO, Ward (4)(3) also is void-ab-initio and we hold accordingly. Penalty levied u/s 271(1)(c) - In the light of us quashing the assessments framed u/s 153C of the Act for AY 2010-11, 2011-12, 2012-13, the penalty levied also based on those assessments, has to fall because the case of assessee is squarely covered by the legal Maxim Sublato Fundamento credit opus meaning in case foundation is removed, the super-structure falls. In the case of Badarinath Vs. Tamilnadu [ 2000 (9) TMI 1044 - SUPREME COURT] held that once the basis of proceedings is gone, all consequential order/action would fall on the ground automatically which is applicable to judicial and quasi-judicial proceedings also. Thereafter, the impugned penalty for all the captioned appeals needs to be cancelled and we do so. All the appeals of the assessee are allowed.

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• 2022 (10) TMI 558
  Delayed employees contribution of provident fund - scope of amendment - HELD THAT:- The amendment was brought in Finance Act, 2021 w.e.f 01.04.2021. The law was not framed/amended in the relevant Assessment year and any legal proposition which cast additional burden/liability on the assessee cannot be implemented retrospectively. We considering the overall facts, circumstances, judicial decisions, are of the reasoned view that the amendment to section 36(1)(va) of the Act will not be applicable to Assessment Year 2019-20. The assessee has deposited the employees contribution of provident fund before the due date u/s. 139(1) of the Act. Accordingly, we set-aside the order of the Ld.CIT(A) and direct the assessing officer to delete the disallowance and allow the grounds of appeal in favour of the assessee.

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• 2022 (10) TMI 552
  Deduction u/s 36(1)(viii) - long term finance for agricultural and industrial development - AO declined to allow the deduction on the ground that notification declaring the assessee as a financial institution was issued on 23.02.2004, which fell in the subsequent year - Assessee in computation of the income has claimed deduction contending that it has provided long term financing for agricultural development and therefore eligible for deduction under section 36(1)(viii) of the Act to the extent of profit derived from such activities subject to creation of special reserve - HELD THAT:- In determining the liability of a subject to tax, regard must be had to the strict letter of law and if the revenue would satisfy the Court that case falls strictly within the provisions of the law, necessarily the assessee has to be taxed. In interpreting the Taxing Statute, equitable construction are entirely out of place. The Court would look into the words of Statute and interpret them. Taxing Statute cannot be interpreted on any presumption or assumptions. It cannot import the provisions in the Statute so as to supply any assumed deficiency. It is trite law that exemption notification is to be read strictly and burden is on the assessee to prove that item falls within the four corners of such exemption notification. An exemption notification should be given a liberal meaning. Recourse to other principles or cannons of interpretation of Statute would be resorted to only in the event of the same giving rise to anomaly or absurdity. The exemption given under the notification or Statute must be construed having regard to the purpose and object sought to be achieved. Insofar as the contention of assessee that section 35C also provided for allowing deduction, the amount of expenditure relatable to agricultural development and the expression used in section 36(1)(viii)(b)(i)(A) requires to be considered for the purposes of outright rejection, inasmuch as the very provision namely section 35C itself provides that where any Company or a co-operative society is engaged in the manufacture or processing of any article or thing which is made from, or uses in such manufacture or processing as raw material, any product of agriculture, animal husbandry, or diary or poultry farming, and has incurred after the 29th day of February, 1968 [but before the 1st day of March, 1984], whether directly or through an association or body which has been approved for the purposes of this section by the prescribed authority, any expenditure in the provision of any goods, services or facilities specified in clause (b) to a person (not being a person referred to in clause (b) of sub-section (2) of section 40A) who is a cultivator, grower or producer of such product in India, the company (or co-operative society) shall, subject to the provision of this section, be allowed a deduction of the amount of such expenditure incurred during the previous year. Whereas said provision pressed into service would not include or extend to the expression or phrase Industrial or agricultural development by taking within its sweep the dairy or animal husbandry activity. Contention raised by assessee cannot be accepted. Hence, we are of the considered view that providing long term finance for industrial or agricultural development to various diary cooperations cannot be covered as long term finance extended for agricultural or industrial development. Decided in favour of revenue. Deduction on account of payment of gratuity u/s 43B - amount was contributed to NDDB employees group gratuity cum life assurance scheme and as such claimed deduction - assessee was awaiting the approval and non approval does not amount to non recognition . Hence, it was contended that in terms of section 43B(b) - HELD THAT:- A mere intimation is to be made in absence of any withdrawal of earlier approval, at this stage, we may state that for long period of 15 years, scheme remained inoperative, without continuance of approval and when we see communications which are sought to be relied upon clearly indicate that even assessee was also in clear understanding about the requirement of approval. In no uncertain terms, said communications dated 23.9.2003, 1.4.2004, 12.4.2004 and 17.8.2004 indicate that it is the appellant assessee who submitted deed of variation on 23.9.2003 onwards and sought specific approval. Not only this communication dated 23.9.2003 but subsequent reminders also clearly suggest that what has been sought for is approval and as such, the assessee itself was conscious about the situation of seeking approval. As a result of this, a conjoint effect of sequence of events, as stated above, and in view of the literal meaning of relevant provisions, we are of the considered opinion that no error is committed by the authorities below in disallowing deduction sought for by the assessee and as such, we hereby answer the substantial question No.(F) in favour of the revenue.

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• 2022 (10) TMI 551
  Validity of reopening of assessment u/s 147 - proceedings initiated by passing order u/s 148A(d) of the Act and issuing notice u/s 148 of the Act in the new regime - without taking into consideration the fact that the limitation for completing the re-assessment proceedings pursuant to the notice issued under Section 148 had already elapsed subsequently issued the impugned show cause notice under Section 148A(b) - HELD THAT:- This Court is of the view that the Respondent having issued and served the impugned notice on 31 st March, 2021 under Section 148 of the unamended Act, could not have issued another notice under Section 148A(b) of the Act dated 2nd June, 2022 to the Petitioner. Further the directions given by the Supreme Court in Ashish Agarwal [ 2022 (5) TMI 240 - SUPREME COURT] were applicable to cases, where notices under Section 148 of the Act had been issued during the period 01st April, 2021 to 30th June, 2021 which is not the case in the present matter. Consequently, the show cause notice dated 2nd June, 2022 as well as the order passed under Section 148A(d) of the Act and the notice issued under Section 148 of the Act, both dated 28th July, 2022, for the Assessment Year 2017-18 are quashed. This Court clarifies that it has not dealt with the legality and validity of the proceedings initiated vide show cause notice dated 31 st March, 2021 issued under Section 148 of the unamended Act. If the law permits the Respondent-Revenue to take further steps in the matter, they shall be at liberty to do so. Needless to state that if and when such steps are taken and if the Petitioner has a grievance, it shall be at liberty to take its remedies in accordance with law.

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• 2022 (10) TMI 550
  Reopening of assessment u/s 147 - Scope of mandatory procedure of newly inserted Section 148A - bogus LTCG - HELD THAT:- The issue of limitation though raised in the reply to the SCN was not urged by the learned counsel for the petitioner. However, as noted above the initial reassessment notice has been construed as a notice under Section 148A(b) in terms of the judgment in Ashish Agarwal [ 2022 (5) TMI 240 - SUPREME COURT] and therefore the proviso to Section 149 of the Act is not attracted in the facts of this case. In view of the report of DDIT (Inv.) Unit-7(1) and 7(3) Mumbai, shared with the AO which suggests that the LTCG earned by the petitioner in AY 2014-15 was bogus and since, the said LTCG was claimed as exempt income, the AO at this stage, concluded that the said bogus LTCG is an income chargeable to tax which has escaped assessment. We therefore in the facts of this case do not find any ground to interfere with the impugned order dated 20th July, 2022, passed under Section 148A(d) of the Act and the re-assessment proceedings, at this initial stage. Writ petition is dismissed reserving liberty to the petitioner to raise all its contentions before the AO. We however direct the AO to provide the petitioner with all the relevant information pertaining to petitioner s transaction with Nyssa Corporation Limited available with the AO, after redacting third party information within four weeks from today.

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• 2022 (10) TMI 549
  Reopening of assessment - notice u/s 148 A(b) - monetary limit of amount of income alleged to be escaped - period as granted is less than seven days as prescribed by Section 148A(b) - unexplained cash deposits - HELD THAT:- The petitioner has responded to the notice by his reply dated 29.03.2022. Alongwith the reply, copy of the registered sale deed dated 03.02.2015 indicating that it was his daughter who had purchased the immovable property therein was supplied. The petitioner s daughter is separately assessed for tax. The name of the petitioner is mentioned as special power of attorney holder for his daughter. The registered sale deed clearly indicates that the petitioner is not the purchaser of the immovable property mentioned therein but it is his daughter, a separate assessee. The amount of consideration mentioned is Rs.40,00,000/- and it is stated that the purchaser had availed housing loan for the same. On a bare perusal of the registered sale deed, it becomes evident that the petitioner is not the purchaser of the said property as stated in the notice issued under Section 148A (b) of the Act of 1961. Despite supplying copy of the registered sale deed to the AO, it has not been taken into consideration by him before passing the order under Section 148A(d) of the Act of 1961. The same thus clearly indicates lack of application of judicious mind to the material on record. The amount of Rs.40,00,000/- as mentioned in the notice issued on 23.03.2022 u/s 148A(b) thus deserves to be excluded from consideration. As regards deposit of cash petitioner denied having deposited the aforesaid amount in his bank account. The material/source of information was not supplied to the petitioner. Be that as it may, even if the amount of Rs.40,00,000/- as mentioned in the notice dated 23.03.2022 is excluded from consideration for the reason that the petitioner is not the purchaser of the property in question, the amount remaining for consideration is Rs.20,71,500/- and Rs.16,20,000/- thus totaling Rs.36,91,500/-. In this regard, if the provisions of Section 149(1)(b) of the Act of 1961 are considered, it is seen that only if the amount in question that is likely to have escaped assessment is Rs.50,00,000/- or more, the time limit for issuing notice to re-open the assessment is three years but less than ten years. Thus if the income that is likely to escape assessment is only Rs.36,91,500/- after excluding the amount of Rs.40,00,000/-, it is clear that the proceedings are not liable to be re-opened as the amount involved is less than the one contemplated u/s 149(1)(b) of the Act of 1961 and the same pertains to Assessment Year 2015-16. The notice under Section 148(b) is dated 23.03.2022 which is beyond the permissible period of three years. On this count, a case for interference has been made out. It would be futile to require the petitioner to face proceedings under Section 148 of the Act of 1961. The material on record that was placed before the AO warranted consideration especially in the light of the fact that the document relied was a registered sale deed. If the amount of Rs.40,00,000/- mentioned therein is excluded from consideration, the notice as issued on 23.03.2022 falls foul of the provisions of Section 149(1)(b) of the Act of 1961. Hence for this reason, we do not find that the petitioner should be required to further contest the proceedings under Section 148 of the Act of 1961. The order passed under Section 148 A(d) as well as notice issued under Section 148 are quashed and set aside. Decided in favour of assessee.

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• 2022 (10) TMI 548
  Reopening of assessment u/s 147 - order u/s 148A(d) - HELD THAT:- We have gone through the order under Section 148A(d) of the Act. We find that the impugned order does not deal with the contentions and submissions advanced by the petitioner in its replies dated 9th June, 2022 and 28th June, 2022. Since the impugned order and the notice issued u/s 148 are non-reasoned, the same are set aside and the matter is remanded back to the AO for a fresh consideration u/s 148A(d) - AO shall pass a fresh reasoned order in accordance with law within eight weeks. This Court clarifies that the AO shall be at liberty to conduct any further enquiry or verification before passing the order.

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• 2022 (10) TMI 547
  Refund the amount back to the petitioner - Reasons for non-crediting of refund is that assessee is not able to validate bank account on e-filing portal - HELD THAT:- The material on record clearly indicate that the respondent is liable to refund the amount back to the petitioner together with applicable interest in accordance with law. Under these circumstances, the present petition deserves to be allowed by issuing necessary directions to the respondent to refund the amount together with applicable interest back to the petitioner in accordance with law. WP allowed. The respondent is directed to refund the amount together with applicable interest back to the petitioner in accordance with law.

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• 2022 (10) TMI 546
  Unexplained cash deposits, disallowance of claim made under Chapter-VIA and unexplained credits - CIT(A) admitted the additional evidence filed by the assessee and granted part relief and confirmed the additions - HELD THAT:- It is noted from the order sheet that on various occasions, in fact on all occasions, the case was adjourned as there was none appeared to represent the case of the assessee. However, on perusal of the facts, we observed that the though the Ld. AO made additions the Ld. CIT(A) provided sufficient opportunity to the assessee and following the principles of natural justice allowed the additional evidence furnished before him and called for the remand report. Based on the assessee s submissions, remand report of the Ld. AO as well as the additional evidences produced by the assessee, the Ld. CIT(A) granted substantial relief to the assessee more that 60% of the quantum additions. In our considered opinion, the onus is on the assessee to appear before the Tribunal and substantiate its claim by producing the cogent material and documentary evidence. In the present case, this lacks on the part of the assessee. Therefore, in the absence of any material / documentary evidence contrary to the decision of the Ld. CIT(A), we are of the considered opinion that there no interference is required in the order of Ld. CIT(A). Assessee appeal dismissed.

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• 2022 (10) TMI 545
  Computing the income from LTCG - adoption of market value by the Ld.CIT(A) as against the market value adopted by the SRO at the time of registration - reverse formula adopted by the CIT(A) would work out the market value - assessee could not obtain the certificate of market value of the property as on 01.04.1981 as the records of the Sub-Registrar were destroyed for the period prior to 01.01.1989 due to riots - HELD THAT:- As relying on ASHVEN DATLA [ 2012 (11) TMI 1098 - ANDHRA PRADESH HIGH COURT] CIT(A) has considered the reverse indexation method submitted by the Ld.AR and has rightly directed the AO to adopt the same. Therefore, find no interference in the order of the Ld.CIT(A) and accordingly dismiss the grounds raised by the revenue.

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• 2022 (10) TMI 544
  Exemption u/s 54 - investment towards the purchase of new residential property - As submitted exemption needs to be allowed if the amount is invested on or before the due date of filing of return under section 139(4) - HELD THAT:- As relying on ratio laid down by in the matter of Xavier J. Pulikkal v. Dy. CIT [ 2014 (4) TMI 211 - KERALA HIGH COURT] it can be safely be concluded that the assessee in the case before us is entitled to claim exemption under section 54 to the extent she had invested towards the purchase of new residential property under consideration upto the date of filing of belated return under section 139(4) i.e. 31.03.2014. In the case before us assessee purchased new property well before the deadline given in section 139(4) i.e. 30.04.2013 for Rs. 1,66,74,200/-. Which we find is much in excess of LTCG of Rs. 1,19,45,236/-. We therefore, in terms of our aforesaid observations set-aside the order of the CIT(A) and vacate the disallowance of the assessee s claim of exemption under section 54 of Rs. 1,19,45,236/- as was sustained by him. Appeal filed by the assessee is allowed.

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• 2022 (10) TMI 543
  Addition u/s 69 - Unexplained investment - argument taken up by the assessee is that he is not the owner of the properties and in respect of 11 properties he is only a confirming party - HELD THAT:- We observe that the Assessing Officer in the absence of supporting material produced before by the assessee (despite several opportunities being granted to the assessee) made additio on estimated basis by considering 1/10th of the total consideration of 14 properties as unexplained investments u/s. 69 of the Act in the hands of the assessee. From the above facts, it is however not very clear as to whether the assessee was a confirming party in respect of 14 properties referred to the AO and also what was the precise investment in the aforesaid properties made by the assessee and consequently the amount that may be taxed in the hands of the assessee. In view of the above facts, in the interest of justice, we are restoring the matter back to the AO in order to ascertain from the facts whether the assessee is only a confirming party in respect of the aforesaid transaction of investment in 14 properties or whether he is a owner in respect of such properties, the precise investment made by the assessee in the aforesaid properties and also to verify whether the source of such investment has been duly explained by the assessee. In the result, the matter is being restored to the file of Assessing Officer with the above directions. Appeal of the assessee is allowed for statistical purposes.

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• 2022 (10) TMI 542
  On-money received - survey action conducted on them u/s 133A - assessee had failed to honour surrender made by it during survey in this regard for the impugned year - addition made was that the surrender made by the assessees during survey was on estimate basis while disclosure made subsequently in the return filed was on actual basis of the number plots sold by the assessee on which the assessee admitted to have received on-money - HELD THAT:- For the impugned assessment year, accordingly, no disclosure has been made by the assessee in the return of income. It is therefore clearly not a case of retraction of surrender at all. Whatever the assessee had surrendered, it was duly declared in its return of income of the preceding year. What the Revenue is now attempting to do is to apply a hypothesis that since the assessee had admitted to having received on-money in the preceding year, the same logic would apply to all properties sold in the impugned year also. But we find that other than surrender made by the assessee, there is no incriminating material with the Revenue lending credence to this hypothesis. The assessee has repeatedly stated that it made surrender to buy peace and whatever was surrendered it had honoured in the preceding year. In the absence of any other evidence, the surrender made by the assessee alone cannot be sufficient to establish that the assessee has actually received onmoney on all transactions, and therefore no addition could have been made in the impugned year for any on-money receipt. Accordingly, the order of the CIT(A) upholding the addition.

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• 2022 (10) TMI 541
  Applicability of provisions of section 44AE - deduction of business expenditure against the business receipts - HELD THAT:- As there is no dispute that the assessee fulfilled the aforesaid conditions, he owned not more than ten carriages at any time during the previous year and he was also engaged in the business of plying, hiring or leasing of such goods carriages. The receipts related to such goods carriages which owned by the assessee, would be subjected to provisions of section 44AE of the Act. In the present case, the assessee has taken certain goods carriages on hire which is not owned by the assessee and the assessee claimed certain expenses related to such carriages which is disallowed by the lower authorities. CIT(A) has not appreciated this aspect. AO is directed to give deduction of expenditure which related to the goods carriages which were not owned by the assessee but taken on hire from the open market for carrying out the transportation activities. Hence, Ground Raised by the assessee in this appeal are allowed in terms indicated herein above. Appeal of the assessee is partly allowed.

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• 2022 (10) TMI 540
  Demand u/s 201(1 )/201 (1 A) - jurisdiction on account of expiry of limitation - whether the limitation period would be two years or six years as per amendment and whether amendment applies retrospectively? - HELD THAT:- This issue is squarely covered in favour of the assessee by the order of the Tribunal in assessee s own case passed [ 2022 (8) TMI 219 - ITAT DELHI] as ITAT had held that in similar circumstances in the similar period, the assessment order passed was held to be invalid as it was passed beyond the limitation period for two years. Following the precedent in assessee s own case as above, we hold the assessment order passed in the present case on 05.03.2018 relating to the Assessment Year 2011-12, on the same reasoning is beyond limitation period and void ab intio. Following the decision of the Co-ordinate Bench, the appeal of the assessee stands allowed.

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• 2022 (10) TMI 539
  Capital gain - income arising from sale of impugned property - Addition applying provisions of section 50C - valuation done to arrive at the fair market value of the impugned land property - HELD THAT:- AO and CIT(A) left the calculation of income on the sale transaction of impugned land property midway, owing to non-availability of fair market value of impugned land property on the date of conversion i.e. as on 31.03.2008. CIT(A) while giving relief to the assessee has accepted the income from the sale transaction of the impugned land as business income as claimed by the assessee in its return. By accepting such a claim of the assessee by the CIT(A), it implies that provisions of section 45(2) have been applied which is without verifying and examining the veracity of the claim of conversion itself. It is pertinent to note that assessee itself made a submission before the ld. AO vide its letter dated 09.03.2016, contents of which are reproduced in para 2.2 above, whereby assessee had discontinued its business and had no staff and also that the impugned property is the only property which it held as stock in trade. As already noted that there are two components of income which are brought to tax when the provisions of section 45(2) are applied, viz., capital gains on the conversion and business income on the sale of converted stock in trade. In the present case, the business income is subjected to tax as claimed by the assessee and allowed by the Ld. CIT(A). However, the other component of capital gains on the conversion of capital asset into stock in trade has been assumed to be forming part of the business income itself, which to our mind is not a correct application of the provisions of section 45(2) of the Act. It is proper to set aside the order of ld. CIT(A) on the issue of income from sale transaction of land property and remit the matter back to the file of CIT(A) to call for and obtain the pending valuation report from the DVO for which he had directed the Ld. AO as stated - We also direct to conduct due verification and examination of the claim of conversion made by the assessee in terms of our above observations for which, if deem fit, a remand report may be called from the ld. AO. Based on the valuation report of the DVO, examination of the veracity of claim of conversion and the remand report from the ld. AO, if any, Ld. CIT(A) is directed to arrive at both the components of income from sale transaction of the impugned land property by applying the provisions of section 45(2) of the Act and decide the issue accordingly. The assessee is also directed to cooperate with the Ld. DVO and Ld. CIT(A) in having the valuation done to arrive at the fair market value of the impugned land property as on 31.03.2008 i.e. the date of conversion. Needless to say that the assessee be given a reasonable opportunity of the heard before disposal of the appeal by the Ld. CIT(A). In the result, ground taken by the Department in this respect is partly allowed for statistical purposes. Disallowance u/s 14A - sufficiency of own funds - HELD THAT:- As undisputed facts are that own funds available with the assessee are much more than the investments made by the assessee. Accordingly, respectfully following the decisions referred by the Ld. Counsel in the case of South Indian Bank [ 2021 (9) TMI 566 - SUPREME COURT] by the Hon ble Supreme Court, we direct to delete the disallowance made by the ld. AO under section 14A of the Act. Thus, ground taken by the Department in this respect is dismissed.

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• 2022 (10) TMI 538
  Revision u/s 263 by CIT - applicability of 5th proviso to section 32(1) - depreciation claimed on goodwill arise out of amalgamation - HELD THAT:- As regards, the first issue of depreciation on goodwill arise out of amalgamation, we find that similar issue had been considered by the Tribunal in the assessee s own case for the AY 2015-16 [ 2022 (7) TMI 160 - ITAT CHENNAI] where on identical set of facts and on identical reasons, PCIT has revised assessment order passed by the AO u/s.263 of the Act, on the issue of depreciation on goodwill in light of 5th proviso to sec.32(1) - Tribunal after considering relevant facts and also applicability of 5th proviso to sec.32(1) held that depreciation claimed on goodwill arose out of amalgamation, is not hit by 5th proviso to sec.32(1) of the Act and thus, set aside the order of the PCIT u/s. 263 on this issue. Thus we are of the considered view that the assessee has rightly claimed depreciation on goodwill arise out of amalgamation, because, 5th proviso to sec.32(1) has no application to the facts of the present case. Therefore, we are of the considered view that assumption of jurisdiction by the PCIT on this issue is fails. Disallowance of provision for warranty expenses - According to the PCIT, there is a five times increase in provision for warranty expenses for the AY 2014-15 when compare to AY 2013-14 - We find that the assessee is in the business of manufacturing diagnostic equipments is required to provide warranty on goods manufactured and sold to customers. The assessee is making provision for warranty expenses on the basis of past history and such provision has been made on scientific basis considering the facts including past history and experience and warranty provided to customers. In our considered view, provision for warranty expenses provided by the assessee in the books of accounts is on the basis of past history and further, such provision has been made on scientific basis. It is in accordance with the decision in the case of Rotork Controls India (P) Ltd. [ 2009 (5) TMI 16 - SUPREME COURT] wherein, it was held that provision for warranty expenses is ascertained liability and hence, allowable as business expenditure. AO after considering the relevant facts has rightly allowed the claim of the assessee. No doubt, there is no specific discussion on the issue in the body of the assessment order, however, just because there is no specific discussion on the issue in the assessment order, it does not mean that the AO has not carried out necessary enquiries. In this case, on the basis of details furnished by the assessee, what we noted that the issue has been thoroughly examined by the AO and has allowed the claim of the assessee. Therefore, we are of the considered view that assumption of jurisdiction by the PCIT on this issue also fails. Disallowance u/s.14A r.w.r.8D - Consequent to the merger effective from 01.04.2013, when both the assessee s financials and M/s.Kiran Medical Systems s financials are consolidated, the dividend income earlier received from amalgamating company losses its nature of dividend as no company can declare a dividend for itself and accordingly, the same cannot be treated as dividend for the purpose of s.14A - Tax Auditor has quantified higher disallowance u/s.14 in the case of the assessee, but such quantification has been made by taking into account dividend income received by the assessee and relevant expenditure incurred for the assessment year. Once after amalgamation dividend income becomes nil and the question of disallowance expenditure relatable to dividend income does not arise. Therefore, in our considered view the AO has rightly accepted the claim of the assessee on the issue of disallowance u/s.14A and thus, we are of the considered view that assumption of jurisdiction by the PCIT on this issue also fails. We are of the considered view that assessment order passed by the AO u/s.143(3) of the Act dated 22.12.2016 is neither erroneous nor prejudicial to the interest of the Revenue. PCIT without appreciating the facts simply set aside the assessment order passed by the AO u/s.263 on three issues. Therefore, we quashed the order of the PCIT u/s.263 - Appeal filed by the assessee is allowed.

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• 2022 (10) TMI 537
  Deduction u/s 35AD - in t ax audit report filed, nothing is stated in respect of the said claim - CIT(A) in allowing the claim of 35AD made by the assessee by admitting fresh evidences - Whether there is violation of provisions of Rule 46A of IT Rules? - HELD THAT:- As admitted fact that for the relevant assessment year in the tax audit report, there was no requirement for stating regarding deduction u/s.35AD and the requirement of specifying the deduction u/s.35AD came into existence w.e.f 25.7.2014, much after the relevant assessment year. It is also noticed that in the audit report, the auditors have reduced the value of the assets from the total value of the assets eligible for deduction on the ground that such assets were being claimed against the deduction u/s.35AD. As noticed that the primary evidence being the completion certificate and the commissioning report dated 28.1.2013 certified by the Vice President (Operation Corporate Planning) and Executive Authorisation dated 5.7.2012 confirming the installation and completion report was not before the AO. Hence, the issue in the appeal is restored to the file of the AO for verification of the said two certificates. If the certificates are found to be correct, then the assessee would be entitled to deduction u/s.35AD. Appeal of the revenue is partly allowed for statistical purposes. Denial of deduction of leave encashment u/s.43B(f) - HELD THAT:- As fairly agreed that this issue is identical to the issue in appeal filed by the assessee [ 2022 (10) TMI 463 - ITAT CUTTACK] for the assessment year 2012-13. As we have already restored the issue of allowability of leave encashment u/s.43B(f) of the Act in line with the principles laid down by Hon ble Supreme Court in the case of Exide Industries Ltd [ 2020 (4) TMI 792 - SUPREME COURT] on identical findings, the issue is restored to the file of the AO for this year also. Appeal of the assessee is partly allowed for statistical purposes.

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• 2022 (10) TMI 536
  Addition u/s 68 - unexplained cash credits of share capital and security premium received during the year - HELD THAT:- Even after providing sufficient opportunity no submission was made either before the ld. AO and ld. CIT(A) nor before us in this regard. The assessee was asked to explain the cash credits received by it during the year. The assessee failed to file necessary details to explain the source of alleged cash credit and also unable to prove identity, creditworthiness of the cash creditors as well as genuineness of the transaction as per section 68 - The assessee company has miserably failed to explain the source of alleged cash credit. If the assessee had sufficient details to explain the alleged sum, it could have certainly filed those details. Consistently escaping from appearing before the AO and the appellate authority (CIT-A) indicates that the assessee has no plausible explanation to explain the source of alleged sum of share capital and security premium. If the assessee is unable to explain the alleged cash credit and consistent escaped, the provisions of section 68 of the Act are attracted. Thus, it is held that the assessee has routed its unaccounted income in the books of account in the form of share capital and security premium by arranging bogus share capital and share premium through accommodation entry provider. Therefore, under these facts and circumstances, we find no infirmity in the finding of the ld. CIT(A) confirming the addition made u/s. 68 of the Act and the same is confirmed. Appeal of the assessee is dismissed.

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• 2022 (10) TMI 535
  Addition u/s 68 - unexplained cash credits of share capital and security premium received - identity, creditworthiness and genuineness of the transaction proved or not? - HELD THAT:- After providing sufficient opportunity no submission was made either before the AO and ld. CIT(A) nor before us in this regard. The assessee was asked to explain the cash credits received by it during the year. The assessee failed to file necessary details to explain the source of alleged cash credit and also unable to prove identity, creditworthiness of the cash creditors as well as genuineness of the transaction as per section 68 - The assessee company has miserably failed to explain the source of alleged cash credit. If the assessee had sufficient details to explain the alleged sum, it could have certainly filed those details. Consistently escaping from appearing before the ld. AO and the appellate authority (ld. CIT-A) indicates that the assessee has no plausible explanation to explain the source of alleged sum of share capital and security premium. If the assessee is unable to explain the alleged cash credit and consistent escaped, the provisions of section 68 of the Act are attracted. Thus, it is held that the assessee has routed its unaccounted income in the books of account in the form of share capital and security premium by arranging bogus share capital and share premium through accommodation entry provider. Under these facts and circumstances, we find no infirmity in the finding of the ld. CIT(A) confirming the addition made u/s. 68 of the Act and the same is confirmed. Thus, grounds of appeal raised by the assessee are dismissed.

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• 2022 (10) TMI 534
  Addition u/s.36(1)(va) on the ground of belated payments - EPF contributions and that of ESIC were deposited delayed - HELD THAT:- It is pertinent to note that the Hon ble Jurisdictional High Court [ 2014 (1) TMI 502 - GUJARAT HIGH COURT] has categorically observed that Employees Contribution to the EPF and ESIC deposit s beyond the due date prescribed under Section 36(10(va) of the Act would not be eligible for deduction under Section 43B of the Act even after depositing before the due date of filing of tax return. The issue contested by the assessee in the present appeal is squarely covered by the decision of Hon ble Jurisdiction High Court against the assessee. Hence, appeal filed by the assessee is dismissed.

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• 2022 (10) TMI 533
  Addition u/s 40(a)(ia) - if the tax is deducted in any subsequent year, the expenditure will be deducted in the year in which TDS will be deposited by the assessee - HELD THAT:- As admittedly assessee could not establish that tax was not deducted in the relevant previous year and merely claimed that it was deposited on 05.10.2010 i.e. before extended due date of filing return on 15.10.2010. The assessee will be entitled to deduction of expenditure in the subsequent year in which TDS is deposited. Accordingly, no interference is required in the findings of CIT(A). The issue is decided against the assessee. Addition u/s 41(1) - difference between balance as per the assessee and balance as per confirmation by the parties u/s. 41(1) - HELD THAT:- The assessment order however, mentions that the difference in confirmation was confronted to the assessee on 28.12.2010 and the authorized representative of the assessee had offered the same taxation. This fact is not otherwise established from any matter. Thus, the issue needs to be restored to the files of Ld. AO to take into consideration the confirmation submitted by the assessee from M/s. Steel Grace India Pvt. Ltd. and tendered along with the letter dated 18.03.2013 and thereupon decided the disputed addition of Rs. 35,00,000/- afresh. Accordingly, ground no. 2 and 3 are decided in favour of the assessee for statistical purposes. Addition u/s 68 - HELD THAT:- Assessee justifies the entry of loan made on 31.03.2010 by general voucher entry after receiving letter dated 22.03.2010 form HUDA. AO had made the addition primarily on the basis of lack of documentary evidence which were sufficiently produced before CIT(A) and where rightly taken into consideration to delete the addition. The submissions raised before this Bench on behalf of the Revenue have no substance as Ld. CIT(A) having coterminus powers with Ld. AO had duly considered the evidence of assessee. Accordingly, this ground is decided against the Revenue. Addition u/s 41(1) in respect of various sundry creditors - HELD THAT:- The letter dated 18.03.2013 has also been placed before this bench and it shows that annexure 2 to 5 being letters of confirmations were submitted before the Ld AO also but he did not take them into consideration. The subsequent payment to these creditors add genuineness to them and Ld. CIT(A) has rightly deleted the addition and there is no substance in the ground raised by the Revenue. Consequently, the same is decided against the assessee.

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• 2022 (10) TMI 532
  Deemed dividend addition u/s 2(22)(e) - monies advanced to the assessee are not in the natural course of the business and in no way, the assessee is not in the business of money lending as substantial part of his the business - accumulative profit up to the date of loan on 28/03/2013 was Rs. 4052528/- and on pro rata basis the balance of security premium was of Rs. 72.00 lacs - HELD THAT:- No one off loan that was given to the assessee nor have any funds of the company been divested; what exists is a current account which keeps fluctuating as per requirement of the funds. The fluctuating balances correlates to requirement that arise in the ordinary course of business and hence cannot be treated as deemed dividend under section 2(22)(e). We find that the case of the assessee throughout the proceedings is that the appellant was having two accounts with the said company; one is a loan account wherein appellant has received loan to the extent of Rs. 1,58,20,000/- whereas another account is a Trade account of appellant s proprietary concern, in which the appellant has credit balance of Rs. 5,36,20,634/-. The details of both the accounts were furnished to the Range head during the proceedings under section 144A and to the CIT(A) at the time of first appellate stage. We find that Hon ble Punjab High Court in the case of CIT Vs Suraj Devi Dada [ 2014 (5) TMI 625 - PUNJAB HARYANA HIGH COURT] held that where assessee had running current account with a company and it had been advancing money to it for business purposes, and had not gained any benefit from funds of company, and there was credit period only for 55 days, said credit in account could not be treated as deemed dividend under Section 2(22)(e) in the hands of assessee. Hon ble Andhra Pradesh High Court in India Fruits [ 2014 (10) TMI 749 - ANDHRA PRADESH HIGH COURT] held where subsidiary company was advancing money to assessee company for purchase of raw material and to make payments to a company to meet their business liabilities, said amount could not be considered as deemed dividend income of assessee company within purview of Section 2(22)(e). Tribunal in Iswar Chand Jindal [ 2015 (8) TMI 119 - ITAT DELHI] held that nomenclature cannot be a basis to conclude that business transactions between two entities constitute deemed dividend under Section 2(22)(e), therefore, current account transactions between two group companies which were business/commercial transactions could not be regarded as deemed dividend under Section 2(22)(e). Thus in view of the aforesaid factual and legal discussion, we find that merits in the submissions of the Ld. AR of the assessee no funds of the company is divested; there exists a current account which keeps fluctuating as per requirement of the funds that arise in the ordinary course of business and hence cannot be treated as deemed dividend under section 2(22)(e). DR for the revenue that the Ld. CIT(A) reduced the accumulated profit of Rs. 40,52,528/- on the date of loan as on 28.03.3013 to Rs. 13,52,095/- on whims and fences and without basis is absolutely baseless as this appeal is filed by the assessee, if the Ld. DR for the revenue has any grievances against the finding, he should have file cross objection or cross appeal against the finding in the impugned order. Thus, the assessee succeeded on primary submissions of the assessee. hence, ground No. 1 2 of the appeal is allowed.

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• Benami Property

• 2022 (10) TMI 531
  Benami Transaction - application under Order VII Rule 11 of the CPC rejected - whether the suit property was actually purchased from the funds of the HUF or whether the suit property was treated as an individual property of the father of the parties or as an HUF property? - defendant no.1 submits that there is a discrepancy in the name of the HUF occurring in various documents - HELD THAT:- Under Section 4(1) of the unamended Benami Act, a suit cannot be filed on the ground that the property was held benami against a person in whose name the property is held. An exception to Section 4(1) of the unamended Benami Act is provided in Sub-Section (3) of Section 4 which states that provisions of Section 4 would not apply in cases where the property is held in the name of a coparcener in an HUF and the property is held for the benefit of the coparceners in the family. As clearly been averred that the HUF received a sum of Rs.19.90 lacs on 21st June, 1991 from the redemption of the HUDCO Tax Saving Bonds held by the HUF. A reference has also been made to various documents with regard to the same and they have been filed along with the plaint. It has clearly been averred that late Shri Surinder Singh Chowdhary, as the karta of the HUF, purchased the suit property from the funds of the HUF. The suit property was purchased for a consideration of Rs.5,40,000/- vide sale deed dated 18th August, 1992, soon after a sum of Rs.19.90 lacs was received by the HUF from the sale of HUDCO Bonds. It has also been specifically pleaded that the late Shri Surinder Singh Chowdhary, being the karta of the HUF was holding the suit property on behalf of HUF for the benefit of all the coparceners. Along with the plaint, the plaintiff has also filed TDS certificates issued by the tenant in the suit property in favour of the HUF. The plaintiff has made the necessary averments in the plaint and filed documents along with the plaint in support of his case that the suit property was purchased from the funds of the HUF. Further, the plaintiff has also pleaded that the suit property was held by the father of the parties in his capacity as the karta for the benefit of the coparceners. The plaintiff has made the necessary averments in the plaint so as to fall within the exception provided under Section 4 (3) (a) of the unamended Benami Act. Therefore, the plaint cannot be outrightly rejected under the provisions of under Order VII Rule 11 of the CPC. At the stage of Order VII Rule 11 of the CPC, the Court cannot go into the veracity of the pleas taken in the plaint or its truthfulness. The same can only be tested in a trial. The scope of an application under Order VII Rule 11 of the CPC is limited only to the extent whether or not in terms of averments made in the plaint and the documents filed along with the plaint, the suit is maintainable. Needless to state that the plaintiff would have to prove in the trial, whether the suit property was actually purchased from the funds of the HUF or whether the suit property was treated as an individual property of the father of the parties or as an HUF property. At this stage, the Court cannot prejudge whether the plaintiff would be in a position to prove the same or not. The issues can only be determined after a proper trial. At this stage, it cannot be said that the present suit is vexatious or the plaint is barred by any law. Thus no grounds have been made out for rejection of the plaint under the provisions of Order VII Rule 11 of the CPC. There is no merit in the application and the same is dismissed.

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• 2022 (10) TMI 530
  Benami Prohibition transaction - order of attachment has come to be passed by the Officials of the Income Tax Department attaching the salary of the petitioner for appropriation as against the dues arising from order of assessment - HELD THAT:- To be noted that the order u/s 24 (4) of the PBPT Act has been passed by R1, which is stated to be pending in appeal before the Tribunal. That order is irrelevant to the lis in the present writ petition since the garnishee notice has been issued by the assessing authority under the Income Tax Act to secure the demand arising from the income tax assessment order. This writ petition is hence not maintainable for want of proper parties being arrayed. However, bearing in mind the profile of the petitioner, the Deputy Commissioner of Income Tax, Central Circle, 3(4), Chennai is impleaded suo motu as R3, for whom Mr.ANR Jayaprathap, learned Junior Standing Counsel accepts notice. Let the cause title be amended to reflect this impleadment. No notice is thought necessary to either R1 and R2 and it would suffice that learned Standing Counsel for the Income Tax Department, who has taken notice for R3, be heard. Since the petitioner has availed the statutory remedy of appeal, it is appropriate that necessary orders in regard to interim protection are also obtained from the appellate authority. It would not be appropriate for this Court to intervene only for the purpose of grant of interim protection, as such interim protection, if any, would fall within the discretion of the appellate authority. We are not inclined to intervene in the matter and the impugned order of attachment is left undisturbed. However, liberty is granted to the petitioner to move the Assessing and/or the Appellate authorities under the IT Act, as he may be advised, seeking appropriate interim protection. Such stay application, if and when filed, shall be disposed by the Authority within a period of three weeks from date of receipt thereof, after hearing the petitioner. The petitioner would submit that his salary is the only source of income and that he does not have financial resources to meet any portion of the demand impugned before the Appellate authority. He would also cite family exigencies, including the upkeep of a special child and paucity of funds in this regard.

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• Customs

• 2022 (10) TMI 529
  Levy of cess - HELD THAT:- The impugned judgement do not require interference - the cess in question is not being enforced w.e.f. 2006. The appeals are dismissed.

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• 2022 (10) TMI 528
  Confiscation - penalty - smuggling of Gold bars - delay of ten days in preferring appeal - HELD THAT:- Given the fact that the delay involved was of only ten days, and the matter has not been heard on merits, both before first appellate authority i.e., Commissioner of Customs (Appeals), as well as the revisional authority, we are inclined to set aside the order of the revisional authority, and the Commissioner of Customs (Appeals), with a direction to hear the matter on merits. The order of the revisional authority dated 20.07.2021, and that of the first appellate authority i.e., Commissioner of Customs (Appeals) dated 27.04.2018 are set aside - the matter is remitted to the Commissioner of Customs (Appeals) for a de novo hearing, on merits. Since the petitioner, in a sense, too was responsible, partially, if not wholly, as regards the fate that the matter suffered both before the first appellate authority i.e., the Commissioner of Customs (Appeals) and the revisional authority, he should be, according to us, burdened with costs of Rs. 25,000/-. - Matter restored back.

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• 2022 (10) TMI 527
  Classification of Sharp Professional LCD monitors (of specified models and size), intended to be imported - classifiable under sub-heading 8528 52 00 or 8528 59 00 of the First Schedule to the Customs Tariff Act? - applicability of Serial Number 17 of Notification No. 24/2005-Customs, dated 1-3-2005, as amended on import - import is exempt from levy of the whole of duty of Customs leviable thereon under the First Schedule of the Customs Tariff Act or not? HELD THAT:- The applicant has submitted a copy of rulings dated 9-3-2017 issued by the US Customs and Border Protection regarding classification of Sharp Professional LCD Monitors which support landscape and portrait viewing modes, including SD card slot, D-sub input, DVI-D input/output, HDMI input and USB port, and also contain 10W speakers for audio playback, do not contain television tuner or any television reception capability, and are capable to directly connecting to and are designed for use with an ADP machine of Heading 8471. The US authorities have held the LCD monitors with aforesaid features, bearing specific model numbers (which are different from those covered by this ruling) under Heading 8528.52. On complete reading of the guidance provided by Chapter Note 6, it is evident that the goods in question, which are monitors, not incorporating television reception apparatus, and are capable of directly connecting to and designed for use with an automatic data processing machine of Heading 8471 do not merit classification under Heading 8471. Further, in terms of Note 6(E) of Chapter 84, such goods merit classification under the heading appropriate to their respective functions, which in the present case is display of images and videos - the appropriate heading for monitors, not incorporating television reception apparatus is 8528. Further, at the sub-heading level, non-cathode ray monitors are classifiable under other monitors, and those that are capable of directly connecting to and designed for use with an automatic data processing machine of Heading 84.71 are classifiable under sub-heading 8528 52 00. Thus, all the 10 model of LCD Monitors or Touchscreen CD Monitors, viz. PN-HW861, PN-HW751, PN-HW651, PN-HW551, PN-HW501, N-HW431, PN-R903A, PN-86HC1, PN-75HC1, PN-70HC1E do not answer to the description of automatic data processing machine of heading 84.71. Further, there is nothing on record to contest the submission of the applicant that these monitors are capable of directly connecting to and designed for use with an automatic data processing machine of Heading 84.71. Therefore, these monitors are correctly classifiable under Heading 8528; and being non-cathode ray monitor under sub-heading 8528 52 00. Applicability of exemption vide Serial Number 17 of Notification No. 24/2005-Customs, dated 1-3-2005, as amended on the proposed import of goods in question - HELD THAT:- While it is undeniable that these monitors can be used with ADP machines, presence of a built-in USB media player or display of AV sourced images or writing board function, enable these monitors to be used even without ADP machine for display of media content. Following the settled principle of law that provisions of notification benefits must be interpreted restrictively, it is concluded that the benefit of exemption vide Serial Number 17 of Notification No. 24/2005-Cus., dated 1-3-2005 is not admissible to the said monitors which are capable of being used without ADP machines. The said 10 models of Sharp monitors are correctly classifiable under Heading 8528 and more specifically sub-heading 8528 52 00. However, in view of the features available in the monitors that allow for the same to be used readily with ADP machine, the benefit of notification No. 24/2005-Cus., as amended is not available to the said goods.

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• Securities / SEBI

• 2022 (10) TMI 526
  Registration of stock brokers, sub-brokers, share transfer agents with SEBI - Single registration with SEBI as sufficient even if the stock broker has various memberships and functions from several stock exchanges - Whether under the Act 1992, a stock broker has to obtain a certificate of registration from SEBI for each of the stock exchanges where he operates or whether a single certificate of registration from SEBI is sufficient and the same would enable him to trade in all other stock exchanges? - Whether the ad valorem fee to be paid for an initial period of five years will recur with every such registration? HELD THAT:- High Court, in our view, appears to be influenced by the expression a certificate of registration referred to under Section 12(1) of the Act, 1992 but has failed to notice that the expression a certificate is not in reference to any number and it can be considered that the words in the singular shall include plural as well, and has failed to notice that certificate of registration has to be obtained from the Board in accordance with the regulations framed in exercise of power under Section 30 of the Act 1992. The very scheme of rules framed by the Central Government in exercise of power under Section 29 and regulations framed by the Board under Section 30 of the Act, 1992 has been completely misplaced which indeed has a statutory force. Although the scheme may be in the nature of subordinate legislation, the same has superior force and supplements a mechanism/ procedure according to which the member (stock broker) of the stock exchange has to obtain certificate of registration from the Board and issuance of certificate of registration from SEBI remain co-terminus with the stock exchange to which the stock broker is a member and that being the reason, Reg. 10 read with Schedule III lays down the procedure according to which the fees has to be paid/deposited by the stock broker in obtaining certificate of registration from SEBI in reference to the stock exchange and for its renewal at a later stage for keeping its registration in force. When the law has to be applied in a given case, it is for the Court to ascertain the facts and then interpret the law to apply on such facts. Interpretation, indeed, cannot be in a vacuum or in relation to hypothetical facts. It is always the function of the legislature to say what shall be the law and it is only the Court to say what the law is and this Court applied the principle of purposive construction while interpreting the law to apply to such facts. A statute has to be construed according to the intent that makes it and it is always the duty of the Court to act upon the true intention of the legislature. If a statutory provision is open to more than one interpretation, it is always desirable of the Court to choose the interpretation which represents the true intention of the legislature. It is also well-settled that to arrive at the intention of the legislation, it is always depending on the objects for which the enactment is made, the Court can resort to historical, contextual and purposive interpretation leaving textual interpretation aside. Thus, while interpreting the statutory provisions, the Court is always supposed to keep in mind the object or purpose for which the statute has been enacted. The conjoint reading of the expression a certificate as referred to in Section 12(1) of the Act read with the scheme of Rules, 1992 and Regulations 1992, leads to an inevitable conclusion that the stock broker not only has to obtain a certificate of registration from SEBI for each of the stock exchange where he operates, at the same time, has to pay ad valorem fee prescribed in terms of Part III annexed to Regulation 10 of the Regulations, 1992 in reference to each certificate of registration from SEBI in terms of the computation prescribed under Circular dated 28th March, 2002 and fee is to be paid as a guiding principle by the stock broker which is in conformity with the scheme of Regulations 1992. So far as the emphasis which was made to the expression date of initial registration as referred to in Schedule III(I)(1)(c) is concerned, it is in relation to a certificate of registration which has been obtained by the stock broker from SEBI, which in turn is in relation to the stock exchange of which he is a member. After the expiry of five financial years from the date of initial registration, in reference to the stock exchange, the fee has to be deposited for the purpose of sixth financial year to keep his registration in force. Insofar as the procedure of charging fees as prescribed under Schedule III annexed to Regulation 10 of the Regulations, 1992 is concerned, it has already been examined by this Court, in B.S.E. Brokers Forum, Bombay and Others [ 2001 (2) TMI 957 - SUPREME COURT] and needs no further deliberation of this Court. As in the case where stock broker is declared defaulter or disqualified to continue as a stock broker in reference to one of the stock exchanges, in terms of SEBI Circular SEBI/MIRSD/Master Cir-04/2010 dated 17th March, 2010, it has been notified that such stock exchange shall immediately inform all other stock exchange(s) the details of the defaulter member such as name of the member, the names of the proprietors/partners/ promoters/dominant shareholders, as applicable. This may be a mechanism according to which if the stock broker who is a member of the stock exchange commits default, or on being disqualified to continue as a member, consequential actions could be taken against him pursuant to the circular to which a reference has been made. However, this is not a question to be examined by this Court in the instant proceedings. Consequently, the appeal deserves to succeed and is accordingly allowed and the judgment and order passed by the Division Bench of the High Court is hereby quashed and set aside.

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• Insolvency & Bankruptcy

• 2022 (10) TMI 573
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - order of attachment - Financial Debt or not - existence of debt and dispute or not - HELD THAT:- M/s Dove Infrastructure Private Limited is to set up I.T. Park does not make the disbursement made by Appellant to M/s ABW Infrastructure Ltd. as a Financial Debt against the Corporate Debtor. The disbursement against time value of money is against M/s ABW Infrastructure Ltd. and not against the Corporate Debtor. The order of District Magistrate attached the property under Section 4 of Haryana Protection of Interest of Depositors in the Financial Establishment Act, 2013. Order of attachment and observations as made in the order for recovery does not make the claim of Appellant as Financial Debt. Section 7 Application filed by the Appellant has been rightly rejected by the Adjudicating Authority. The impugned order does not warrant any interference - appeal dismissed.

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• 2022 (10) TMI 557
  Time limitation - application filed for condonation of 1-day delay in filing the Appeal and 53 days delay in filing the physical copy of the Appeal - It is submitted that in view of the order of the Hon ble Supreme Court dated 10.01.2022 [ 2022 (1) TMI 385 - SC ORDER ], the Appellants are entitled to compute limitation as per directions in para 5(IV) and para 5(III) is not applicable to them - HELD THAT:- By direction issued in para 5(III), the Hon ble Supreme Court has directed that period of limitation expired between 15.03.2020 till 28.02.2022, all persons shall have limitation period of 90 days w.e.f. 01.03.2022. Direction in para (IV) is a clarificatory which states that period from 15.03.2020 till 28.02.2022 shall also stand excluded in computing the periods prescribed under Sections 23(4) and 29A of the Arbitration and Conciliation Act, 1996, Section 12A of the Commercial Courts Act, 2015 and provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe period(s) of limitation for instituting proceedings, outer limits within which the court or Tribunal can condone delay. The direction in Para 5(IV) is only clarificatory and in no manner restrict the benefit which has been extended in Para 5(III). The Appellants are clearly entitled to the benefit of limitation as provided in Direction 5(III) under which w.e.f. 01.03.2022, they are entitled to file Appeal within 90 days. 90 days period came to an end on 29.05.2022. There are no substance in the submission of the Counsel for the Respondents that the Appellants are not entitled for the benefit as provided in Para 5(III) - application disposed off.

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• 2022 (10) TMI 525
  Existence of pre-existing dispute or not - Applicability of provision of Sales of Goods Act, 1930 - NCLT admitted the application - NCLAT confirmed the same - whether the appellant has raised a dispute which can be described as a pre-existing dispute as understood by this Court in the decision in MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED [ 2017 (9) TMI 1270 - SUPREME COURT] ? - HELD THAT:- In this case, a perusal of the notice sent by first respondent and the application under Section 9 of the IBC would show that the case is premised on there being a sale, and there was a debt owed by the second respondent under the sale. It means that the cause of action in general law would have been a suit for the price of the goods sold within the meaning of Section 55 of the Act. On 03.11.2016, undoubtedly, the second respondent in its own name has ventilated its complaint about the inferior and the poor quality of the Indonesian coal. The impact of using such coal on the boiler and about the damage being done to the boiler has been specifically articulated. Further, a request was made to stop delivery of the goods. - The supply was stopped on the basis of the communication dated 04.11.16. Pursuant to the purchase order, it is undoubtedly true, that 412 MT was delivered at the factory site of the second respondent. It is beyond challenge that no part of 412 MT has been returned by the second respondent to the first respondent - Section 59 of the Act contemplates a buyer setting up a breach of a warranty to diminish or reduce the price or even extinguish it. If this line is accepted, it could indeed be said that the decks are not cleared for the first respondent-seller for its claim under Section 8. The factum of the filing of the suit, however, cannot be taken into consideration for the purpose of deciding whether there is a preexisting dispute under the IBC. This is for the simple reason that the suit was not filed before the receipt of the demand notice under Section 8 of the IBC. No doubt, the documentary evidence furnished by the first respondent, namely, the purchase order indicates that the price is to be paid within seven days of receipt of the goods. It is true that Section 55(2) of the Act speaks about a contract of sale where the price is payable on a day certain entitling the seller to sue for price. This is irrespective of the fact that the property in the goods has not passed and the goods have not been appropriated to the contract and whether delivery has been made or not Section 55(2) also contemplates that the buyer must wrongfully neglect or refuse to pay the price. Interestingly, it will be noticed that the law-giver has in Section 55(1) also used the words and the buyer wrongfully neglects or refuses to pay for the goods but the law-giver has further added the words according to the terms of the contract which words are not found in Section 55(2). Even proceeding on the basis that under Section 55(2) of the Act, this is a case where there is a certain day fixed for the payment of the price irrespective of the passing of the property inter alia, the law does clothe the buyer with the right to resist the suit on the basis that the refusal to pay the price is not wrongful. In other words, he can lean on Section 59 and set up a breach of warranty and seek at least the diminution of the price if not extinction of the same. That apart, he has a right to seek damages even on the same breach. The delivery of the goods and the acceptance of the goods by use of the goods by the corporate debtor being not in dispute, the impact of Section 13(2) read with Section 59 cannot at least for the purpose of determining whether there is a pre-existing dispute be ignored. The first respondent lays store by the purchase order requiring certificate of analysis in that in view of there being no challenge to the said certificate of analysis and there being no rejection of the goods which was contemplated under the purchase order at the ground site, it is contended that the dispute cannot be countenanced. The appellant would, on the other hand, seek to buttress his case with reference to the lab reports, no doubt, procured from the labs which the second respondent has set up - Overlooking the boundaries of the jurisdiction can cause a serious miscarriage of justice besides frustrating the object of the IBC. The NCLAT, has clearly erred in not appreciating the issue, bearing in mind the principles in the Act. The NCLAT has erred in its finding about the existence of a pre-existing dispute, the impugned order merits interference - Application dismissed - Appeal allowed.

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• 2022 (10) TMI 524
  Validity of Liquidation order passed - sum in the resolution plan remitted - HELD THAT:- In view of the fact that the Appellant had Remitted a total sum of Rs.72 Crore to the 2nd Respondent / State Bank of India (Sole Committee of Creditor Member), in Terms of Settlement, and that fact is not Contradicted on the Respondents side, this Tribunal, to prevent an aberration of Justice and to permit the substantial cause of Justice, sets aside the Order of Liquidation dated 06.06.2022 in IA/196(CHE)/2022 in IBA/578/2019 passed by the Adjudicating Authority (National Company Law Tribunal, Special Bench II, Chennai), and directs the Adjudicating Authority (National Company Law Tribunal, Special Bench II, Chennai), to take on Record the Improved Resolution Plan dated 30.08.2022, which was submitted by the Appellant to the 2nd Respondent / State Bank of India (Sole Member of the Committee of Creditor) and to proceed further, as per the ingredients of the Insolvency Bankruptcy Code, 2016 and as per the Rules and Regulations that are in force. As regards the Exclusion of a Time, prayed for, by the Appellant, i.e., from 07.03.2022 till 28.09.2022 (205 Days), being the Time Spent before the Adjudicating Authority (National Company Law Tribunal, Special Bench II, Chennai) and the Period Spent from 06.06.2022, till this Date (13.10.2022), shall be Excluded, for the purpose of computing the Completion of Corporate Insolvency Resolution Process period, by the Adjudicating Authority (National Company Law Tribunal, Special Bench II, Chennai). Application disposed off.

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• 2022 (10) TMI 523
  Fraudulent Trading/Wrongful Trading - crystalline stand of the Appellant is that the Adjudicating Authority (National Company Law Tribunal, Division Bench II, Chennai) had not considered the Relevant Documents, notwithstanding the Forensic and Transactions Audit Report - HELD THAT:- A High Level Proof, is very much required in regard to a Fraudulent Intent. Even for an Isolated / Single Fraud, against an Individual, the action, in Civil Wrong (Tort) will lie. Furthermore, a Creditor, who was Defaulter has a viable, effective, an efficacious, alternate remedy in Civil Law. In this connection, this Tribunal, pertinently points out that it is not open to the Directors of a Company accused of Fraudulent Trading to allege that the Company s Claim for recovery in Tort, are barred. The Yardstick / Tape i.e., to be pressed in to service to determine, the Liability, is whether a Director had exercised the General Knowledge, Skill and Experience, to be expected of a person, in carrying out the functions of his duties. The aspect of Fraud is the cementing platform for a Liability. An element of Dishonesty, is to be Proved and the Aspect of Dishonesty, cannot be inferred, when the Conduct of the concerned Individuals is Receptive of more than one explanation. It must be borne in mind, that for Fraudulent Trading / Wrongful Trading, Relevant Facts / Acceptable Materials, are to be pleaded by a Party, by providing requisite details / adequate facts, to fall within the parameters of Section 66 of the I B Code, 2016. The stand taken by the respective parties, comes to a Resultant Conclusion that the Transfer of Assets among the Group Companies ex-facie is not a Fraudulent Trading, as per Section 66 (1) of the Insolvency Bankruptcy Code, 2016. Moreover, because of the fact that all Transactions between the Companies as well as the Asset details were maintained in a Transparent Manner on an SAP System (including the Fixed Assets Register) and further the Transactions of the Corporate Debtor and the 1st Respondent were Audited, every year, the Plea of Fraudulent Trading as projected by the Appellant / Applicant is not proved, to the subjective satisfaction of this Tribunal, in a convincing manner. This Tribunal, comes to an inevitable and irresistible conclusion that the view arrived at by the Adjudicating Authority (`National Company Law Tribunal, Division Bench II, Chennai), in dismissing application, does not suffer from any material irregularity or patent legality, in the eye of Law - Appeal dismissed.

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• 2022 (10) TMI 522
  Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- It is very clear that the Company Petition has to be filed within 3 years from the date of default of the respective invoices after excluding the credit period if any. Hon ble NCLAT in M/S. NEXT EDUCATION INDIA PRIVATE LIMITED VERSUS M/S. K12 TECHNO SERVICES PRIVATE LIMITED [ 2021 (3) TMI 767 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] has held that the Tribunal does not have jurisdiction in these Insolvency Proceedings to cut-short the invoices which would cause recurring dates of cause of action as it is not a suit for recovery. Thus, this bench is of the considered view that there is no merit in the above Company Petition and the same deserves to be dismissed as barred by limitation - petition dismissed.

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• 2022 (10) TMI 521
  Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational creditors - pre-existing disputes between the parties or not - time limitation - HELD THAT:- It is very clear from the e-mail that the Corporate Debtor had once again acknowledged the debt on 02.02.2015 and the above Company Petition can be filed within 3 years from 02.02.2015 i.e. on or before 01.02.2018. In addition to the above as rightly contended by the Petitioner the time spent by the Petitioner in prosecuting the winding up petition before the Hon ble Bombay High Court till its dismissal on 06.09.2017 has to be excluded under Article 14 of the Limitation Act - this Tribunal while dismissing the early Company Petition granted liberty to the Petitioner to file fresh Petition after issuing demand notice and therefore the question of limitation does not arise in this case. Nothing prevented the corporate debtor from preferring an appeal against the order dated 06.09.2017 in granting liberty to the Operational Creditor to file fresh petition while dismissing the company petition as abated. Accordingly, the above Company Petition being filed on 06.03.2018 is within limitation. Pre-existence of disputes - HELD THAT:- It is important to observe here that the Operational Creditor has got issue a legal notice before filing winding up petition before the Hon ble Bombay High Court for which the Corporate Debtor did not choose to even send any reply. Even otherwise, the Corporate Debtor having admitted the liability through the minutes of meeting dated 07.12.2012 as well as email dated 02.02.2015 is estopped from raising the issue of quality of goods and thus this bench is of the considered opinion that the above plea of preexistence of disputes raised by the Corporate Debtor is a palpable defence that does not require any further investigation and is liable to be rejected. This bench is of the opinion that the above company petition is liable to be admitted - Petition admitted - moratorium declared.

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• 2022 (10) TMI 520
  Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- It is established that the Corporate Debtor is liable to pay the Petitioner and it has defaulted in making the payment to the Petitioner. Considering the facts, it is concluded that the nature of Debt is a Financial Debt as defined under Section 5 (8) of the Code. It has also been established that there is a Default as defined under Section 3 (12) of the Code on the part of the Debtor. The two essential qualifications, i.e., existence of debt and default , for admission of a petition under section 7 of the I B Code, have been met in this case. Besides, the Company Petition is well within the period of limitation. It is clear that the Corporate Debtor has defaulted in repayment of debt. Hence, owing to the inability of the Corporate Debtor to pay its dues, this is a fit case to be admitted u/s 7 of the I B Code - the Corporate Debtor having admitted their liability in the earlier Company Petition 45 of 2020 through Consent Terms is estopped from disputing of the existence of debt and default since this Company Petition is nothing but second round of litigation in respect of same debt and default. It is found that the Petitioner has not received the outstanding debt from the Corporate Debtor and that the formalities as prescribed under the code have been completed by the Petitioner, and thus this Petition deserves Admission - petition admitted - moratorium declared.

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• 2022 (10) TMI 519
  Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- Upon perusal of the Application, it is observed that this Tribunal has dismissed the captioned petition vide order dated 03.06.2022. The Applicant had preferred an appeal against the aforesaid order of dismissal of petition passed by this Tribunal before the Hon ble NCLAT. Vide order dated 08.09.2022, the Hon ble Appellate Tribunal has set aside the order dated 03.06.2022 with directions to this Tribunal to pass an order of admission and other consequential order. Therefore, this Tribunal, vide order dated 20.09.2022, has restored the captioned petition. The Letter of Intent dated 06.09.2010 was executed between the Operational Creditor and the Corporate Debtor clearly substantiate the Operational Creditor s claim that the Corporate Debtor has defaulted on repayment which is duly admitted by Corporate Debtor. Vide order dated 20.09.2022, the Ld. Counsel for Corporate Debtor has admitted the liability of the Corporate Debtor. Upon appreciation of the documents placed on record to substantiate the claim, this Tribunal admits this petition and initiates CIRP on the Corporate Debtor with immediate effect - moratorium declared.

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• PMLA

• 2022 (10) TMI 518
  Demand of bribe by Insolvency Professional - Rejection of application for dispensing with the personal appearance of the petitioner - Section 205 of the Code of Criminal Procedure (Cr.P.C.) - Applicability of Section 44 and 45 of the PMLA Act, 2002 - HELD THAT:- On perusal of the proviso of section 45 of the PMLA Act, it transpires that if the allegation is of money laundering of a sum of rupees less than rupees one crore, the learned special court can release on bail if the person is of age of 16 years or a woman or sick or infirm. In the case in hand, it has been submitted that the petitioner has suffered from Covid-19 twice and he is having ailments and on that ground, he has filed a petition before the learned court. In the petition filed under section 205 Cr.P.C before the learned court and certified copy of which is on the record, it has been disclosed in paragraph no.12 that the petitioner undertakes in it that he will not dispute his identify during trial if he is allowed exemption. The undertaking in that particular paragraph is also there to the effect that he will appear in person as and when deemed fit by the learned court. On the record, there is nothing to suggest that due to the petitioner at any point of time, the investigation has been delayed. It has been disclosed that the petitioner has cooperated under section 50 of the PMLA Act. Admittedly, the allegation against the petitioner is of taking bribe of Rs.5 lakhs and proviso to section 45 of the PMLA Act speaks of that if the proceed is less than of rupees one crore, the bail can be granted. The law is well settled that as per sub-section 1 of section 205 Cr.P.C., whenever a Magistrate issues a summons, he may, if he sees reason so to do, dispense with the personal attendance of the accused and permit him to appear by his pleader. As per sub-section 2 of section 205 of the Cr.P.C, the Magistrate in inquiring into or trying the case may, in his discretion, at any stage of the proceedings, direct the personal attendance of the accused, and, if necessary, enforce such attendance in a manner hereinbefore provided. Thus, the learned Magistrate has a discretion to dispense with the personal attendance of the accused and to permit him to appear by the pleader. The purpose of exemption under section 205 Cr.P.C is that the order of the learned magistrate should be such which does not make any unnecessary harassment to the accused and at the same time does not cause any prejudice to the complainant and the learned court is required to ensure that exemption from personal appearance granted to the accused is not an abuse or delay the trial. The order dated 09.05.2022 passed in Misc. Criminal Application No.362 of 2022 by learned Additional Judicial Commissioner-XVIII-cum-Special Judge, Prevention of Money Laundering Act, Ranchi whereby the petition filed by the petitioner under Section 205 of the Code of Criminal Procedure (Cr.P.C.) for dispensing with the personal appearance of the petitioner has been rejected in connection with ECIR 05/2021, corresponding to CNR-JHRN01-002561-2022, pending in the same learned court is set-aside. Application allowed.

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• Service Tax

• 2022 (10) TMI 517
  Maintainability of petition - availability of alternative remedy of appeal - evasion of service tax or not - opportunity of personal hearing not provided - HELD THAT:- As it is, the order-in-original dated 30.03.2022 is an appealable order under Section 85 of the Finance Act, 1994. That being the position, we relegate the petitioner to the forum of appeal clarifying that we have not expressed any opinion on merit. All contentions are kept open. Petition dismissed.

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• 2022 (10) TMI 516
  Refund claim of service tax paid on input service used for export of the manufactured goods - Computation of time period - whether the period of one year should be computed from the date of resubmitting the refund claim or the date of original claim? - HELD THAT:- Needless to say that the date of original submission has to be taken for computing the period of one year as it is the date on which the appellant has filed the claim initially. The claim has been returned and not processed and rejected by the department. When the claim is returned for resubmission, the appellant is allowed to make the required rectification. The rejection of the refund claim on the ground that the same is time-barred when computed from date of resubmission of the refund claim is erroneous and requires to be set aside - appeal allowed.

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• 2022 (10) TMI 515
  Refund of the accumulated CENVAT credit - denial of refund has been premised on the assumption that they had themselves conducted clinical trials on goods supplied by their holding company - taxable territory - rule 4(a) of Place of Provision of Services Rules, 2012 - HELD THAT:- It is seen from the records that no demand has been raised in relation to the alleged taxable service owing to which the present claim for refund has been denied for not being export within the meaning of rule 6A of Service Tax Rules, 1994. It is only by raising such demand that taxability can be asserted and exports held as not having taken place. Rule 4 of Place of Provision of Services Rules, 2012 is a deviation from the default principle set out in rule 3 of Place of Provision of Services Rules, 2012, which, itself, has been structured to conform to the new paradigm of taxing all services other than in negative list and omnibus declaration in section 65B(44) of Finance Act, 1994 that does not identify the beginning and end of specific services. Essential to invoking of rule 4 of Place of Provision of Services Rules, 2012 is the providing of goods upon which service can be rendered. No records are available of such having been done and there is also no reference in the show cause notice to such. The impugned order is set aside and the refund application is restored to the original authority for proceeding in accordance with the provisions of the said notification on the finding that it is rule 3 of Place of Provision of Services Rules, 2012 which applies - Appeal disposed off.

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• Central Excise

• 2022 (10) TMI 514
  Wrongful availment of CENVAT Credit - manufacture of Emulsion Matrix (bulk explosive) - It is submitted that the disputed goods had been used for the purposes of manufacturing of BMD Vehicles and the Storage Tanks, without which, the Bulk Explosive cannot be prepared - period January, 2013 to December, 2013 - HELD THAT:- The ld.Adjudicating Authority has relied upon the Larger Bench decision of the Tribunal in the case of VANDANA GLOBAL LTD. VERSUS CCE [ 2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)] for dis-allowance of cenvat credit as claimed by the Appellant, which is not at all applicable to the facts of the present case. Further the Hon ble Chhattisgarh High Court in M/S VANDANA GLOBAL LIMITED AND OTHERS VERSUS COMMISSIONER, CENTRAL EXCISE AND CUSTOMS, CENTRAL EXCISE [ 2018 (5) TMI 305 - CHHATTISGARH, HIGH COURT] has distinguished the decision of the Larger Bench of the Tribunal on the findings that it is not a good law and various other High Courts have also expressed similar views. By respectfully following the decision of the Hon ble Chhattisgarh High Court, the impugned demand cannot sustain and accordingly, the same is set aside - appeal allowed.

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• 2022 (10) TMI 513
  CENVAT Credit - inputs - HR Sheets, HR Plates and MS Rods used for fabrication of Steel Formers which is in the nature of a consumable in the Appellant s induction furnace - HELD THAT:- The Show Cause Notice does not dispute the usage of the impugned goods. It is not in dispute that the impugned goods are used for manufacture of Steel Formers which is used as the liner of the Appellant s induction furnace and such Steel Formers get consumed in the process of the Appellant s manufacturing process - However, in the present case, Cenvat credit in respect of the impugned goods has been denied on the ground that Steel Formers fall under Chapter 73 of the Central Excise Tariff Act, 1985 . Upto 31.03.2011, the definition of input covered all goods except diesel and petrol used in relation to the manufacture of the final products whether directly or indirectly and whether contained in the final products or not and included various other goods such as lubricating oil, coolant etc. With effect from 01.04.2011, the definition of input was amended to mean inter alia, as all goods used in the factory by the manufacturer of the final product , unless specifically excluded - In the present case, the authorities below have categorically admitted that the impugned goods are used in the fabrication of Steel Former, which undisputedly gets consumed in the process of the Appellant s manufacturing of finished goods. Since the functional usage of the metal casing in Eastern Electro Chemicals Industries [ 2005 (2) TMI 132 - SUPREME COURT] and also MS Round in the case of Sova Ispat Alloys [ 2012 (9) TMI 603 - CESTAT, KOLKATA] is almost identical to the Steel Formers in the present case, the ratio of the aforesaid decisions are squarely applicable to the Appellant s case at hand. Appeal allowed.

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• 2022 (10) TMI 512
  Recovery of amount of duty on the additional consideration to the extent of forfeiture of security deposit - breach of contract - earnest money deposit - HELD THAT:- The definition of transaction value has been defined as reproduced by the Commissioner (Appeals) in para 6 of the order. It clearly states that whatever the amounts paid or payable as the condition of the sale of the goods shall be part of the assessable value. Earnest money deposit and deductions made therefrom cannot be termed as an amount charged for the sale of the impugned goods, more-so-ever when it was against an auction sale. In M/S SOUTH EASTERN COALFIELDS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, RAIPUR [ 2020 (12) TMI 912 - CESTAT NEW DELHI] , the Tribunal has held that the view taken by the Principal Commissioner that penalty amount, forfeiture of earnest money deposit and liquidated damages have been received by the appellant towards consideration for tolerating an act leviable to service tax under Section 66E(e) of the Finance Act. In M/S. STEEL AUTHORITY OF INDIA LTD., SALEM VERSUS COMMISSIONER OF GST CENTRAL EXCISE, SALEM [ 2021 (7) TMI 1092 - CESTAT CHENNAI] , the Tribunal has held that The activities, therefore, that are contemplated under section 66E(e), when one party agrees to refrain from an act, or to tolerate an act or a situation, or to do an act, are activities where the agreement specifically refers to such an activity and there is a flow of consideration for this activity. There are no merits in the impugned order - appeal allowed.

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• 2022 (10) TMI 511
  100% EOU - calculation of Central Excise duty and Customs duty on the depreciated value of the capital goods - While computing the depreciation for the last part of the quarter whether the appellant was allowed to avail depreciation only for the part of the quarter or for the entire quarter? HELD THAT:- Explanations to paragraph 8 of the Central Excise notification and paragraph 4 of the Customs Notification clearly state that for the purpose of computing rate of depreciation for any part of a quarter, a full such quarter shall be taken into account. The show cause notice and the impugned order relied on CBEC Circular No. 14/2004-Cus. dated February 13, 2004 to hold that the appellant was entitled to take depreciation only for part of the quarter and not for the entire quarter. A perusal of the circular clearly shows that it was not dealing that the question as to how to treat a part of the quarter for the purpose of reckoning the depreciation. The audit team, the show cause notice, the order of the lower authority and the impugned order of the Commissioner (Appeals) have misread this circular to infer that part of the quarter cannot be taken as the complete quarter for the purpose of calculating the depreciation. Clearly such is not the case and the circular does not say so. Even otherwise, the CBEC circular is an administrative order binding on the departmental officer but it cannot prevail over on delegated legislation in the form of an exemption notification. When the notification itself has allowed depreciation for the entire quarter the circular cannot restrict it to part of it. Therefore, the impugned order cannot be sustained. Appeal allowed.

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• CST, VAT & Sales Tax

• 2022 (10) TMI 510
  Application for suo motu review of the Tribunal s judgment dismissed - steps taken towards recovery of the demand raised against the petitioner could be retracted or not - HELD THAT:- While on one hand, the legal issue stands decided in favor of the assessees, generally, which includes the petitioner, the demand, which would have been formally set aside, had the petitioner preferred an appeal with this Court, remains undisturbed - the assessment order [given the aforementioned peculiar circumstances], has to be seen in the backdrop of the decision of this Court, and the fact that the Supreme Court had dismissed the SLP of the respondents/revenue, both on the ground of delay, as well as on merits. On merits, the broad issue which arose for consideration of this Court was whether the respondents/revenue were right in contending that the assessees were required to reverse input tax credits claimed by them on purchases made, on account of credit notes issued by selling dealers, despite the selling dealers having confirmed, that they had not reduced their output tax liabilities - this issue has been decided in favour of the assessees. The impugned order deserves to be set aside - Petition disposed off.

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• 2022 (10) TMI 509
  Termination of petitioner form services - Action against the Junior clerk with the Sales Tax Department - bogus billing being carried out by the main accused one Nilesh Mali - violation of principles of natural justice - HELD THAT:- Apparently perusal of the inquiry officer s report would indicate that it is a mere reproduction of reply and response of the Presenting Officer and on that basis holding the charges as proved. This is in violation of the principles of natural justice and the rules in question. Obviously apparent it is that the inquiry officer and the disciplinary authorities have rushed through the proceedings in a slipshod manner throwing the rule book to the winds merely to comply with the time limit in the order dated 30.11.2021 in the petition filed earlier. The order dated 30.03.2022 is hereby quashed and set aside. The respondents are directed to reinstate the petitioner in service with all consequential benefits as if the order dated 30.03.2022 was never passed - Petition allowed.

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• Wealth tax

• 2022 (10) TMI 556
  Valuation of gifted shares - valuation of shares in lock-in period as per the provisions of Schedule III of the W.T. Act. - rules for determining the value of a gifted property under Gift Tax Act - HELD THAT:- The shares in the lock-in period have market value, which would be the value that they would fetch if sold in the open market. Rule 21 of Part H of Schedule III of the W.T. Act permits valuation of the property even when the right to transfer the property is forbidden, restricted or contingent. Rights and limitations attached to the property form the ingredients in its value. The purpose is to assume that the property which is being valued is being sold, and not to ignore the limitations for the purpose of valuation. This is clear from the wording of Rule 21 of Part H of Schedule III of the W.T. Act, which when read carefully expresses the legislative intent by using the words hereby declared . The Rule declares that the price or other consideration for which any property may be acquired by, or transferred, to any person under the terms of a deed of trust or through any other restrictive covenant, in any instrument of transfer, is to be ignored as per the provisions of the Schedule III of the W.T. Act. The price of such property is the price of the property with the restrictions if sold in the open market on the valuation date. Notwithstanding the restrictions, hypothetically the property would be assumed to be saleable, but the valuation as per the Schedule III of the W.T. Act would be made accounting and taking the limitation and restrictions, and such valuation would be treated as the market value. The rules do not postulate a charge in the nature and character of the property. Therefore, the property has to be valued as per the restrictions and not by ignoring them. Thus, Rule 21 of Part H of Schedule III of the W.T. Act permits valuation and ascertainment of the market value as per the provisions of Schedule III of the W.T. Act, but does not state that the valuation will be done by disregarding the restrictions, or by enhancing the rights which have been transferred, or by revaluation of the asset when provisions of Schedule III are invoked for the purpose of valuation of an asset under the W.T. Act. Explanation to Rule 2(9) of Part A, Schedule III of the W.T. Act. The certificate from the concerned stock exchange is only to state whether an equity share, preference share or debenture, as the case may be, was quoted with the regularity from time to time and whether the quotations of such shares or debentures are based on current transactions made in the ordinary course of business. The explanation does not prohibit the authority, tribunal or the court from examining whether a particular share, be it equity or preference share, is a quoted share or an unquoted share in terms of sub-rules (9) and (11) of Rule 2 of Part A of Schedule III of the W.T. Act. This right which is conferred on the authorities under the W.T. Act or the G.T. Act is not delegated to the stock exchange. A decision of the authority is amenable and can be examined when challenged in an appeal. The present appeal by the Revenue is to be dismissed.

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• Indian Laws

• 2022 (10) TMI 508
  Validity of circular of RBI - directions issued to online payment gateway services - non-banking entities which offer payment aggregation services - main plank of the petitioners case rests on the argument, that PAs who perform the work of intermediaries do not fall within the scope and ambit of the definition of payment system incorporated in the 2007 Act - HELD THAT:- Once it is held, that the work function of the PAs comes within the definition of a payment system, then axiomatically, the power to have them seek authorization from the RBI for operating as PAs gets traced to section 4 of the 2007 Act - there are no merit in the argument, that petitioner no. 1, if it chooses to function as a PA, should not be called upon to seek authorization from RBI, as per the criteria laid down in Clause 3 of the 2020 Guidelines. There are no merit in the submissions advanced on behalf of the petitioners concerning Clause 4 of the 2020 Guidelines, which obliges an applicant, who wishes to function as a PA, to have a minimum net worth of Rs.15 crores and have the same scaled up to Rs. 25 crores by the end of the third FY. RBI has demonstrated, that before the 2020 Guidelines were issued, the same was put up in the public domain in the form of a Discussion paper. The responses received were duly analysed, and as a matter of fact, the criteria contained therein were sculpted and moderated. Thus, in our view, the argument advanced qua fixing of a threshold limit vis- -vis minimum net worth seems untenable - there is merit in RBI s stand, that since PAs will handle funds provided by customers, RBI would require such applicants to enter the industry who have some amount of financial wherewithal. The 2009 Directions involved an indirect regulation and supervision of PAs. However, after RBI had put its Discussion paper in the public domain, the responses received by it were examined internally by the Board. The result of such deliberation convinced the RBI, that it should work on the third option outlined in the Discussion paper i.e., that which involved RBI s direct regulation and supervision of PAs since they were handling funds of customers. The difficulties put forth on behalf of PAs, perhaps are a small wrinkle, which cannot be the reason for striking down the impugned clauses of the 2020 Guidelines. The public interest element, which is imbued in the framing of the Guidelines, trumps the concerns raised by the petitioners. There are no merit in the writ petition - petition dismissed.

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