TMI Tax Updates - e-Newsletter
October 18, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Requirement of separate registration is required in Odisha state - The Applicant through its expert belonging, therefore, is to supply the services at the site from the establishment as defined under section 2 (7) of the IGST Act. The location of the supplier should, therefore, be in Odisha in terms of section 2 (15) of the IGST Act - the Applicant is required to be registered under Odisha Goods and Services Tax Act, 2017 and Central Goods and Services Tax Act, 2017 in the State of Odisha for the works contract services to be provided to M/s East Coast Railway Odisha vide agreement under discussion. - AAR
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GST:
Seeking grant of Bail - record of false fabricated record for the purpose of availment of ITC present or not - On the basis of proposal before GST Authorities to pay amount of Rs.5 crores per month till settlement of the amount and by taking appropriate surety and condition to cooperate GST Authorities till pending investigation, applicant be released on bail - DSC
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Income Tax:
Belated deposit of employees’ contribution towards the EPF and ESI - Nevertheless, the assessees are given some leeway in that as long as deposits are made beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees’ contributions- which are deducted from their income. - the non-obstante clause under Section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee’s contribution on or before the due date as a condition for deduction. - SC
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Income Tax:
Liability of directors of private company - Section 179 - garnishee notice - it is clear that the department has not taken any steps to recover the dues from the defaulting private limited company. It is nearly after 25 years the present attempt had been made by issuing garnishee notice on the appellant who is no more the director of the company eversince 1990. After the company had gone into liquidation, the department could have lodged a claim before the Official Liquidator. - HC
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Income Tax:
Penalty proceedings u/s 271D and 271E - Period of limitation - Apparently in this case, the first notice was issued on 15.12.2013 and second notice was issued on 16.01.2014 are identical. Therefore, from the date of notice dated 15.12.2013, the penalty order should have been passed on or before 30th June 2004 but were passed on 30th July 2014. Therefore, both the orders of the penalty are barred by limitation. - AT
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Income Tax:
Interest free loan was advanced to the sister concerned - in the absence of any reference to any business transaction between the assessee and the sister concerns, the plea of commercial expediency cannot be accepted. The assessee has miserably failed to establish a case of commercial expediency or business exigency in granting interest free loan to the sister concerns by utilizing the borrowed fund. - Additions confirmed - AT
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Income Tax:
Penalty u/s 271(1)(c) - TP Adjustment - it is a debatable issue whether reimbursement of expenses qualifies as FTS and there are various decisions which have held that reimbursement of expenses does not qualify as FTS. Accordingly, we are of the considered view that no penalty can be levied u/s 271(1)(c) of the Act on account of treating reimbursement of expenses as FTS. - AT
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Income Tax:
Income deemed to accrue or arise in India - Since there article 8 of the Indo Bhutan DTAA is more beneficial to the assessee, therefore the profits derived by the assessee from the operation of ships or aircraft in international traffic are liable to be taxed in the contracting state in which its place of effective management of the enterprise is situated, which undisputedly is Bhutan. - AT
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Income Tax:
Remuneration to partners u/s 40(b) - assessee has claimed deduction on account of remuneration paid to partners, even in respect of interest income on investment in FDRs etc. - Claim of the assessee cannot be denied - AT
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Income Tax:
Deduction of expenditure from income taxable under the head "From Other Sources" - Car Lease rental income - A plain reading of section 57 (iii) of the Act would lead one to the conclusion that it does not say that the expenditure shall be deductible only if any net positive income is made or earned. Therefore, there can even be a negative income/loss u/s. 57(iii) of the Act. Therefore, by this reasoning also, CIT(A) was incorrect in directing that the amount of deduction should be restricted to the income earned. - AT
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Customs:
Levy of Anti-dumping duty - valuation - acrylic fibre imported from United States of America, Thailand, and South Korea - Decision of Tribunal granting relief to the importer sustained - SC
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Indian Laws:
Smuggling - It is true that Section 54 of the Act raises a presumption and the burden shifts on the accused to explain as to how he came into possession of the contraband. But to raise the presumption under Section 54 of the Act, it must first be established that a recovery was made from the accused. The moment a doubt is cast upon the most fundamental aspect, namely the search and seizure, the appellant will also be entitled to the same benefit as given by the Special Court to the co-accused. - SC
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Indian Laws:
Grant of Regular Bail - Grant of bail to the Respondent No.2/Accused only on the basis of parity shows that the impugned order passed by the High Court suffers from the vice of non-application of mind rendering it unsustainable. The High Court has not taken into consideration the criminal history of the Respondent No.2/Accused, nature of crime, material evidences available, involvement of Respondent No.2/Accused in the said crime and recovery of weapon from his possession - SC
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IBC:
Financial Creditors - The disbursal was made by CDR Lenders to the Corporate Debtor and the Appellant(s) were Personal Guarantors/ Corporate Guarantors to guarantee the repayment of Financial Facilities extended to the Corporate Debtor. We fail to see as to how the Guarantors will become a ‘Financial Creditor’ of the Corporate Debtor. - AT
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Service Tax:
Levy of Service Tax - Work Contract Services - The Mandi Samiti is required to establish markets to exercise superintendence and control over the sale and purchase of the agricultural produce. The construction activities inside the Mandi area cannot be termed as business activities. - HC
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Central Excise:
Exemption from Excise duty - imported paraffin/wax used by the Assessee in the process of manufacturing of cotton yarn - on merits the Learned CESTAT is not right in holding that the Assessee was entitled to benefit of Notification No. 8/97 for concessional rate of duty. - But extended period of limitation cannot be invoked - SC
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VAT:
Maintainability of writ petition - availability of alternative remedy of appeal - In a tax matter when a statutory remedy of appeal is available, the High Court ought not to have entertained the writ petition under Article 226 of the Constitution of India against the Assessment Order by-passing the statutory remedy of appeal. - SC
Articles
News
Case Laws:
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GST
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2022 (10) TMI 622
Cancellation of registration certificate of the petitioner - non-filing of GST returns continuously for more than six months - Section 29(2) of the Central Goods and Services Tax Act, 2017 - HELD THAT:- The issue raised in this writ petition is squarely covered by a decision of this Court in M/S. CHENNA KRISHNAMA CHARYULU KARAMPUDI VERSUS THE ADDITIONAL COMMISSIONER APPEALS1 AND ANOTHER [ 2022 (7) TMI 82 - TELANGANA HIGH COURT] where it was held that Though the lower appellate authority may be right in holding that while it may allow filing of an appeal beyond the limitation of three months for a further period of one month, therefore, by extension of limitation beyond the extended period of one month delay beyond the extended period of one month cannot be condoned, we are of the view that such a stand taken by respondent No.1 may adversely affect the petitioner. The matter is remanded back to the file of respondent No.4 to consider the grievance expressed by the petitioner against cancellation of GST registration and thereafter pass an appropriate order in accordance with law - the writ petition is disposed off.
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2022 (10) TMI 621
Maintainability of petition - availability of alternative remedy of appeal - Detention of goods belonging to the petitioner - mismatch of the company s name in the tax invoice - violation of principles of natural justice - HELD THAT:- The issues raised in this writ petition have to be dealt with basing on the factual aspects. Since the Statute provides an appeal under Section 107 of the GST Act, the petitioner can as well avail the same. The Writ Petition is disposed of directing the petitioner to avail the alternative remedy of appeal, under Section 107 of the GST Act before Joint Commissioner concerned.
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2022 (10) TMI 620
Requirement of separate registration is required in Odisha state - location of supplier - whether E-tender document/LOA would suffice as address proof since nothing else is with the Applicant and service recipient will not provide any other proof? - purchase of goods from a supplier of Maharashtra and shipment of goods directly from the premises of a supplier of Maharashtra to Odisha state - purchase of goods from a dealer of Odisha to use the goods in Odisha - applicability of CGST SGST or IGST by the supplier/dealer of Maharashtra. HELD THAT:- Location of supplier is usually where a supply is made from, a place mentioned as a principal place of business on the GST registration certificate. But in the instant case, clause (b) appears to be applicable to the Applicant for the location of supplier of services. The location of supplier seems to be at the project site, East Coast Railway, Odisha which is different from the place of business - The nature of supply is such that, it is not feasible to get it supplied from the State of Maharashtra. So an establishment is definitely required in the state of Odisha, where the work is being carried out. In the present case, we observe from the E-Tender documents of East Coast Railway that the Applicant shall, at its own expense, will provide it self with Sheds, Store houses and Yards in such situation and in such numbers as in the opinion of the Engineer is requisite for carrying on the works and the Applicant shall keep at each such sheds, storehouses and yards a sufficient quantity of materials. The Applicant has sub contracted some part of the work to M/s SRC Company Infra (P) Ltd, Hyderabad. The value of the contract accepted by the sub-contractor is Rs. 137,60,47,790 out of the total cost of the contract of Rs.337.18 Cr. - The Engineer s representative shall have free access to the said sheds, storehouses and yards at any time for the purpose of inspecting the stock of materials. Further, the Applicant shall at its own cost provide and maintain suitable mortar mills, soaking vats or any other equipments Necessary for execution of the works. The Applicant is required to maintain suitable structures in terms of human and technical resources with sufficient degree of permanence at the sites of East Coast Railway, Odisha to effect supply of desired services as per the terms and conditions of the work order. It has to ensure provision of works contract service for the contract period, indicating sufficient degree of permanence to the human and technical resources employed at the sites. The Applicant through its expert belonging, therefore, is to supply the services at the site from the establishment as defined under section 2 (7) of the IGST Act. The location of the supplier should, therefore, be in Odisha in terms of section 2 (15) of the IGST Act - the Applicant is required to be registered under Odisha Goods and Services Tax Act, 2017 and Central Goods and Services Tax Act, 2017 in the State of Odisha for the works contract services to be provided to M/s East Coast Railway Odisha vide agreement under discussion.
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2022 (10) TMI 619
Seeking grant of Bail - record of false fabricated record for the purpose of availment of ITC present or not - it is contended that applicant is cooperated investigating agency, reversed ITC availed by them as well as paid amount of Rs.10,39,00,000/and shown readiness to deposit Rs.5 crores each month under protest till settlement of their liability - HELD THAT:- Prima facie it appears that there is no intention of applicant to avail ITC illegally. Further tax liability shown against them is in dispute for legal interpretation, still applicant is ready to deposit amount of Rs.5 crores per month by their letter submitted to GST Authorities on 22.09.2022. In such circumstances, it is opined that applicant is not running to avoid legal process. They have shown cooperation by way of reversing ITC as well as paying amount of Rs.10,39,00,000/- - In view of the fact coming forth from submissions from both sides, there is no prima facie intention, fraud of any record for claiming Input Tax Credit as well as there is no any prima facie false and fabricated record for the purpose of evasion of any tax. Applicant is coming with bonafide by making statement that he is ready to pay any tax which is liable to pay after legal interpretation about their liability. On the basis of proposal before GST Authorities to pay amount of Rs.5 crores per month till settlement of the amount and by taking appropriate surety and condition to cooperate GST Authorities till pending investigation, applicant be released on bail - Application allowed.
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2022 (10) TMI 618
Seeking grant of Anticipatory bail - Jurisdiction to entertain the present application - accused/applicant has been summoned for prosecution regarding availment of ITC without actually receipt of goods - evasion of GST - creation of 12 fake suppliers of goods - section 16 of CGST Act 2017 - HELD THAT:- There are no manner to curtail jurisdiction to entertain the application for anticipatory bail. Hon ble High Court of Delhi in SATISH KUMAR SHARMA VERSUS DELHI ADMINISTRATION AND ORS. [ 1990 (9) TMI 363 - DELHI HIGH COURT] has specifically stated that if the offence having been committed outside the jurisdiction of Delhi, since accused being resident of Delhi can approach the court at Delhi for seeking anticipatory bail. In the present case without touching upon merits of the matter which would be decided later, it is evident that registered office of M/s Best Crop Science Pvt. Ltd is in Delhi, even as per reply of the Department some of the fake suppliers were under control and managed by the employees of M/s Best Crop Science Pvt. Ltd at Delhi. These facts by itself are clearly indicative that courts at Delhi can entertain the application - this court can entertain present application for bail u/s 438 Cr.P.C. At this stage when this court has not considered facts of present case, on merits, no case is made out for giving any interim relief which of course would be decided upon examination of merits of the matter subsequently - Put up this matter on 15.10.2022.
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Income Tax
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2022 (10) TMI 617
Belated deposit of employees contribution towards the EPF and ESI - AO ruled that by virtue of Section 36(1)(va) read with Section 2(24)(x) of the IT Act, such sums received by the appellants constituted income - HELD THAT:- One of the rules of interpretation of a tax statute is that if a deduction or exemption is available on compliance with certain conditions, the conditions are to be strictly complied with. See for e.g., Eagle Flask Industries Ltd. v. Commissioner of Central Excise [ 2004 (9) TMI 102 - SUPREME COURT] - This rule is in line with the general principle that taxing statutes are to be construed strictly, and that there is no room for equitable considerations. The analysis of the various judgments cited on behalf of the assessee i.e., Commissioner of Income-Tax v. Aimil Ltd. [ 2009 (12) TMI 38 - DELHI HIGH COURT] ; Commissioner of Income-Tax and another v. Sabari Enterprises [ 2007 (7) TMI 169 - KARNATAKA HIGH COURT] , Commissioner of Income Tax v. Pamwi Tissues Ltd. [ 2008 (2) TMI 400 - BOMBAY HIGH COURT] , Commissioner of Income-Tax, Udaipur v. Udaipur Dugdh Utpadak Sahakari Sandh Ltd. [ 2014 (8) TMI 677 - RAJASTHAN HIGH COURT] and Nipso Polyfabriks [ 2012 (11) TMI 592 - HIMACHAL PRADESH HIGH COURT] would reveal that in all these cases, the High Courts principally relied upon omission of second proviso to Section 43B (b). No doubt, many of these decisions also dealt with Section 36(va) with its explanation. However, the primary consideration in all the judgments, cited by the assessee, was that they adopted the approach indicated in the ruling in Alom Extrusions. As noticed previously, Alom Extrutions did not consider the fact of the introduction of Section 2(24)(x) or in fact the other provisions of the Act. When Parliament introduced Section 43B, what was on the statute book, was only employer s contribution (Section 34(1)(iv)). When Parliament introduced the amendments in 1988-89, inserting Section 36(1)(va) and simultaneously inserting the second proviso of Section 43B, its intention was not to treat the disparate nature of the amounts, similarly. As discussed previously, the memorandum introducing the Finance Bill clearly stated that the provisions especially second proviso to Section 43B - was introduced to ensure timely payments were made by the employer to the concerned fund (EPF, ESI, etc.) and avoid the mischief of employers retaining amounts for long periods. Parliament intended to retain the separate character of these two amounts, is evident from the use of different language. Section 2(24)(x) too, deems amount received from the employees (whether the amount is received from the employee or by way of deduction authorized by the statute) as income - it is the character of the amount that is important, i.e., not income earned. Thus, amounts retained by the employer from out of the employee s income by way of deduction etc. were treated as income in the hands of the employer. The significance of this provision is that on the one hand it brought into the fold of income amounts that were receipts or deductions from employees income; at the time, payment within the prescribed time by way of contribution of the employees share to their credit with the relevant fund is to be treated as deduction (Section 36(1)(va)). The other important feature is that this distinction between the employers contribution (Section 36(1)(iv)) and employees contribution required to be deposited by the employer (Section 36(1)(va)) was maintained - and continues to be maintained. On the other hand, Section 43B covers all deductions that are permissible as expenditures, or out-goings forming part of the assessees liability. These include liabilities such as tax liability, cess duties etc. or interest liability having regard to the terms of the contract. Thus, timely payment of these alone entitle an assessee to the benefit of deduction from the total income. The essential objective of Section 43B is to ensure that if assessees are following the mercantile method of accounting, nevertheless, the deduction of such liabilities, based only on book entries, would not be given. To pass muster, actual payments were a necessary pre-condition for allowing the expenditure. The distinction between an employer s contribution which is its primary liability under law in terms of Section 36(1)(iv), and its liability to deposit amounts received by it or deducted by it (Section 36(1)(va)) is, thus crucial. The former forms part of the employers income, and the later retains its character as an income (albeit deemed), by virtue of Section 2(24)(x) - unless the conditions spelt by Explanation to Section 36(1)(va) are satisfied i.e., depositing such amount received or deducted from the employee on or before the due date. In other words, there is a marked distinction between the nature and character of the two amounts the employer s liability is to be paid out of its income whereas the second is deemed an income, by definition, since it is the deduction from the employees income and held in trust by the employer. This marked distinction has to be borne while interpreting the obligation of every assessee under Section 43B. The reasoning in the impugned judgment that the non-obstante clause would not in any manner dilute or override the employer s obligation to deposit the amounts retained by it or deducted by it from the employee s income, unless the condition that it is deposited on or before the due date, is correct and justified. The non-obstante clause has to be understood in the context of the entire provision of Section 43B which is to ensure timely payment before the returns are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability. In the case of these liabilities, what constitutes the due date is defined by the statute. Nevertheless, the assessees are given some leeway in that as long as deposits are made beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees contributions- which are deducted from their income. They are not part of the assessee employer s income, nor are they heads of deduction per se in the form of statutory pay out. They are others income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such interpretation were to be adopted, the non-obstante clause under Section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee s contribution on or before the due date as a condition for deduction. This court is of the opinion that there is no infirmity in the approach of the impugned judgment.
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2022 (10) TMI 616
Owner of the plant for the purpose of section 32 - Income generated through lease - Scope of terms own , ownership and owned Revenue receipt/income accrued - HELD THAT:- On construing the relevant clauses, it is apparent that the respondent-assessee had become the owner of the plant and machinery. Further the lease rentals in entirety have been taxed as a revenue receipt/income accrued and taxable. In view of the aforesaid factual background, we do not find any good ground and reason to interfere with the final conclusion and decision of the High Court. Accordingly, the appeal is dismissed.
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2022 (10) TMI 615
Deduction u/s 80HHC - E.duty, scrap sales, recoveries of rent and other income and service charges not consider but unabsorbed losses consider for the purpose of deduction u/s 80HHC - depreciation on vehicles allowable - Amount of premium on redemption of debenture is spread over and part is deductible in relevant year - HELD THAT:- The issue raised in the present appeal by the appellant-assessee is covered against them, vide the judgment of this Court in Commissioner of Income Tax, Pune vs. Shirke Construction Equipment Ltd., [ 2007 (5) TMI 194 - SUPREME COURT] Recording the same, the appeal is dismissed without any order as to costs
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2022 (10) TMI 614
Exemption u/s 11 - entitled for registration u/s 12AA - Charitable activity u/s 2(15) - Denial of registration as charitable trust under Section-12AA (1)(B) - no charitable activity had in fact taken place since the society was a newly established one - HELD THAT:- In view of the judgment of this Court in Ananda Social And Educational Trust v. Commissioner of Income Tax and Another [ 2020 (2) TMI 1293 - SUPREME COURT] which judgment has approved the view taken by the Delhi High Court in Director of Income Tax v. Foundation of Ophthalmic Optometry Research Education Centre [ 2012 (8) TMI 777 - DELHI HIGH COURT] the question of law raised in these matters has to be answered against the Revenue and in favour of the assessee. Accordingly, the appeals and the special leave petitions are dismissed. However, dismissal of these cases would not bar the Assessing Officer from cancelling the registration in case he finds that the charitable activity was not undertaken, set up or established by the assessee.
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2022 (10) TMI 613
Disallowance u/s 14A - sufficiency of own funds - HELD THAT:- The legal issue relating to disallowance u/s 14A of the Income Tax Act, 1961 would be covered against the Revenue in view of judgment of this Court in South Indian Bank Ltd. v. Commissioner Of Income Tax [ 2021 (9) TMI 566 - SUPREME COURT] Recording the aforesaid the appeal is dismissed without any order as to costs.
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2022 (10) TMI 612
Liability of directors of private company - recovery action against the appellant by invoking the power under Section 179 - garnishee notices issued - what manner the power under Section 179 of the Act could be invoked? - HELD THAT:- We need not labour much to decide this issue as there are several decisions of the various High Courts on this aspect. In the case of K.B. REDDY [ 1998 (4) TMI 129 - ANDHRA PRADESH HIGH COURT] . The Court after taking note of Section 179 as it stood after the amendment in the year 1975 pointed out in terms of the said provision where any tax due from a private company in respect of any income of any previous year cannot be recovered, then every person who was a director of the company during the relevant previous year shall be jointly and severally liable for the payment, noting that the language of the Section is clear that it is only in cases where tax cannot be recovered from the company, the liability of the director arises. Since in the said case there was no finding that the department could not recover the arrears of tax from the company, the proceedings initiated under Section 179 of the Act was held to be without jurisdiction. In Mehul Jadavji Shah [ 2018 (4) TMI 646 - BOMBAY HIGH COURT] relying on MADHAVI KERKAR [ 2018 (1) TMI 749 - BOMBAY HIGH COURT] held that before the Assessing Officer assumes jurisdiction under section 179 requires to recover the tax due from the delinquent private limited company should have failed and if no steps were taken then the notice issued under section 179 is required to be quashed. Admittedly, in the year 1990 the appellant had retired from his directorship and the company had changed hands and fresh set of directors had taken over the company, necessary formalities under the Income tax Act, 1956 was complied with and fresh certificate of incorporation incorporating the new name of the company was issued. The new set of directors carried on business till the year 1997 when the company went under liquidation. From the records placed before the Court, it is clear that the department has not taken any steps to recover the dues from the defaulting private limited company. It is nearly after 25 years the present attempt had been made by issuing garnishee notice on the appellant who is no more the director of the company eversince 1990. After the company had gone into liquidation, the department could have lodged a claim before the Official Liquidator. There is nothing on record to show that such a claim was made by the department before the Official Liquidator. This aspect is very crucial aspect which the learned Writ Court ought to have considered and the same cannot be brushed aside and a direction could not have been issued without reference to the said fact. Thus we hold that the garnishee notices which were impugned in the writ petition are held to be wholly without jurisdiction and accordingly, they are quashed. Appeal filed is allowed.
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2022 (10) TMI 611
Shorter time period to respond to the show cause notice cum assessment order - Addition on account as income from other sources - draft assessment order also shows levy of penalty under Section 271(1)(c) - petitioner has neither furnished the computation of total income for the earlier years i.e., up to the assessment year 2007-08 nor furnished evidence to support the claim of BIFR declaring the company as a sick industrial company and directions to Income Tax Department thereon - HELD THAT:- As just 24 hours time was given for the petitioner to respond to the show cause notice cum assessment order. Learned Standing Counsel for Income Tax states that steps of this nature were forced to be taken since the time limit for passing the orders were getting expired due to indifferent attitude of the assesses. We are not inclined to go into that aspect in this writ petition. Since the time given for responding to the cause notice cum draft assessment order was very short and more particularly, when the said notice was sent in the night, which could not have been noticed by the petitioner, we deem it appropriate, in the facts and circumstances of the case, to set aside the impugned assessment orders and remand the matters back to respondent No.1 for passing orders afresh by giving sufficient time to the petitioner to respond to the impugned show cause notices, in accordance with law. Consequently, the impugned penalty orders issued shall not be given effect to till the assessment orders are passed.
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2022 (10) TMI 610
Penalty u/s 271(1)(c) - whether the assessee-company has neither concealed the particulars nor furnished inaccurate particulars of Income? - HELD THAT:- As in the instant case the assessee-company is following Percentage Completion Method and furnished the profit at 27.2% of the completed construction area, which has been accepted by the A.O. and made the addition in the impugned assessment year, on which, penalty proceedings were initiated. In this connection in the preceding A.Y. 2014-15 on similar set of facts, the A.O. has not levied any penalty, thereby, the A.O. satisfied that there was no concealment of the income on the part of the assessee-company. However, for the impugned A.Y. 2015- 16, when the assessee carried the matter in appeal before the CIT(A), CIT(A) simply confirmed the penalty levied by the A.O. under section 271(1)(c) without going into the merits of the case. It is a fact that in the assessment order the A.O. has accepted the profit arises out of Percentage Completion Method followed by the assessee at 27.2% and accepted the estimated profit on the said percentage at Rs.35 lakhs and made the impugned addition, on which, penalty proceedings were initiated by the A.O. Sr. D.R. did not controvert the submissions of the assessee that under identical facts and circumstances, the A.O. himself has dropped penalty proceedings u/s 271 (1)(c) of the I.T. Act, 1961 for the immediately preceding A.Y. 2014-15. Thus while considering the issue of imposing penalty under section 271(1)(c) of the Act, the A.O. cannot blow hot and cold in different assessment years on identical and similar facts and circumstances. Thus, penalty imposed by the A.O. and confirmed by the Ld. CIT(A) does not stand sustainable on this count. I, therefore, find force in the arguments of the Learned Counsel for the Assessee and in absence of any contrary material brought on record by the Ld. D.R to the effect that assessee concealed the particulars of income or furnished inaccurate particulars of income, set aside the orders of the authorities below and delete the penalty. Accordingly, appeal of the assessee is allowed.
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2022 (10) TMI 609
Disallowance of the claim for deduction u/s 80IA - Operating and maintaining CFS facility - HELD THAT:- Issue is squarely covered by the Hon ble Supreme Court decision in assessee s own case [ 2018 (5) TMI 359 - SUPREME COURT] wherein the assessee has been allowed to claim deduction under Section 80IA as the assessee is developing, operating and maintaining infrastructure facilities in the port area and is Container Freight Station which comes within the definition of port as per subsequent clarification issued by the JNPT on 24.10.2007. Thus, the Ground No. 1 2 of Revenue s appeal are dismissed. Disallowance u/s 14A - assessee has made suo moto disallowance on the dividend income - AO has made the disallowance on expenditure at 0.5% with the specific disallowance that total interest expenditure incurred by the assessee And assessee has not disallowed interest and expenses as provided under Rule 8D as prescribed under Section 14A - HELD THAT:- There was a clear satisfaction that assessee has not made any disallowance on expenditure. Thus, the CIT(A) was not correct in holding that no satisfaction was recorded by the AO. But the contention of the assessee that the AO should have taken only those shares of Mutual Fund and equity shares which resulted in earning tax from dividend income appears to be just and proper and the working of disallowance under Rule 8D(2)(iii) determined by AO should be restricted to Rs. 2,30,935/- as the assessee has earned exempt income of Rs. 6,52,761/-. Thus, we direct the AO to restrict the disallowance as per Rule 8D(2)(iii) to the extent of Rs. 2,30,935/-. Ground Nos. 3 4 of Revenue s appeal are partly allowed. Education cess SHEC under Section 40 of the Income Tax Act is squarely covered by the decision of Hon ble Bombay High Court in case of Sesa Goa Ltd. [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] Deduction under Section 80IA on the rental income - HELD THAT:- It is the requirement of the business that the separate block for user agencies quipped with basic facilities and for accommodation for bank are mandatory for the assessee as per the Ministry of Commerce guidelines. Thus, claiming deduction under Section 80IA on the rental income is just and proper. There is no need to interfere with the finding of the CIT(A) Ground No. 6 is dismissed.
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2022 (10) TMI 608
Penalty proceedings u/s 271D and 271E - Period of limitation - transaction between sister concern - As submitted notice under section 274 read with section 271D of the Act stating that assessee has violated provisions of section 269SS of the Act therefore, from this date the action for imposition of penalty were initiated - HELD THAT:- Hon'ble Delhi High Court in case of Pr. Commissioner of Income-tax Vs. Mahesh Wood Products (P.) Ltd.[ 2017 (5) TMI 433 - DELHI HIGH COURT] has held that limitation for levy of penalty under section 271D and 271E of the Act would begin to run from the date on which The learned Assessing Officer wrote a letter to the Addl Commissioner income-tax recommending issue of show cause notice for initiating penalty proceedings. Hon'ble Delhi High Court following its own decision in Pr. CIT vs. JKD and finlease Ltd [ 2015 (10) TMI 1281 - DELHI HIGH COURT] has held that the orders passed under section 271D and 271E of the Act would be barred by limitation if they were passed beyond six months from the end of the month in which the learned Assessing Officer informed the learned Addl. CIT about the offence and to show cause the notice under section 274 of the Act. Apparently in this case, the first notice was issued on 15.12.2013 and second notice was issued on 16.01.2014 are identical. Therefore, from the date of notice dated 15.12.2013, the penalty order should have been passed on or before 30th June 2004 but were passed on 30th July 2014. Therefore, both the orders of the penalty are barred by limitation. In this case, ld. Adjudicating authority once again issued the same notice for the same offence being show cause notice for levy of penalty u/s 271D and 271E of the act on 16/1/2014. Claim of revenue is that the last notice [ second notice] issued by the ld. Adjudicating authority should be considered for computing outer time limit for passing penalty orders. If the subsequent notices issued by the ld. Adjudicating authorities on 16/01/2014 are taken for computing time limit, the ld. Adjudicating authority would always be in a positing extend the above time limit for issuing a fresh notice for the same offence and it would not be in consonance of letter and spirit of the law. Therefore, same is rejected. Thus owing the decision of JKD Fin lease services limited [SUPRA] we hold that both the penalty orders passed on 30/7/2014 are barred by limitation of time and therefore quashed. Appeal of assessee allowed.
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2022 (10) TMI 607
Deduction u/s 80P(2)(a)(i) - Interest income from Nationalized bank as income from other sources u/s 56 - proportionate deduction u/s 57 from gross interest income as considered income u/s 56 - as per AO CIT(A) has not considered the facts on record that the Assessing Officer has not pointed out anywhere in assessment order about nexus of the source of the investment out of interest free fund only - HELD THAT:- Submissions of the Ld. AR that the assessee has earned interest income from the investment made with nationalized bank which is not allowable for granting deduction u/s 80P(2)(a)(i) of the Act. But the submission of the Ld. AR that the assessee incurred the expenditure to earn the total interest from the actual investment including that of nationalized bank appears to be correct. The finding of the decision in case of Abhay Co-op. Credit Society Ltd. [ 2021 (12) TMI 456 - ITAT AHMEDABAD ] is apt in assessee s case. In fact, in the present case as well the assessee had given before us the proportionate deduction to be disallowed which is reproduced in para 6 in the form of Table. Thus, we direct the AO to allow expenditure for earning such interest income after considering deduction under Section 80P(2)(c)(ii) as allowed by the CIT(A) and restrict the addition accordingly. Hence, Ground No. 2 is partly allowed for statistical purpose.
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2022 (10) TMI 606
Addition u/s 68 - unsecured loans received by the assessee company from it s Associate companies - onus to prove - HELD THAT:- When the assessee has proved the initial onus lay upon it by proving the creditworthiness and genuineness of the transaction in the matter, addition cannot be made under section 68 - Since the Revenue could not bring out any adverse or cogent material to dispute the creditworthiness of the creditors and genuineness of the transaction in the matter or the amount received by the assessee company was in fact from coffers of the assessee company, no addition could have been made in the hands of the assessee treating the same as unsecured loans under section 68 - We decline to accept the reasoning recorded by the Ld. CIT(A) while confirming the part addition made in the hands of assessee with regard to two creditors - Allow the grounds of assessee and direct the A.O. to delete the entire addition confirmed by the Ld. CIT(A).
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2022 (10) TMI 605
Disallowance of interest on loan advanced to the sister concern of the assessee - why disallowance under section 36(i)(iii) of the Income Tax Act should not be done in respect of interest deduction claimed on borrowed fund as it was not utilized for the business of the assessee but was used for advancing interest free loan to the sister concerns? - HELD THAT:- it is clear that the AO has stated the fact that the assessee advanced the interest free loan to the sister concerns which was disbursed from PNB term loan account. This fact has not been disputed by the assessee as the amount was disbursed directly from PNB loan account. Therefore, the contention of the assessee that the assessee was having sufficient interest free fund for advancing the loan to the sister concerned is contrary to the facts on record. Even otherwise, this fact of advancing the loan to the sister concerns from the PNB term loan is based on independent evidence of term loan account of the assessee with PNB. Interest free loan was advanced to the sister concerned for business purpose and commercial expediency - Giving deep thought on the contention of the assessee regarding the commercial expediency for granting interest free loan to the sister concerns but we could not find a single fact in support of the said contention of the assessee. The assessee has not uttered a single word before the AO as well as before the CIT(A) to show that there were business transactions between the assessee and these two sister concerns which has necessitated to advance interest free loan to the sister concerns. Therefore, in the absence of any reference to any business transaction between the assessee and the sister concerns, the plea of commercial expediency cannot be accepted. The assessee has miserably failed to establish a case of commercial expediency or business exigency in granting interest free loan to the sister concerns by utilizing the borrowed fund. As decided in SA BUILDERS LTD. VERSUS COMMISSIONER OF INCOME-TAX [ 2006 (12) TMI 82 - SUPREME COURT] held that if the interest free loan given to the sister concern has been advanced as a measure of commercial expediency, than the interest on the borrowed fund used for advancing the loan to the sister concern is an allowable deduction. However, it is also made clear that it does not mean that in every case, interest on borrowed fund has to be allowed if the assessee advances to the sister concern. It all depends on the facts and circumstances of the respective case. Therefore, the said decision of Hon ble Supreme Court would not help the case of the assessee when the assessee has not brought any fact on record to establish that there was a commercial expediency or business exigency in advancing the interest free loan to the sister concerns. In view of the above discussion and having regard to the facts and circumstances of the case, we do not find any error or illegality in the impugned order of the CIT(A). Issue for the assessment year 2013-14 is identical and also based on the identical facts being the same amount of loan and advances for Assessment Year 2012-13 was continue for the next assessment year. Accordingly, the solitary common issue is decided against the assessee.
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2022 (10) TMI 604
Taxability of the referral fees - underreporting of referral fee from Vijetha Hospitals - appellant has been following cash system of accounting consistently and admitted the referral fee to tax in the AY 2014-15 i.e., in the year in which the appellant received the amount - HELD THAT:- As the referral fee received by the assessee has been offered to taxation in the FY 2013-14 relevant to the AY 2014-15. It is well settled principle that the assessee can chose his method of accounting either cash or mercantile basis which cannot be disputed by the Revenue. Accordingly, the assessee has declared the amount received from M/s. Vijetha Hospitals during the FY 2013-14 while filing his return of income for the AY 2014-15. Merely based on the fact that M/s. Vijetha Hospitals who has accrued the expenses in their books of account cannot be the criteria to tax the income during the AY 2013-14 in the hands of the assessee who is maintaining the books of account on cash basis. DR has also conceded that there is no difference in the tax rates for the AY 2013-14 and AY 2014-15. In view of the above discussions, we are of the considered view that since the assessee is maintaining the books of account on cash basis, the assessee has rightly disclosed his income when the Referral fee is received from M/s. Vijetha Hospitals during the FY 2013-14 and hence has rightly filed his return of income disclosing the same in the AY 2014-15. We therefore quash the orders of the Ld. Revenue Authorities and allow the appeal of the assessee. Unexplained unsecured loan - appellant was unable to furnish confirmation letter in this case - though the appellant had established the identity, creditworthiness and genuineness was not established, in the case of loan creditors, the appellant needs to establish all the three ingredients. Failure to establish any ingredient will render the loan / credit non-genuine - HELD THAT:- CIT(A) has rightly considered the issue and has sustained the addition made by the Ld. AO. We therefore find no error in the order of the Ld. CIT(A) and hence no interference is required on this issue. Thus, the Ground raised by the assessee is dismissed. Reopening of assessment u/s 147 - unsecured loans, confirmation from the loan creditors and also the income tax returns and the bank statements of the loan creditors - HELD THAT:- Admittedly the assessee in order to correct the errors while filing the original return has filed the revised return of income on 2/12/2015. The contention of the DR could not be accepted that the revised return is filed subsequent to the date of search of 12/5/2015. We find force in the argument of the Ld. AR that the revised return was filed before the due date specified u/s. 139(5) of the Act and before the issue of notice U/s. 148 of the Act on 24/2/2016. As observed that the assessee has corrected the accounting errors while filing the revised return of income. Further, we also find from the paper book that the assessee has submitted the details of unsecured loans, confirmation from the loan creditors and also the income tax returns and the bank statements of the loan creditors. Further, we find that the assessee and also its partners are assessed by the same Assessing Officer viz., ITO, Ward-1(4). The Ld. AO if not relying on the documents produced by the assessee, could have verified the creditworthiness based on the filing of returns of the partners available in his records. CIT(A) has rightly verified the loans and the sources of loans of the creditors and rightly deleted the addition made by the AO. We therefore find no error in the order of the Ld. CIT(A) on this ground and therefore no interference is required. Violation of the provisions of section 269SS - HELD THAT:- We find that the assessee has proved the creditworthiness of the loan creditors which is recorded in the books of accounts of the assessee as well as loan creditors. As relying on case of ADA Investigation vs. Kumar A B Shanti [ 2002 (5) TMI 4 - SUPREME COURT] . We are of the considered view that the facts of the present case does not attract the provisions of section 269SS of the Act. We therefore find no error in order of the Ld. CIT(A) and hence no interference is required in the order of the Ld. CIT(A) and dismiss the grounds raised by the Revenue. Accordingly, we are of the considered view that there is no merit on this ground and therefore this ground raised by the Revenue is dismissed. Disallowance of various expenses - HELD THAT:- We find that voluminous documentary evidences have been produced before the Ld. AO for verification however, the Ld. AO not relying on the self-made vouchers and other documents, estimated the disallowance @ 20% of certain expenses as detailed in the order of the Ld. AO. We also find no fresh evidence has been produced before the CIT(A) to provide one more opportunity to the Ld. AO to verify the same. We therefore find no error in the order of the Ld. CIT(A) who was estimated 10% as against 20% of the disallowances made by the Ld. AO. We are therefore of the considered view that the there is no need to interfere with the order of the Ld. CIT(A) on this issue. Assessee has not retracted the sworn in statement who has accepted the disclosure made during the survey operations by offering Rs. 1,09,54,885/- to tax. The assessee has only corrected the hospital receipts which were wrongly accounted as income instead of unsecured loans from partners. We therefore dismiss this ground raised by the Revenue.
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2022 (10) TMI 603
Penalty u/s 271(1)(c) - defective Notice u/s 274 - non striking off the irrelevant portion of the printed show cause notice - HELD THAT:- On conjoint reading of the provision of law for levy of penalty and the definition of undisclosed income and the facts as narrated here in above that AO has not proved that whether the advance in question are in fact taken or given by the assessee or Mr. Anand Singhal. Not only that the revenue has not done any exercise to confirm with Shri Subhas Ji that whether the money in question is related to the person named in or not? Since, the assets being the advances itself is not tested and statement recorded at the time search where in the assessee has categorically submitted that the money in fact taken and not given and the same is not pertain to the assessee. In the assessment proceeding this very basic fact is not establish and in the absence of this fact being not confirmed we are of the considered view that in light of these facts being not clear the levy of the penalty under section 271(1)(c) is not justified on the addition and therefore, the same is required to be deleted. Surrender made after the conceled income was detected by the department cannot be held to be voluntary or bonafide but under compulsion - As in the case of S.P.Goel vs DCIT [ 2002 (4) TMI 952 - ITAT MUMBAI] Mere entry on a loose sheet of paper does not indicate undisclosed income unless circumstantial evidence in the form of extra cash, jewellery or investment outside books is found , in the case of Ashwini Kumar [ 1991 (8) TMI 142 - ITAT DELHI-D] In the case of dumb document, revenue should collect necessary evidence that the figures represent incomes earned by the assessee. In the case of JCIT vs West Bengal Trading Agency, [ 2004 (1) TMI 303 - ITAT CALCUTTA-B] . There has to be direct or circumstantial material to establish that the intention expressed in the seized document/books has actually been implemented and in the case of P.R.Patel [ 2000 (5) TMI 1070 - ITAT MUMBAI] No addition can be made on the basis of a seized documents which do not bear the name of assessee. Based on judicial precedent and the detailed discussion made here in above the penalty levied on the sustained addition is deleted and in terms of these observations ground raised by the assessee is allowed.
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2022 (10) TMI 602
Penalty u/s 271(1)(c) - TP Adjustment - price being charged by the assessee to its Associated Enterprises for services rendered for the future assessment years - HELD THAT:- On the levy of penalty, we are in agreement with the arguments put forward by the counsel for the assessee to the effect that the assessee has consistently taken the position that the lower mark-up charged in respect of services rendered to associated enterprises, for the reason that transfer pricing provisions are not attracted in cases where there is no base erosion, so far as taxes are concerned. Assessee had made adequate disclosure of all the material facts in Form 3CEB, TPSR and also during the course of the transfer pricing assessment proceeding and scrutiny assessment proceedings. Therefore, there is no furnishing of any inaccurate particulars of income by the assessee. We also observe that it has been held by various Courts that Explanation 7 to Section 271(l)(c) of the Act cannot be invoked while levying penalty in relation to the transfer pricing adjustment, when the said Explanation was neither referred nor relied upon at the time of initiation of the penalty proceedings under the Act. Another noteworthy point is that in our view, the additions on which penalty has been levied is a debatable issue. This is evident from the fact that 'Base Erosion' [ 2016 (7) TMI 760 - ITAT KOLKATA] issue was dealt by the Special Bench -Kolkata ITAT. Further, Pune ITAT has also upheld argument of Base Erosion and hence, two views are possible since at the time of hearing before Pune ITAT, it took an independent view since Kolkata SB decision was rendered after the Pune ITAT decision. The fact that Gujarat High Court has admitted the issue for consideration also supports the assessee s contention that the issue involved is debatable. So far as penalty with regards to reimbursement of expenses is being treated as FTS is concerned, in our view, it is a debatable issue whether reimbursement of expenses qualifies as FTS and there are various decisions which have held that reimbursement of expenses does not qualify as FTS. Accordingly, we are of the considered view that no penalty can be levied u/s 271(1)(c) of the Act on account of treating reimbursement of expenses as FTS. We are of the considered view, that in the instant set of facts, no penalty u/s 271(1)(c) of the Act is liable to be imposed on the assessee. Accordingly, we direct that the penalty u/s 271(1)(c) of the Act be deleted in the instant set of facts. Levy of penalty u/s 271(1)(c) - addition made on account of higher profit attributable to project office (PO) - HELD THAT:- While preparing the profit attributable report by third-party consultant, view was taken that single year data would not adequately capture the market and business cycle of the broad range of comparables. Therefore, multiple year data for undertaking a compatibility analysis was taken since it would produce better results and therefore use of such data is more appropriate than using a single year approach. As in the instant set of facts, while determining the profits attributable to project office, the assessee placed reliance on profit attribution report prepared by third-party consultant. Further, the complete basis for determining the profits attributable to the PO were adequately documented and prepared by third-party consultant. Only because there was a difference of opinion between the approach adopted by the assessee and the Ld. Assessing Officer for determining the profits attributable to the PO, this would itself not a sufficient to impose penalty u/s 271(1)(c) of the Act. In fact, from the observations of the Ld. Assessing Officer, it is evident that this is not a fit case for imposing penalty u/s 271(1)(c) of the Act.
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2022 (10) TMI 601
Delayed employees share towards ESI and PF set up for the welfare of the employee u/s 36(1)(va) read with section 2(24)(x) - amount paid within the due dates of filing of return u/s 139 - HELD THAT:- As decided in HARENDRA NATH BISWAS VERSUS DCIT, CIRCLE-29 KOLKATA [ 2021 (7) TMI 942 - ITAT KOLKATA] we do not accept the CIT(A) s stand denying the claim of assessee since assessee delayed the employees contribution of EPF ESI fund and as per the binding decision of the Hon ble High Court in Vijayshree Ltd. [ 2011 (4) TMI 63 - ITAT KOLKATA] u/s 36(1)(va) of the Act since assessee had deposited the employees contribution before filing of Return of Income. Therefore, the assessee succeeds and we allow the appeal of the assessee.
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2022 (10) TMI 600
Income deemed to accrue or arise in India - profit derived Profits derived from the operation of ships or aircraft in international traffic - Indo-Bhutan DTAA - taxation in the contracting state - AO rejected the claim of the assessee only on the ground that the term Profits derived from the operation of ships or aircraft in international traffic has been more elaborately explained to include the transportation of air passengers - HELD THAT:- As per the law laid down by the Hon ble Supreme Court in the case of Union of India vs. AzadiBachaoAndolan [ 2003 (10) TMI 5 - SUPREME COURT ] where a specific provision is made in the DTAA, that provision will prevail over the general provisions contained in the Income Tax Act if, the same is more beneficial to the assessee as provided under section 90(2) of the Income tax Act. Since there article 8 of the Indo Bhutan DTAA is more beneficial to the assessee, therefore the profits derived by the assessee from the operation of ships or aircraft in international traffic are liable to be taxed in the contracting state in which its place of effective management of the enterprise is situated, which undisputedly is Bhutan. From definition the profit derived Profits derived from the operation of ships or aircraft in international traffic , in the India- Singapore DTAA is exhaustive enough not only to include the air passengers but also mail, livestock or goods. There is nothing mentioned in the India-Singapore DTAA to make an inference that the profits from transport of air passengers should not be covered under Article 8 of the Indo-Bhutan DTAA. - Decided in favour of assessee.
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2022 (10) TMI 599
Compensation received on compulsory acquisition of land - Whether CIT(A) was right in holding that the compensation received on compulsory acquisition of land was not taxable and failing to appreciate that the award of compensation to the assessee was made u/s 11 of the Land Acquisition Act 1894 and not an award under RFCTLAAR Act 2013 and hence the provisions of the section 96 of the RFCTLAAR Act 2013 is not applicable in the case of the assessee and the compensation was rightly treated as business income of the assessee? - HELD THAT:- On careful perusal of the award dated 5/8/2016, it is clear that according to rule 18 (3) of the rights to fair compensation and transparency in land acquisition, rehabilitation and resettlement rules 2014 the Commissioner has granted approval to this award. The award was also passed after the land acquisition act 1984 stood repealed from 1/1/2014 which has been replaced by the right to fair compensation and transparency in land acquisition, rehabilitation and resettlement act of 2013. The provisions of Section 24 of the act clearly provides that that when no award u/s 11 of the said land acquisition act has been made, then all the provisions of the new act relating to the determination of compensation shall apply. It also excludes where the award is already been made u/s 11 of that act and for that particular purpose only the old act continue to apply. In this case the award has been made on 5/8/2016. Therefore the new act shall apply. According to Section 96 of that act income tax shall not be levied on any award agreement made Under that act except as provided u/s 46 of that act. This award/agreement is not u/s 46 - Therefore the income arising in the form of compensation shall be governed by the provisions of Section 96 of the act. Accordingly the income is not chargeable to income tax. The issue is squarely covered in favour of the assessee by the decision in Vishwanatha M V Chief Commissioner [ 2020 (5) TMI 465 - KERALA HIGH COURT] , in case of C nand Kumar [ 2017 (4) TMI 662 - ANDHRA PRADESH HIGH COURT] as well as circular number 36/2016 dated 25/10/2016 which clarified in paragraph number 3 of the act that compensation received in respect of award agreement which is been exempted from levy of income tax as per provisions of Section 96 of that act shall also not be taxable Under the provisions of the income tax act. As CIT - A has carefully considered all the above judgement as well as the provision of new law and the old law of acquisition of land and therefore held that sum received by the assessee is not taxable, cannot be found fault with. Accordingly we confirm the order of the CIT- A and dismiss ground number 1 of the appeal of the AO. Addition on account of deemed income from house property in respect of unsold flats deleted by CIT - A - HELD THAT:- The identical issue arose in the case of the assessee for assessment year 2016 -17 which travelled up to the level of the coordinate bench where the above addition was deleted. CIT A following that decision of the coordinate bench in assessee s own case for assessment year 2016 - 17 [ 2020 (9) TMI 1271 - ITAT MUMBAI] has deleted the addition. DR could not show us any reason to deviate from the order of the coordinate bench in assessee s own case. In result, respectfully following the decision of the coordinate bench in ITA in case of the assessee for assessment year 2016 17, we confirm the order of the learned CIT A in deleting the above addition. We dismiss ground of the appeal.
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2022 (10) TMI 598
Remuneration to partners - assessee has claimed deduction on account of remuneration paid to partners, even in respect of interest income on investment in FDRs etc. - According to the AO, the said interest income was chargeable to tax under the head income from other sources and the same, therefore, could not be taken into account for the purpose of allowing deduction to the assessee on account of remuneration paid to the partners under Section 40(b) - HELD THAT:- As the issue involved in this appeal of the Revenue is squarely covered in favour of the assessee by the decision of Co-ordinate Bench of this Tribunal in assessee s own case for AY 2012-13 [ 2019 (2) TMI 512 - ITAT AHMEDABAD] as well as the decision in the case of CIT Vs. J.J. Industries, [ 2013 (7) TMI 577 - GUJARAT HIGH COURT] Respectfully following the said judicial pronouncements, we uphold the impugned order of the learned CIT(A) deleting the addition made by the Assessing Officer on account of disallowance of partners remuneration and dismiss the appeal of the Revenue.
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2022 (10) TMI 597
Estimation of income - unaccounted turnover - Addition arbitrarily treating a sum as found credited in the banking account maintained with ICICI Bank Ltd., as unaccounted turnover, and then by estimating the net profit at the rate of 8% on the same - HELD THAT:- Even though the balance with ICICI Bank, Bhavnagar was inadvertently shown by the assessee in the balance-sheet under the head Sundry Debtors as pointed out by the learned Counsel for the assessee, the transactions reflected therein representing purchase and sales of the assessee s business were not properly reflected in the books of account of the assessee as found by the authorities below. At the time of hearing before us assessee has not been able to bring anything on record to rebut or controvert this finding of fact recorded by the authorities below. Although he has claimed that the entire credits reflected in the said bank account did not represent sales of the assessee, there is no evidence produced by him to support and substantiate this claim. He has not furnished any details regarding the nature of transactions reflected in the bank account of the assessee to show that the credits reflected in the said bank account did not entirely represent the sales of the assessee as claimed by him. He has also not furnished any details or evidence to show that the net profit rate of 8% applied by the authorities below estimating the income of the assessee from the undisclosed turnover is excessive or unreasonable. Keeping in view all the facts of the case, we do not find any justifiable reason to interfere with the impugned order of the learned CIT(A) on this issue and upholding the same, we dismiss Ground No.1 of the assessee s appeal. Addition u/s 40A(3) - payments exceeding cash of Rs.20,000/- as reflected in the bank account of the assessee with ICICI Bank were made against the purchases - HELD THAT:- Since the said purchases were pertaining to the undisclosed business transactions of the assessee as held by the authorities below and profit of the said undisclosed business transactions was estimated by them by applying a net profit rate, we find merit in the contention of the learned Counsel for the assessee that the same purchases cannot be disallowed separately under Section 40A(3) - To arrive at this conclusion, we derive support from the decision in the case of CIT Vs. Hindustan Equipment (P.) Ltd.[ 2013 (3) TMI 221 - MADHYA PRADESH HIGH COURT] cited by assessee wherein it was held that when profit was estimated by applying net profit rate, there was no scope for further disallowance under Section 40A(3) of the Act separately in respect of purchases. To the similar effect is the decision in the case of CIT Vs. Banwari Lal Banshidhar [ 1997 (5) TMI 37 - ALLAHABAD HIGH COURT] wherein it was held that where income of the assessee was computed applying gross profit rate and when no deduction was claimed by the assessee in respect of purchases, no disallowance under Section 40A(3) of the Act could be made by the Assessing Officer. We accordingly delete the disallowance made by the AO and confirmed by the learned CIT(A) and allow Ground No.2 of the assessee s appeal.
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2022 (10) TMI 596
Penalty u/s 271(1)(c) - none appeared on behalf of the assessee nor any application was filed seeking adjournment of the appeal - HELD THAT:- We find that despite various opportunities granted by the lower authorities the assessee has not appeared before them. The conduct of the assessee in not appearing before the lower authorities and the Tribunal shows the negligent approach of the assessee. The fact that the assessee has not appeared before the lower authorities and has also not appeared before the Tribunal despite various opportunities granted to the assessee shows that the assessee is not serious in pursuing the appeal filed by him. Before us, assessee has not placed any material to support its contention nor has pointed to any fallacy in the findings of lower authorities. In such a situation, we find no reason to interfere with the order of CIT(A) and thus uphold the orders of CIT(A). Appeals of the assessee are dismissed.
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2022 (10) TMI 595
Revision u/s 263 by CIT - unexplained cash deposit during the monetization period and agricultural income - HELD THAT:- Pr. CIT has pointed out the areas where the AO ought to have inquiry, both qua the source of cash deposited by her in her bank accounts as indeed agricultural income, accepting instead the returned income of the assessee by simply relying on the submissions by the assessee. No enquiry worth name, much less proper, has been made by the AO. The assessment order is resultantly sans any finding in the matter, i.e., both as regards agricultural income as well as the source of cash deposits. The case law relied upon by the ld. Pr. CIT has not rebutted by the appellant before us in any manner. Case law in the matter is legion, each decision having been rendered in the fact settings of that specific case. We in fact find the decisions in Rampyari Devi Sarogi [ 1967 (5) TMI 10 - SUPREME COURT] and Deekap Kumar Garg [ 2007 (5) TMI 186 - MADHYA PRADESH HIGH COURT] as squarely applicable in the facts of the instant case. We find no reason to interfere with the impugned order and, accordingly, decline to. - Decided against assessee.
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2022 (10) TMI 594
Deduction of expenditure from income taxable under the head From Other Sources - Car Lease rental income - CIT(A) restricted the expenses to the extent of income so earned - HELD THAT:- Section 57(iii) of the Act is in line with section 37 (1) of the Act which in general (subject to its Explanation) makes available deduction of any expenditure, not being expenditure of the nature described in sections 30 to 37 of the Act and not being in the nature of capital expenditure or personal expenses of the assessee, expended wholly and exclusively for the purposes of the business or profession while computing the income chargeable under the head 'profit and gains of business or profession'. Thus, as per the mandate of section 57 (iii) of the Act, it is necessary that the primary motive of incurring such expenditure should be directly relatable to the earning of income falling under the head 'income from other sources'. In the present case it is beyond doubt that depreciation, interest on loan, repairs and maintenance expenses as well as insurance expenses were directly relatable to the earning of lease rental which was shown by the assessee under 'income from other sources'. A plain reading of section 57 (iii) of the Act would lead one to the conclusion that it does not say that the expenditure shall be deductible only if any net positive income is made or earned. Therefore, there can even be a negative income/loss u/s. 57(iii) of the Act. Therefore, by this reasoning also, CIT(A) was incorrect in directing that the amount of deduction should be restricted to the income earned. Accordingly, on an overall view of the facts of the case and in view of our discussion in the preceding paragraphs, we are of the considered view that the Ld. CIT(A) was legally wrong in restricting the disallowance to the quantum of lease rental earned. While allowing the appeal of the assessee, we direct the AO to allow the impugned expenditure claimed in full. Appeal of the assessee stands allowed.
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2022 (10) TMI 593
Unexplained cash credit u/s.68 - Creditworthiness of creditors and genuineness of the transactions were not established - CIT-A deleted the addition - HELD THAT:- No mention of statement recorded under section 131 of the Act. Further, from the submission dated 06/08/2019 filed by the AO, through office of learned DR, we find that the AO accepted the fact that pursuant to summons issued under section 131 statement of Director of Shreeji Aluminium Pvt Ltd. We find that even in the latest submission dated 12/07/2022, filed by the learned DR, statement recorded u/s 131 is stated to be self-serving in nature, which is not corroborated with balance sheet and profit and loss account. From the perusal of financials of Shreeji Aluminium Pvt Ltd. we find that the company has Revenue from operations - Further, it has long-term borrowing from Karnataka bank Ltd. The company has fixed assets - We further find that the company has trade payables of Rs. 1,83,68,844 in comparison to trade receivables of Rs. 5,79,22,610. Therefore, in view of the aforesaid financial position of Shreeji Aluminium Pvt Ltd., we do not agree with the submissions of the Revenue. As a result, we find no infirmity in the aforesaid findings of the learned CIT(A). In respect of all the other entities, the AO in its remand report gave similar reply that unsecured loan lender have advanced the fund on the same day or within 10 to 12 days on which they have received the same. In its latest submission dated 12/07/2022, the Revenue has made submission only regarding loan from Parul Mittal, and submitted that the response under section 133(6) is self-serving and is not corroborated with balance sheet and profit and loss account. In respect of addition on account of Sheelaben Thummar, Kirti Thummar HUF and Krushy Metal, we find from the details available in the paper book that these are appearing as loans / deposits by the assessee s proprietary concern viz. Krushy trading company. Thus, we find no infirmity in the findings of the learned CIT(A) that same cannot be added under section 68 of the Act. Loan from Ram Avtar Paper Ltd., we find from audited financial at page 191 and 192 of the paper book that the company has capital and reserves of Rs. 68,17,941 and short term borrowings from bank of Rs. 26,91,870. Further, this entity has inventory of Rs. 30,54,584. Thus, we are of the considered view that learned CIT(A) has correctly deleted the addition in respect of this entity. As regards payment from Suyash Mittal family, it is the claim of the assessee that this is in respect of repayment of earlier loan. No material contrary to assessee s claim has been brought on record. Thus, we are of the considered view that learned CIT(A) has correctly deleted the addition in respect of this entity. We find that the details of capital account of few loan lenders were not examined by the learned CIT(A) and these details are also not placed in the paper book. Further, other aspects of the financial statement of the loan lenders have also not been examined by the learned CIT(A). Therefore, we deem it appropriate to remand the addition pertaining to loan transactions of the assessee with Parul Mittal, Sanjay Mittal Sons, Shivakumar Sons HUF, Vikas Mittal Sons, and Ram Mittal HUF to the file of learned CIT(A) for de novo adjudication. The assessee is also directed to file all the details of the loan lenders in support of its claim for necessary examination by the learned CIT(A). The learned CIT(A) shall be at liberty to seek any other information / document for complete adjudication of this issue. Appeal by the Revenue is partly allowed for statistical purpose in view of our aforesaid findings. Issuance of notice under section 143(2) of the Act on the ground that the same is without jurisdiction - From the perusal of record we find that this issue was not raised by the assessee in its appeal before the learned CIT(A) and has been raised for the first time in the present cross objection against the Revenue s appeal. Though, this fresh issue should have been raised by way of an application seeking admission of additional ground, however, the assessee has raised the same in the present cross objection. It is settled that being a legal issue, same can be raised at any stage of proceedings. However, since, this legal issue was not raised and therefore was not considered by the CIT(A), thus, we deem it appropriate to remand the issue arising in grounds no.2 and 3, raised in assessee s cross objection, to the learned CIT(A) for necessary adjudication. Needless to mention that no order shall be passed without affording opportunity of being heard to both the parties. Grounds raised in assessee s cross objection are allowed for statistical purpose.
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Customs
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2022 (10) TMI 592
Proper service of both the Show Cause Notice and the addendum on the Assessee or not - HELD THAT:- There are no ground to interfere with the impugned Order and the Appeal is accordingly, dismissed.
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2022 (10) TMI 591
Levy of Anti-dumping duty - valuation - acrylic fibre imported from United States of America, Thailand, and South Korea - applicability of Notification dated 24-10-1997 - HELD THAT:- The appellants are liable to pay anti-dumping duty of the imported goods in terms of Notification No. 72/2001-CX., dated 12-2-2001 at the rate of US $ 180 per kg whereas they had originally paid duty at the rate of US $ 9.73 per kg in terms of Notification No. 81/97, dated 24-10-1997 - While calculating the CVD, the element of anti-dumping duty is to be excluded for arriving at the assessable value - since the goods had been found to be of Thai origin and the department earlier enhanced the assessable value by treating the same as of Taiwan origin, the declared value of the goods by the appellants is to be accepted which was US $ 0.80 per kg. (iv) the penalty imposed on the appellants is not to exceed 25% of the re-calculated duty amount. No case to interfere with the impugned order of the Tribunal is therefore made out - Appeal dismissed.
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2022 (10) TMI 590
Refund - Additional duty of customs [ 2008 (9) TMI 656 - CESTAT, BANGALORE] - Benefit of N/N. 21/2002-Cus., dated 1st March, 2002 - kits for conversion of petrol and diesel vehicle into compressed natural gas/propane or liquefied petroleum gas driven vehicles [ 2015 (12) TMI 1755 - CESTAT HYDERABAD] - HELD THAT:- Since, the tax effect, in these appeals, is less than Rs. 25 lakhs, which is below the threshold monetary limits prescribed in the National Litigation Policy, Learned Additional Solicitor General and Learned Senior Counsel appearing for the Revenue-appellant(s) do not wish to press these appeals - In view of the aforestated Policy, notified by the Ministry of Law and Justice, these appeals are, thus, dismissed as not pressed for. Refund claim - eligibility for concessional rate of additional duty of 5% - notification no. 21/2002-CE dated 1st March 2002 ignorance of order of the Tribunal no. 1112/2008 dated 1st September 2008 by appellate authority - certificate by chartered accountant furnished that burden of duty not passed - principle of unjust enrichment - CESTAT Hyderabad [ 2016 (9) TMI 121 - CESTAT HYDERABAD] held that It is surprising that a senior officer discharging functions as Commissioner (Appeals) appears to be bereft of knowledge of judicial hierarchies and comprehension of judicial discipline. The disposal of these matters by the appellate authority ignoring the decision of Tribunal reflects poorly on the first tier of the appellate mechanism in the scheme of tax administration leaving needless burden on the assesse - HELD THAT:- The order(s) of self-assessment was admittedly not assailed by the respondent(s)-assessee(s) and subsequently, only refund application(s) was filed, which has been allowed by the Customs, Excise Service Tax Appellate Tribunal, Regional Bench at Hyderabad (the Tribunal ) vide impugned order(s). Such claim(s) for refund is not maintainable as held by this Court in ITC LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA -IV [ 2019 (9) TMI 802 - SUPREME COURT ] - Appeal allowed.
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2022 (10) TMI 589
100% EOU - Excess Production of Wastage - HELD THAT:- There are no reason to interfere with the impugned order passed by the Tribunal. However, the question of law is kept open. The appeal is disposed of accordingly.
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Insolvency & Bankruptcy
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2022 (10) TMI 588
Rejection of claim of the Appellant(s) to be declared as Financial Creditors of the Corporate Debtor - HELD THAT:- The disbursal was made by CDR Lenders to the Corporate Debtor and the Appellant(s) before us were Personal Guarantors/ Corporate Guarantors to guarantee the repayment of Financial Facilities extended to the Corporate Debtor. We fail to see as to how the Guarantors will become a Financial Creditor of the Corporate Debtor. The Appellant(s) who were Promoters of the Corporate Debtor had given guarantee for repayment of the debt and the relevant clauses of the Personal Guarantee. Coming back to Section 5(8)(h), which is the sheet anchor of submission of Appellant(s) to be covered under Clause (h), the requirement is any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution etc. The financial claim has been filed by the Appellant(s) for invocation of guarantee dated 31.03.2015 and 30.03.2015, which is specifically mentioned in Form-C. Clause 5.10 in the Purchase Agreement dated 04.03.2015 cannot be read to be any counter-indemnity obligation in respect to guarantee dated 31.03.2015 and 30.03.2015. Since the Guarantee was not even existent when Purchase Agreement dated 04.03.2015 was executed. Thus, pre-condition for applicability of Section 5(8)(h) is not fulfilled in the facts of the present case. When the specific case of the Appellant is on the basis of invocation of the guarantee dated 31.03.2015 and 30.03.2015, the Appellant(s) cannot rely on Clause 5.10 to satisfy the condition of existence of any counter-indemnity obligation in respect of a guarantee. One of the clauses in the Personal Guarantee, i.e. Clause 4.6 under which Guarantor waives in favour of the Security Trustee all the suretyship and other rights, which the Guarantors might otherwise be entitled to enforce, including but not limited to those arising under Sections 133, 134, 135, 139 and 141 of the Indian Contract Act, 1872. It was not open for the Appellant(s) to file any claim in view of the specific Clause 4.6. Hence, the claim was liable to be rejected on this ground also. The condition for declaring the Appellant(s) as Financial Creditor are not satisfied in the claims submitted by the Appellant(s) and both Resolution Professional and Adjudicating Authority have rightly rejected their claims as Financial Creditor for valid reasons - appeal dismissed.
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2022 (10) TMI 587
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- In the present case, on looking into the Power of Attorney which has been brought on record and in paragraph 20 of the Power of Attorney, there is a clear mention that Power of Attorney was executed by Director of Bank on the basis of Resolution dated 24.01.2005 passed by the Board of Directors in the meeting held at Bangalore. The statement in Column 5 of Part-I of Section 7 Application was clearly with regard to person authorised to file Section 7 Application. In reply filed to Section 7 Application, none of the contents of Part-I was denied. It was stated by the Corporate Debtor that it does not require any reply. Submission of the Learned Counsel for the Appellant that Bank may be directed to produce the Resolution cannot be entertained at this stage especially when in the reply it was not even contended that no Resolution has been passed as mentioned in the Power of Attorney. The admission of Section 7 Application and rejection of this Appeal may not come in the way of the Appellant and the Bank in considering the One Time Settlement. The route under Section 12A of the IBC is always open in event the Bank- Financial Creditor accept the OTS. Appeal dismissed.
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2022 (10) TMI 586
Seeking to delete the Appellant and Respondents 3 to 7 as Financial Creditors of Reliance Infratel Limited (RITL) - seeking a direction to the RP to reconstitute the CoC by deleting the Appellant and Respondents 3 to 7 who were claiming to be the Financial Creditors of the Corporate Debtor on the basis of the Guarantees - Related party - HELD THAT:- The contention of the Learned Sr. Counsel for the Appellant that 20.12.2017 has to be taken as the date of NPA and not 22.08.2016 is unsustainable as the Appellant themselves have declared the Corporate Debtor as an NPA, with effect from 26.08.2016, which indicates that the Corporate Debtor was in default for at least 90 days prior to 26.08.2016. This Tribunal in Avantha Holdings Ltd. [ 2022 (7) TMI 203 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI ] is not applicable to the facts of this case as the observation relied upon was in terms of the related party transaction and consequence submission of Resolution Plan by such a related party . This Tribunal is also conscious of the fact that it is obligatory under law to produce a document duly stamped in accordance with the provisions of Maharashtra Stamp Act, 1958, for it to be considered as being enforceable in law and claims were required to be submitted to the IRP i.e., the address in Maharashtra within the State of Maharashtra and it is only to evade the stamp duty, that the documents were not shared electronically with the IRP. It is relevant to mention that an Application under Section 30(6) of the Code was preferred by the Resolution Professional seeking approval of the Resolution Plan, in IA920/2020, which was allowed by the Adjudicating Authority, vide Order dated 03.12.2020. This Appeal is devoid of merit - Appeal dismissed.
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2022 (10) TMI 585
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 - HELD THAT:- There is a dispute even before the issuance of the Demand notice dated 29.03.2019. The Corporate Debtor had Terminated the Work Order between the parties, via letter dated 12.12.2018, which is also prior to the said Demand Notice. Thus, upon perusing the above e-mails, this Bench notes that both parties are in loggerheads much prior to issuing the Demand Notice. Hon ble Supreme Court in Mobilox Innovations Private Limited Versus Kirusa Software Private Limited [ 2017 (9) TMI 1270 - SUPREME COURT] , the Supreme Court clearly held that what the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the dispute is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster - So long as a dispute truly exits in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application. This Bench has no option except to hold that there are Pre-existing disputes between the parties and there is no merit in the Company Petition and the Company Petition deserves to be dismissed - Petition dismissed.
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2022 (10) TMI 584
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- The applicant in Part-IV of Form 5 of the petition had claimed outstanding debt amounting Rs. 4,77,73,937/- including outstanding principal amounting Rs. 2,21,38,643/- and interest amounting Rs. 2,56,35,294/-. From the averments of the applicant, no doubt that the applicant had issued demand notice ('first demand notice') dated 09.10.2020 for the outstanding operational debt amounting Rs. 5,60,46,493/- including Rs. 4,22,75,591/- as outstanding principal amount and outstanding interest amounting Rs. 1,37,70,902/- as on 16.03.2020, which was subsequently withdrawn by the applicant in view of the admission of the liability by the corporate debtor and part payment of Rs. 2,00,00,000/- by way of RTGS and further issuing 11 post-dated cheques for an aggregate amount of Rs. 2,16,00,465/- which were later dishonored at the time of presenting the cheques for encashment precisely during the period 09.04.2021 to 30.09.2021 - what is to be observed is the documents relied by the applicant on the basis of which the demand notice and the instant petition is filed. As evident the applicant in pt.7 of the second demand notice dated 25.11.2021 and Part-V of the instant petition had majorly relied on the copy of the pending invoices, account statements to prove the existence of debt. Further, neither the applicant nor the corporate debtor had placed on record any document or correspondence as to show that any settlement was arrived at between the parties and the second demand notice dated 25.11.2021 was issued subsequent to the breach of any settlement terms. The corporate debtor had failed to raise any plausible contention as to the existence of disputes prior to issuance of demand notice dated 25.11.2021 and the pre-existing dispute attempted to be raised by the corporate debtor is a feeble one, unsupported by any evidence, is a moonshine and nothing else. The operational debt is above the pecuniary threshold limit of Rs. 1 crore as envisaged under Section 4 of the Code, 2016 which was due and there was default on the part of the corporate debtor in pursuance of invoices raised on behalf of the applicant. Further, keeping in view all the reasons, this Adjudicating Authority is satisfied that there is an existence of 'debt' and 'default' as defined under the Code, 2016. Petition admitted - moratorium declared.
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Service Tax
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2022 (10) TMI 583
Levy of Service Tax - Work Contract Services - construction of toilets, roads, sanitation, water reservoir, drinking water supply, sewage treatment plant etc - stand of the respondent is that Rajya Krishi Utpadan Mandi Parishad being a statutory authority created under the U.P. Krishi Utpadan Mandi Adhiniyam, 1964 is covered within the definition of Government Authority and is entitled for exemption under Clauses-12 and 13 of the Mega Exemption Notification no.25/2012-ST dated 20.06.2012 - dispute is of financial year 2015-16. HELD THAT:- The Krishi Utpadan Mandi Samiti is established by an Act of the State Legislature to provide for the regulation of sale and purchase of agricultural produce and for the establishment, superintendence and control of markets therefor in the State of Uttar Pradesh. Section 16 of U.P. Krishi Utpadan Mandi Adhiniyam has been placed before us to demonstrate that none of the functions and duties of the Committee are commercial or business in nature - It is evident from the Mandi Samiti Act that the Mandi Samiti is a Corporate body and all its functions and duties are directed towards regulating the sale and purchase of the agricultural produce. The Mandi Samiti is required to establish markets to exercise superintendence and control over the sale and purchase of the agricultural produce. The construction activities inside the Mandi area cannot be termed as business activities. In the similar facts and circumstances of this Court in Central Excise Appeal no.06 of 2022 [ 2022 (9) TMI 535 - ALLAHABAD HIGH COURT] had taken a view that the provisions of Mega Exemption Notification in light of the functions and duties of the Krishi Utpadan Mandi Samiti would be applicable in case of Work Contract Services provided by the Contractor to Krishi Utpadan Mandi Samiti and the Contractor would be entitled to exemption from levy of service tax in view of the exemption notification no. 12/2012-ST. - The argument of the learned counsel for the appellant revenue therein that the activity of letting/renting of Krishi Utpadan Mandi Samiti being commercial has been turned down. Appeal dismissed.
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2022 (10) TMI 582
Levy of penalty u/s 77 and 78 of the Finance Act - goods transport agency service - short payment of service tax - service tax along with interest paid on being pointed out by the department - deliberate suppression of facts or not - HELD THAT:- It can be seen that the department has to refrain from issuing Show Cause Notice if the appellant pays up the service tax along with interest as ascertained by himself or by the officers - In the present case, the appellant has paid up the service tax along with interest on 4.5.2012 and 16.8.2012. The Show Cause Notice was issued only on 22.10.2012. The learned AR has submitted that there is deliberate suppression of facts and therefore the Show Cause Notice issued and the penalties imposed are proper. It can be seen that the appellant on being pointed out has paid the service tax immediately. It is also seen that they have paid 1% penalty in case the matter falls under sec. 73(4A) of Finance Act, 1994. The conduct of the appellant pursuant to the verification of accounts shows that they had the intention to pay up the service tax. Further, the payment of service tax on GTA service during the relevant period was under litigation before various forums and there were conflicting decisions. It is also argued that the entire issue is a revenue neutral as they would be eligible to take credit of the service tax being tax paid on input services. Taking note of these submissions that there is no deliberate suppression of facts. On such score, sub-section (3) of section 73 would apply. The decision of the Hon'ble High Court of Karnataka in the case of COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX VERSUS M/S ADECCO FLEXIONE WORKFORCE SOLUTIONS LTD [ 2011 (9) TMI 114 - KARNATAKA HIGH COURT] has held that no penalty can be imposed under sub-section (3) of section 73 of Finance Act, 1994. The penalties imposed under sections 77 and 78 are not legal and proper and requires to be set aside - Appeal allowed - decided in favor of appellant.
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2022 (10) TMI 581
CENVAT Credit - inputs, input services and capital goods used by the appellant for provision of telecommunication services - eligibility of the appellant to claim CENVAT credit on tower, tower material, shelter, input services for the period from October 2004 to March 2012 and April 2014 to March 2015 - denial of credit primarily on the ground that the subject goods, being attached to earth, are immovable in nature, and thus not used for providing output services - applicability of Board Circular dated 26.02.2008 - conflicting decisions - whom shall Tribunal follow in case of conflicting judgements?. Whether towers are movable property or immovable property? - Excisability of goods - HELD THAT:- In MALLUR SIDDESWARA SPINNING MILLS (P) LTD. VERSUS CCE., COIMBATORE 2004 (3) TMI 68 - SUPREME COURT] , the Supreme Court held that mere bolting of machine to a frame from which it can be unbolted and then shifted would not render the machine to be an immoveable property - This issue was also examined at length by a Division Bench of the Tribunal in M/S. RELIANCE JIO INFOCOMM LTD. VERSUS ASSISTANT COMMISSIONER, CGST CENTRAL EXCISE, BELAPUR-IV DIVISION [ 2022 (4) TMI 1361 - CESTAT MUMBAI] and it was held that towers and shelters would not be immovable property - Thus, in view of the factual position and the decisions referred, the towers and shelters would not be immovable property. Whether towers and shelters would also qualify as inputs under rule 2(k) of the 2004 Rules or not - HELD THAT:- Reliance placed in the judgement of Vodafone Mobile Services [ 2018 (11) TMI 713 - DELHI HIGH COURT] where it was held that The towers in CKD condition are used for the purpose of supplying the service and therefore, would qualify as inputs . There is actual use of the tower and shelters in conjunction with the Antenna and the BTS equipment in providing the output service, which also includes provision of the Business Support Service. Whether the items in dispute are capital goods and, therefore, credit was correctly taken as capital goods also deserves to be accepted or not? - HELD THAT:- The Delhi High Court in Vodafone Mobile Services [ 2018 (11) TMI 713 - DELHI HIGH COURT] had also examined this issue and held that the Tribunal clearly erred in concluding that the towers and parts thereof and the prefabricated shelters are not capital goods with the meaning of Rule 2(a) of the Credit Rules. This question is answered in favour of the assessee and against the Revenue - Thus, the appellant was also entitled to take CENVAT credit since the items in dispute are capital goods . Two conflicting views have been expressed by the Delhi High Court in Vodafone Mobile Services and the Bombay High Court in Bharti Airtel Ltd. A Larger Bench of the Tribunal in Kashmir Conductors [ 1997 (7) TMI 186 - CEGAT, COURT NO. II, NEW DELHI] has considered which decision should be relied upon when conflicting views have been expressed by High Courts and it was held when a Jurisdictional High Court has expressed any view in regard to the issue and conflicting views have been taken by High Courts, other than the Jurisdictional High Court, then the Tribunal will follow the jurisdictional High Court. What also needs to be noticed is that the judgment of the Bombay High Court rendered in Bharti Airtel [ 2014 (9) TMI 38 - BOMBAY HIGH COURT] was considered by the Delhi High Court in Vodafone Mobile Services and it was distinguished as is clear from paragraph 48 of the judgment that has been reproduced above. In this connection the Delhi High Court had also placed reliance upon the later decision of the Supreme Court in Solid and Correct Engineering Works - The decision of the Delhi High Court in Vodafone Mobile Services would have to be followed. The appellant would, therefore, be entitled to claim CENVAT credit on tower/tower material and pre-fabricated buildings/shelters. It would, therefore, not be necessary to examine other contentions raised by learned Counsel for the appellant. Appeal allowed.
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Central Excise
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2022 (10) TMI 580
CENVAT Credit - removal of Cenvatted capital goods - Interpretation of statute - proviso added in 2007 to sub-rule (5) of Rule 3 to Cenvat Credit Rules, 2004 - clarificatory in nature or not - retrospective effect or not - whether in absence of said proviso the words as such appearing in sub-rule (5) of Rule 3 contemplated the removal of cenvated capital goods without use shall be the substantial question of law for adjudication in this appeal? HELD THAT:- Admittedly, the appellant had used the goods in question in its factory at Goa from 1999 to 2004. As such, the appellant was entitled to the benefit of Rule 57-S(2)(b) of 1944 Rules. It appears that though the said proviso to sub-rule (5) of Rule 3 existed in the 2002 Rules, by a legislature slip, it was not included in the 2004 Rules. As such, to clarify the position, an amendment was carried out in 2007 to bring it in tune with Rule 57-S(2)(b) of the 1944 Rules. Having held the 2007 amendment to be clarificatory, the effect would be that the said proviso existed in the statute book from 2004 itself. This being the position, the appellant was entitled to take benefit of the said proviso and make an adjustment as per the said proviso. The question of law as framed by the High Court is held in favour of the appellant. The demand issued by the revenue is quashed and set aside - Appeal allowed.
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2022 (10) TMI 579
Exemption from Excise duty - imported paraffin/wax used by the Assessee in the process of manufacturing of cotton yarn - can be said to be a raw material or not - whether Assessee was entitled to the benefit of Notification No. 8/97-C.E., dated 1-3-1997 or not? - extended period of limitation - HELD THAT:- So far as the issue whether the Assessee was entitled to benefit of Notification No. 8/97-C.E., dated 1-3-1997 is concerned, the same is squarely covered against the Assessee in view of the decision of this Court in the case of M/S. MERIDIAN INDUSTRIES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE [ 2015 (11) TMI 94 - SUPREME COURT] where this Court considered the very exemption notification and the use of wax in manufacturing of cotton yarn. After detailed analysis of the submissions made on behalf of the Revenue and Assessee and after considering the process of manufacturing cotton yarn and definition of raw material , ultimately it is observed and held that the wax used in manufacturing of cotton yarn is a raw material/input and therefore, the Assessee is not entitled to the benefit of notification dated 1-3-1997. Therefore, on merits the Learned CESTAT is not right in holding that the Assessee was entitled to benefit of Notification No. 8/97 for concessional rate of duty. Extended period of limitation - HELD THAT:- As this Court laid down the law and clarified the law only in the year 2015 and till then, the issue was at large and therefore, on facts it cannot be said that there was any suppression on the part of the Assessee in disclosing the true and correct facts - it is to be noted that the demand for some period can be said to be within the period of limitation. Therefore, to the extent, the Department invoked the extended period of limitation, the demand must fail, as the Department was not justified in invoking the extended period of limitation. Now the Department to re-calculate the duty/differential duty to the extent the demand/show cause notice was found to be within the period of limitation/time. At the cost of repetition, it is observed that the demand of duty/differential duty found to be beyond the period of limitation by invoking the extended period of limitation is held to be unsustainable and bad in law. Appeal allowed in part.
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2022 (10) TMI 578
Whether the extracts were goods for the purpose of the Central Excise Act and if so, whether they were classifiable under Chapter 13 or 30 of the Act? - the issue is decided in the case of DABUR INDIA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MEERUT [ 2003 (8) TMI 50 - SUPREME COURT] where it was held that Since the concurrent finding of act is that the liquid extracts used by the appellant in the manufacture of the medicines had therapeutic value, then they can, according to the CBEC circular be classifiable only under Tariff Entry 30.30 and not 13.03. HELD THAT:- The appeal is dismissed as covered by the above decision.
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2022 (10) TMI 577
Exemption from Excise Duty - Iron Ore and Ore Concentrate - two distinct commercial commodities or one and the same commodity? - applicability of N/N. 13/2000-C.E. - HELD THAT:- A similar view was taken by the Tribunal in the case of COMMR. OF CUS. C. EX., JSR BBSR-II VERSUS STEEL AUTHORITY OF INDIA LTD. [ 2002 (12) TMI 142 - CEGAT, KOLKATA ], wherein it was held that the process of obtaining Iron Ore does not amount to manufacture under the Notification dated 1-3-2000. The circular of 26-2-2003 clarifies that the word Ore provided in the Explanation of Integrated Steel Plant in the Notification dated 1-3-2000, also includes Ore Concentrate . There are no ground to interfere with the impugned order passed by the Tribunal - appeal disposed off.
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CST, VAT & Sales Tax
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2022 (10) TMI 576
Maintainability of writ petition - availability of alternative remedy of appeal - Validity of assessment order - denial of Input Rebate - Section 14 of the Madhya Pradesh Value Added Tax Act, 2002 - HELD THAT:- While entertaining the writ petition under Article 226 of the Constitution of India challenging the Assessment Order denying the Input rebate, the High Court has observed that there are no disputed question of facts arise and it is a question to be decided on admitted facts for which no dispute or enquiry into factual aspects of the matter is called for. The aforesaid can hardly be a good/valid ground to entertain the writ petition under Article 226 of the Constitution of India challenging the Assessment Order denying the Input rebate against which a statutory remedy of appeal was available. After taking into consideration the earlier decision of this Court in the case of UNITED BANK OF INDIA VERSUS SATYAWATI TONDON AND OTHERS [ 2010 (7) TMI 829 - SUPREME COURT] , it is observed and held that in a tax matter when a statutory remedy of appeal is available, the High Court ought not to have entertained the writ petition under Article 226 of the Constitution of India against the Assessment Order by-passing the statutory remedy of appeal. The impugned judgment and order passed by the High Court entertaining the writ petition under Article 226 of the Constitution of India against the Assessment Order denying the benefit of Input rebate is unsustainable and the same deserves to be quashed and set aside and the original writ petitioner is to be relegated to prefer an appeal against the Assessment Order dated 28.02.2015 passed by the Divisional Deputy Commissioner, Commercial Tax, Jabalpur, which may be available under Section 46(1) of the MP VAT Act, 2002. The writ petition preferred by the respondent herein original writ petitioner assessee is hereby dismissed on the ground of alternative efficacious statutory remedy of appeal available to the respondent.
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Indian Laws
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2022 (10) TMI 575
Smuggling - Ganja - possession of contraband item - lack of corroboration of the testimony of police witnesses by independent witnesses - raising of presumption - shifting of burden on accused - section 50 of Narcotic Drugs and Psychotropic Substances Act, 1985 - HELD THAT:- Exhibit C-1 is the notice purportedly served on the independent witness Firuturam Banware. This notice directs the said witness to appear at 17:10 hrs. at the place indicated therein namely, Saida Tiwari Para By-pass Main Road . Even according to PW-7 this notice to the witness was sent only at 17:10 hrs., to be served at the residence of the witness located 1 Km. away. Therefore, there was no way that PW-7 could have expected the witness to be available at the place of incident at 17:10 hrs - Exhibit C-2 is the notice served on the appellant herein (A-1) under Section 50 of the Act. The time shown therein is 18:00 hrs. This notice requires the appellant to indicate whether he would like to be searched in the presence of Magistrate or Gazetted Officer. It is also stated in the notice that the contents thereof were read over in the presence of witnesses. Exhibit C-3 is the consent Panchnama of the appellant agreeing to be searched by the police officer. This Panchnama contains the names of Sunil Malghani and Firuturam Banware (CWs 1 and 2). Even the search Panchnama of the accused marked as Exhibit C-4 refers to the presence of CWs 1 and 2 at the time of search. Right from the beginning, the co-accused Reena Das (A-2) was implicated at every stage. Admittedly, the information received by PW-7 at 16:50 hrs. on 31.05.2014 contained a reference to the appellant as well as the co-accused Reena Das. But for some strange reason, PW-7 chose to serve a notice under Section 50 of the Act only on the appellant and not on the co-accused. PW-7 also omitted deliberately or otherwise, to record, (i) the consent Panchnama of co-accused; (ii) the search Panchnama of the co-accused; and (iii) the recovery Panchnama in relation to the co accused. It is true that Section 54 of the Act raises a presumption and the burden shifts on the accused to explain as to how he came into possession of the contraband. But to raise the presumption under Section 54 of the Act, it must first be established that a recovery was made from the accused. The moment a doubt is cast upon the most fundamental aspect, namely the search and seizure, the appellant will also be entitled to the same benefit as given by the Special Court to the co-accused. The appellant is also entitled to the benefit of doubt. Therefore, the appeal is allowed.
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2022 (10) TMI 574
Jurisdiction - grant of Regular Bail - whether the High Court was justified in exercising jurisdiction under Section 439(1) of the Code of Criminal Procedure (Cr.P.C) for grant of regular bail in the facts of the present case? - HELD THAT:- The importance of assigning reasoning for grant or denial of bail can never be undermined. There is prima facie need to indicate reasons particularly in cases of grant or denial of bail where the accused is charged with a serious offence. The sound reasoning in a particular case is a reassurance that discretion has been exercised by the decision maker after considering all the relevant grounds and by disregarding extraneous considerations. A two-Judge Bench of this Court in Ramesh Bhavan Rathod [ 2021 (4) TMI 1276 - SUPREME COURT] held that the duty to record reasons is a significant safeguard which ensures that the discretion which is entrusted to the court, is exercised in a judicious manner. The Respondent No.2/Accused was arrested on 13.01.2021 subsequent to which, he had applied for regular bail before the Sessions Court which was rejected on the ground that he is named in the FIR on the basis of the information provided by the deceased himself and that the same has been clarified after perusal of the documents/forms that the bullet was shot by the Respondent No. 2/Accused himself. Being aggrieved by the same, Respondent No.2/Accused filed an application under Section 439 Cr.P.C before the High Court seeking regular bail. Grant of bail to the Respondent No.2/Accused only on the basis of parity shows that the impugned order passed by the High Court suffers from the vice of non-application of mind rendering it unsustainable. The High Court has not taken into consideration the criminal history of the Respondent No.2/Accused, nature of crime, material evidences available, involvement of Respondent No.2/Accused in the said crime and recovery of weapon from his possession - the impugned order passed by the High Court is not liable to be sustained and is hereby set aside. The bail bonds of Respondent No.2/Accused stand cancelled and he is hereby directed to surrender within one week from the date of passing of this order, failing which, the concerned police authorities shall take him into custody. Appeal allowed.
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