TMI Tax Updates - e-Newsletter
November 13, 2024

Case Laws in this Newsletter:

GST Income Tax Customs Securities / SEBI Insolvency & Bankruptcy FEMA Service Tax Central Excise Indian Laws

Articles

1. THE INSOLVENCY AND BANKRUPTCY CODE, 2016 PREVAILS OF THE SPECIAL ECONOMIC ZONE ACT, 2005 AND ITS RULES

   By: DR.MARIAPPAN GOVINDARAJAN

2. No IGST on Ocean Freight for CIF and FOB contracts after notification invalidated

   By: Kamal Aggarwal and Aditi Vishnoi

3. Madras HC directs Department to hear appeal on merits filed beyond condonable period

   By: Bimal jain

4. PAS 6 Applicability in the Annual Filing Process

   By: Ishita Ramani

News

1. Advisory regarding IMS during initial phase of its implementation

2. India secures position in top 10 countries in Patents, Trademarks, and Industrial Designs: WIPO 2024 Report

3. Public Sector Banks (PSBs) show strong performance in the First Half of FY 2024-25 with 11% Y-o-Y growth

4. IEPFA, NCAER and BSE jointly organised a workshop on the revolutionizing impact of digital technology on financial sector

5. Union Minister for Finance and Corporate Affairs Smt. Nirmala Sitharaman meets AIIB Board of Directors in New Delhi

6. DFS Secretary urges banks to use all means, especially digital, for updating of PMJDY accounts in a time bound manner

Notifications

Customs

1. 24/2024 - dated 11-11-2024 - ADD

Seeks to impose ADD on Epichlorohydrin imported from China PR, Korea RP and Thailand for 5 years, pursuant to final findings of DGTR.

2. 76/2024 - dated 11-11-2024 - Cus (NT)

Inland Container Depots for loading and unloading of goods - Removal of Pimpri - Amendment in Notification No. 12/97-Customs (NT) dated the 2nd April, 1997

GST - States

3. 25/2024-State Tax - dated 10-10-2024 - Gujarat SGST

Amendment in Notification No. 50/2018-State Tax, dated the 14th September, 2018

4. 09/2024-State Tax (Rate) - dated 10-10-2024 - Gujarat SGST

Amendment in Notification No. 13/2017-State Tax (Rate), dated 30th June, 2017

5. 08/2024-State Tax (Rate) - dated 10-10-2024 - Gujarat SGST

Amendment in Notification No. 12/2017-State Tax (Rate), dated 30th June, 2017

6. 07/2024-State Tax (Rate) - dated 10-10-2024 - Gujarat SGST

Amendment in Notification No. 11/2017-State Tax (Rate), dated 30th June, 2017

7. 05/2024-State Tax (Rate) - dated 10-10-2024 - Gujarat SGST

Amendment in Notification No. 1/2017-State Tax (Rate) dated 30th June, 2017

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/AFD/AFD-PoD-3/P/CIR/2024/156 - dated 12-11-2024

Simplified registration for Foreign Portfolio Investors (FPIs)

Customs

2. Instruction No. 28 /2024 - dated 12-11-2024

General ways of identification of the Low Voltage Switchgear and Controlgear under EEQCO as per phased implementation plan

3. F. No. 390/Misc/3/2019-JC - dated 5-11-2024

Guidelines for conduct of personal hearings under CGST Act, 2017, IGST Act, 2017, Customs Act, 1962, Central Excise Act, 1944 and Chapter V of Finance Act, 1994

Highlights / Catch Notes

GST

• Court Invalidates Finance Ministry's Directive on Hand Sanitizer Tax Rate, Ensures Unbiased Product Classification.

  Case-Laws - HC : The High Court held that the impugned Press Release by the Ministry of Finance, purporting to direct judicial and quasi-judicial authorities to classify all alcohol-based hand sanitizers as "disinfectants" attracting 18% GST rate, is invalid. The Court ruled that the executive cannot transgress on the functions within the exclusive province of judicial or quasi-judicial authorities. The issue of product classification falls within the domain of judicial and quasi-judicial bodies created under the Act, who must exercise their powers independently without executive interference. The Press Release virtually expressed a firm view on classifying hand sanitizers as "disinfectants" rather than "medicaments," urging authorities to levy 18% tax, thereby influencing their independent decision-making. Consequently, the Court set aside the Press Release to enable unbiased adjudication by judicial and quasi-judicial authorities on product classification and applicable tax rates.
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• Goods release ordered upon deposit & bank guarantee amid tax liability dispute.

  Case-Laws - HC : Interim order directing release of goods upon depositing Rs. 4 lakhs challenged. Considering the order, determined liability of Rs. 22,35,932/- on respondent No. 1, and total goods value of Rs. 12,83,354/-, appeal disposed by upholding the order. Additionally, respondent No. 1 directed to furnish a Bank Guarantee from a Nationalized Bank for Rs. 8,83,354/- in favor of the Joint Commissioner of Commercial Taxes (Vigilance), valid during the pendency of the writ petition. Respondent No. 1 also required to furnish a personal bond of Mr. Chikka Aanjibabu, Proprietor, within two days to enable appellants to release goods and conveyance as per the Single Judge's direction, subject to the writ petition's outcome.
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• Company wins ITC claim; delayed filings acceptable under GST law amendment.

  Case-Laws - HC : The High Court set aside the assessment order disallowing Input Tax Credit solely on the ground of delayed filing of claims beyond the prescribed period u/s 16(4) of the GST Acts. The Court directed the assessing adjudicating authority to re-do the assessment considering the amendment. The petitioner was granted three weeks to submit objections after receiving the amended assessment and other details. The impugned order remains undisturbed on other issues. The petition was disposed of.
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• GST Registration Cancellation: Authority's Role Questioned Over Alleged Error in Show Cause Notice; High Court Declines to Intervene.

  Case-Laws - HC : Cancellation of GST registration - violation of Section 29(2)(a) of Central Goods and Services Tax Act, 2017. Respondent no. 2 is the proper authority to inquire about cancellation or suspension of GST registration and pass necessary orders. Although a notice might have been issued under an erroneous provision, petitioner no. 1 has liberty to reply, raise jurisdictional issues, and request amendments. Respondent no. 2 can initiate appropriate proceedings if petitioner no. 1 shows the provision invoked is incorrect. Only a show cause notice has been issued seeking clarification and documents from petitioner no. 1. Authorities must hear the party and pass orders per law. Premature for the High Court to interfere at this stage. Petition disposed of.
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• Show cause notices clubbing tax demands for multiple years quashed; Dept to issue separate notices per year.

  Case-Laws - HC : Consolidated show cause notices for multiple assessment years contravene provisions of CGST Act and legal precedents. Impugned notices grouping demand from 2017 to 2023 quashed, with liberty to issue separate notices for each assessment year u/s 73 of CGST Act. Petition allowed, quashing impugned notices and further proceedings.
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Income Tax

• Penalty Proceedings Time-Barred: Initiation Date is Reference Receipt, Not Show Cause Notice Issuance.

  Case-Laws - HC : Initiation of penalty proceedings u/s 271C and the limitation period for levying such penalty. The key points are: The penalty proceedings were initiated on the date of receipt of the reference for penalty proceedings (25.09.2014) and not on the date of issuance of the show cause notice (04.08.2014). The reference marked the first step for initiating penalty action, while the show cause notice provided an opportunity to the assessee to explain. The word 'initiated' means to begin, commence, or set in motion, as per dictionary meanings cited. The Supreme Court decision in Om Prakash Jaiswal v. D.K. Mittal was referred to for interpreting the expression 'initiate any proceedings'. Since the penalty order was passed beyond the limitation period from the date of initiation (25.09.2014), it was barred by limitation. The High Court upheld the Tribunal's decision in favor of the assessee.
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• Cooperative society tax-exempt, no advance tax payable. Order quashed, waiver of interest granted for 1996-2000 after SC ruling.

  Case-Laws - HC : Cooperative society exempt from tax u/s 80P(2)(a)(iii), no obligation to pay advance tax. Order rejecting waiver of interest u/ss 234B and 234C for assessment years 1996-97, 1997-98, and 1998-99 quashed. Society entitled to claim waiver of interest for said period, as Supreme Court judgment relied upon was overruled. Assessee's appeal allowed.
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• Tax Tribunal Allows Deduction for Solvent Disposal; Deemed Dividend Addition Deleted as Trade Advances Confirmed.

  Case-Laws - AT : The assessee claimed deduction of expenditure incurred for handling and disposal of spent solvents/scrap against unaccounted cash receipts from their sale. The ITAT held that while there is no direct evidence, the possibility of incurring such expenditure cannot be ruled out considering the nature of materials. It estimated 60% of receipts as reasonable expenditure. Regarding addition of deemed dividend u/s 2(22)(e) and consequent dividend distribution tax, the ITAT held that payments to associated concerns were trade advances in the ordinary course of business and not loans/advances attracting deemed dividend. The transactions were current adjustment account entries reflecting movement of funds both ways as per business requirements among group companies, not loans/advances to shareholders. Payments were utilized for recipient companies' business, not diverted to common substantial shareholder's benefit. Hence, the ITAT deleted the addition of deemed dividend and consequent levy of dividend distribution tax.
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• Film Finance Middleman Assessed: Profit Margin Accepted, Gift Partially Upheld, Cash Partially Explained, Jewelry Cleared.

  Case-Laws - AT : The assessee's investment in film financing business was examined based on seized documents and statements recorded during the search operation. The explanation that the assessee acted as a middleman/agent arranging finance for film producers through lenders was accepted as bonafide, considering the nature of the unorganized film financing sector. A 5% net profit margin on the total loans facilitated was determined as reasonable income, after allowing 1% deduction for expenditure. The addition for a gift received from the brother-in-law was upheld for one year due to lack of evidence establishing the relationship and creditworthiness of the donor. However, for another year, the gift was accepted based on confirmation, bank statements, and the identity of the donor being established, despite the lack of relationship proof. The unexplained cash found during the search was partially accepted, with the remaining unexplained portion added to income. The jewellery investment was directed to be deleted as an addition, considering the quantity fell within prescribed limits and the assessee explained the known sources.
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• Merger Nullifies Tax Assessment Against Non-Existent Entity: Court Quashes Order.

  Case-Laws - AT : Assessment order passed against a non-existent entity due to merger of companies is invalid. The assessment order was passed in the name of Genpact India, which had already merged with Genpact India Private Limited. As per Section 394 of the Companies Act, 1956, upon merger, the amalgamating company ceases to exist and cannot be regarded as a 'person' u/s 2(31) of the Income Tax Act, 1961, against whom assessment proceedings can be initiated or an order passed. Issuing an assessment order in the name of a non-existent entity is not a procedural irregularity curable u/s 292B. The Appellate Tribunal upheld the assessee's contention and decided in its favor.
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• Tribunal Rules Loan Waiver on Capital Account Non-Taxable; Dismisses Revenue Appeal on Asset Depreciation Disallowance.

  Case-Laws - AT : The Assessing Officer disallowed depreciation claimed on Plant & Machinery to the extent of the External Commercial Borrowing (ECB) amount waived off during the previous year, invoking Sections 43(1) and 41(1) of the Income Tax Act. However, the Tribunal held that the waiver of loan on capital account cannot be taxed u/s 41(1), as per the Supreme Court's ruling in Mahindra & Mahindra. Since the assets were purchased in the relevant year, Section 43(1) is not applicable as the cost was not met by any other person. The Tribunal relied on the Supreme Court's decision in Tata Iron & Steel Co., which held that the mode of loan repayment does not affect the actual cost of the asset acquired by the assessee for business purposes. The cost of an asset and the cost of raising funds are separate transactions. Consequently, the Tribunal dismissed the Revenue's appeal.
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• Tax notice defect: Penalty for concealment/inaccuracy not specified - Fatal flaw renders penalty void.

  Case-Laws - AT : The penalty notice issued u/s 271(1)(c) of the Act was defective as it did not specify whether the penalty proceedings were initiated for concealment of income or furnishing of inaccurate particulars of income. When the charge is not specified in the notice, it is considered an omnibus notice. The Delhi High Court in the case of PCIT vs. Sahara India Life Insurance Co. Ltd. and the Bombay High Court in the case of Mr. Mohd. Farhan A. Shaikh (Full Bench) held that the penalty order passed without specifying the charge in the notice is liable to be quashed due to this fatal defect. Consequently, the penalty in this case is liable to be deleted in favor of the assessee.
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• Business Start Date for Tax Deduction Confirmed: Tribunal Upholds June 2008 as Commencement Based on Provident Fund Evidence.

  Case-Laws - AT : The issue pertained to determining the commencement date of business operations for the purpose of claiming deduction u/s 35D of the Act for preliminary expenses incurred prior to the commencement of business. The assessee had deducted provident fund from June 2008 onwards, indicating the commencement of business operations from that date. The Assessing Officer, however, contended that the business commenced only upon acquisition of the equity research unit under a slump sale agreement. The CIT(A) ruled in favor of the assessee, and the ITAT upheld the CIT(A)'s finding, dismissing the Revenue's appeal. The critical issue was the determination of the appropriate commencement date for claiming deduction u/s 35D, with the ITAT accepting the assessee's claim based on the evidence presented.
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• Tribunal Overturns Interest Disallowance; Assessee's Sufficient Interest-Free Funds Justify Overdrawn Partner Accounts.

  Case-Laws - AT : Disallowing interest expenditure claimed u/s 36(1)(iii) when the assessee firm has interest-free funds and the amount overdrawn by partners. The Tribunal held that since the assessee firm had interest-free funds sufficient to cover the amounts overdrawn by partners, as evident from audited accounts, the disallowance of interest expenditure by the Assessing Officer was unjustified. The Tribunal relied on decisions of the Bombay High Court and its own coordinate Bench, which established that if an assessee has sufficient interest-free funds and advances are made without charging interest, disallowance u/s 36(1)(iii) on such advances for notional interest is not permissible. The Tribunal found no merit in the Revenue's appeal, concluding that the Assessing Officer's adverse inference was a misreading of facts contrary to documented evidence provided by the assessee.
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Customs

• Customs Broker's License Revocation Overturned; CESTAT Validates Government-Certified Documents Despite Allegations.

  Case-Laws - HC : The Customs Broker's license revocation was challenged for facilitating exports by allegedly non-existent exporters. The DGFT had issued IEC and GST registration was valid for the entity. The CESTAT referred to Section 79 of the Indian Evidence Act, presuming genuineness of government-certified documents. The respondent relied on IEC, GSTIN, rent agreement, and electricity bill furnished by the exporter, which were genuine. The CoC faulted the respondent for accepting expired rent agreement and old electricity bill. The CESTAT observed that continuous surveillance at exporter's address is unnecessary; KYC documents are required at onboarding and periodic verification. The rent agreement and electricity bill could not be considered stale or disbelieved. The order setting aside the revocation order cannot be faulted.
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• Customs fraud: Goods released on forged docs; duplicate IMEIs; no proof of due diligence.

  Case-Laws - AT : Denial of adjournment request - Release of goods based on forged documents leading to fraud - Customs clearance of imported mobile phones with duplicate IMEI numbers - Failure to provide evidence of bona fide actions in releasing goods. Perusal of statements reveals admission of mistake in releasing warehoused goods based on unauthorized 'Out of Charge' order without proper document verification. Lack of evidence produced by appellant to prove bona fide actions. Repeated adjournment requests and absence indicate intent to delay proceedings. Appellate Tribunal upholds original order dismissing appeal on merits and for want of prosecution.
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FEMA

• Foreign Investment Approval Overturned Due to Lack of Fair Hearing; New Committee to Ensure Justice and Proper Review.

  Case-Laws - HC : Ex post facto approval granted to a respondent for foreign investment violated principles of natural justice. A committee was constituted to examine rival contentions, but the reconstituted committee granted approval without affording fresh opportunity of personal hearing to parties, resulting in gross violation of right to personal hearing. The High Court held that any authority exercising discretionary power must apply its mind to facts and not act mechanically. The approval was granted without reasons, necessitating fresh reconsideration by a new committee after hearing parties afresh on the proposal. The High Court directed constitution of a fresh committee to hear parties and take appropriate decision on the proposal, without changing committee's composition, affording opportunity of personal hearing and filing written submissions.
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IBC

• Appeal on Insolvency Code Application: Refunds of Rs. 3 Crores Denied, Rs. 25 Lakhs Approved by NCLAT Modification.

  Case-Laws - AT : The appeal challenged the maintainability of an application filed u/s 60(5) of the Insolvency and Bankruptcy Code seeking refund of an amount deposited as part of a settlement under a Memorandum of Understanding (MoU). The key points are: The CIRP of one corporate debtor (JDECL) was closed by allowing an application u/s 12A after payment of its entire debt of Rs. 3 crores. The MoU required payment of Rs. 25 lakhs for approval of the resolution plan for the other corporate debtor (UCL), but the plan was not approved. The NCLAT held that the application u/s 60(5)(c) was maintainable as it related to the insolvency resolution process. However, the prayer for refund of Rs. 3 crores paid for closing JDECL's CIRP was rejected as it would amount to double benefit. The NCLAT allowed refund of Rs. 25 lakhs paid for UCL's resolution plan, modifying the adjudicating authority's order to that extent.
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• Tribunal Upholds Replacement of Resolution Professional Due to Conflict of Interest in Insolvency Case.

  Case-Laws - AT : The Appellate Tribunal upheld the replacement of the Resolution Professional (RP) appointed u/s 97 of the Insolvency and Bankruptcy Code (IBC). The RP had previously represented the Corporate Debtor and Personal Guarantor as counsel in a dispute arising from the same debt, which was a rational ground for the Financial Creditor to form an opinion u/s 98 for replacement. The scheme of Section 98 does not require proving a particular ground for replacement. Although Section 94 allows a debtor to initiate insolvency resolution personally or through an RP, the stage u/s 98 for replacement is subsequent to the RP's appointment u/s 97. The Adjudicating Authority did not err in allowing the Financial Creditor's application for replacement, and the appeal was dismissed.
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• Operational Creditor's Section 9 Petition Rejected Due to Pre-Existing Disputes, Corporate Debtor Released from CIRP.

  Case-Laws - AT : Corporate Debtor failed to repay operational dues, leading to a Section 9 application by the Operational Creditor. However, pre-existing disputes were evident from the Notice of Disputes, fulfilling Section 8(2)(1)(a) requirements. The defense raised cannot be deemed spurious or illusory. For such disputed operational debt, Section 9 proceedings cannot be initiated. The Adjudicating Authority erred in admitting the Section 9 application, disregarding the Notice of Disputes. The reliance on Naresh Sevantilal Shah judgment was misplaced due to distinguishable facts. The Impugned Order initiating CIRP and subsequent orders were set aside, releasing the Corporate Debtor from CIRP with immediate effect. The appeal was allowed.
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• Dispute Over Unpaid Dues for e-Auction Solutions Dismissed; No Default Without Third-Party Auditor Certification.

  Case-Laws - AT : The dispute revolves around the non-payment of outstanding dues by the Corporate Debtor to the Appellant, pursuant to an agreement for providing e-Auction solutions. The agreement mandated certification by a Third-Party Auditor (TPA) for release of quarterly payments. However, the TPA was not appointed by the Government, resulting in non-payment. The Adjudicating Authority rejected the Section 9 application filed by the Appellant, holding that no default occurred as the non-payment was due to the contractual requirement of TPA certification. The Appellate Tribunal upheld the rejection, stating that while the Government's inaction caused prejudice to the Appellant, the Corporate Debtor cannot be subjected to insolvency proceedings when the agreement prescribed a specific payment mechanism. The Appellant retains the remedy to recover dues through appropriate means under the agreement.
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• Appeal Dismissed: Liabilities Classified as Operational Debt, Not Trust Assets, in Resolution Plan.

  Case-Laws - AT : The appeal contested the adjudicating authority's treatment of certain liabilities as operational debt payable under the approved resolution plan. It involved disincentive amount imposed by the appellant, security deposits, and unspent balances of prepaid subscribers held by the corporate debtor. The appellant argued these amounts were held in trust and not corporate debtor's assets. However, the NCLAT upheld the adjudicating authority's order, treating the liabilities as operational debt payable per the resolution plan. It rejected the appellant's contention that security deposits and unspent balances constituted CIRP costs, citing lack of relevant material. The appeal was dismissed, upholding the impugned order's treatment of the liabilities under the approved resolution plan.
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Service Tax

• Compensation for Land Purchase Cancellation Not Taxable as Service Under Finance Act, 1994; Appeal Allowed.

  Case-Laws - AT : Whether the compensation received by the appellant for cancellation of agreements to purchase land constitutes a taxable service u/s 66E(e) of the Finance Act, 1994. The key points are: The compensation received for breach of contract does not qualify as consideration for rendering a declared service u/s 66E(e). The act of entering into a cancellation agreement is not an act of rendering a taxable service, and any amount received as damages cannot be treated as taxable value. The Circular dated 03.08.2022 clarifies that there must be an express or implied agreement to do or abstain from an act against consideration for a taxable supply to exist. The decision aligns with the Supreme Court's ruling in Union of India vs. Intercontinental Consultants and Technocrats Pvt. Ltd. Since the appellant did not render any taxable service, the extended period invoked for alleged evasion is also incorrect. Consequently, the order under challenge is set aside, and the appeal is allowed.
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• Penalties for delayed work/exit don't attract service tax as not for any service rendered.

  Case-Laws - AT : Penalty recovered from contractors for not completing work within stipulated time does not constitute consideration for declared service u/s 66E(e) of Finance Act, 1994, as it is merely a penalty imposed for non-fulfillment of contractual condition, not consideration towards any service. Consideration recovered from employees for not serving notice period before leaving job does not attract service tax u/s 66E(e), as employer merely facilitated employee's sudden exit upon compensation, not rendering any taxable service. Demand for service tax on such penalties/recoveries is unsustainable and set aside by the Appellate Tribunal.
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• Banks can claim CENVAT credit on DICGC insurance fees and brokerage for investments under Banking Act.

  Case-Laws - AT : Banks are entitled to avail CENVAT credit on service tax paid to Deposit Insurance Credit Guarantee Corporation (DICGC) for insurance services, commission/brokerage paid to brokers for underwriting government securities or making investments to maintain Statutory Liquid Ratio under Banking Regulation Act, 1949. These activities are essential for banking operations and qualify as input services under CENVAT Credit Rules, 2004. The Larger Bench decisions of CESTAT in South Indian Bank and Bank of America cases have upheld this position, which has also been confirmed by High Courts. Penalty cannot be imposed if service tax with interest is paid before issuance of show cause notice, as per Section 73(3) of Finance Act, 1994.
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Central Excise

• Penalties on Co-Noticees Waived Under SVLDRS 2019; Appeals Allowed Despite Non-Declaration Filing.

  Case-Laws - AT : Once the main demand of duty case is settled under the Sabka Vishwas Legacy Dispute Resolution Scheme (SVLDRS) 2019, penalties imposed on co-noticees cannot be sustained, even if they did not file a declaration under the scheme. As per the scheme, there is a waiver of penalties on the main assessee against whom the demand was confirmed, as well as on other co-noticees. This position is established by the judgments in the cases of Anil K Modani and Subhash Panchal, where it was held that upon settlement of the main duty evasion case under SVLDRS 2019, penalties on co-appellants/co-noticees shall not survive. These Division Bench judgments prevail over the contrary view expressed by the Single Member Bench in the case of Four R Associates and others. Consequently, the penalties imposed on the appellants (co-noticees) are set aside, and the appeals are allowed.
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• Export Unit Wins Appeal on Duty Exemptions for Domestic Sales; Tribunal Overrules Incorrect Denial and Duty Demand.

  Case-Laws - AT : Denial of exemption benefits under Notifications 30/2004-CE and 23/2003-CE for clearances of finished goods into the Domestic Tariff Area (DTA) by a 100% Export Oriented Unit (EOU). The appellant imported raw materials and also procured domestically for manufacturing finished goods exported and cleared to DTA. The demand pertained to differential duty on DTA clearances by availing concessional rates, considering exemption from excise duty portion. The Tribunal examined conditions under the notifications, finding the appellant eligible for exemption under Sr. No. 4 of Notification 23/2003-CE as imported raw materials were not used for DTA clearances. Denial of Sr. No. 3 benefit was incorrect as the appellant maintained separate records, ensuring domestic raw materials were used for DTA clearances. The demand of Special Additional Duty (SAD) was also incorrect as the goods were not exempted from VAT/sales tax. Regarding the extended period of limitation invoked, the Tribunal held that since the issue involved interpretation of statutory provisions without any evidence of malafide intent, fraud or suppression of facts, the larger period could not be invoked. The impugned order was set aside, and the appeal was allowed.
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Case Laws:

• GST

• 2024 (11) TMI 523
  Valuation - Section 67 - Associated enterprises - lease rent equalisation shown in Balance sheet - it was held by CESTAT that The amount shown in the balance sheet is not an income for the purposes of computing Tax under the Income Tax Act. In the result it is also not a payment actually received or receivable, and therefore neither consideration nor the gross amount charged in terms of clauses (a) and (c) respectfully of the explanation to Section 67 of the Act. Hence the appellant is not liable to pay Service Tax on the amount of lease rent equalisation shown in the balance sheet. HELD THAT:- It is not required to interfere with the impugned order passed by the Customs, Excise Service Tax Appellate Tribunal. The Civil Appeal is dismissed.

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• 2024 (11) TMI 522
  Validity of the impugned Press Release dated 15.07.2020, by which the Ministry of Finance, Union of India, purporting to exercise its executive powers, virtually issued a fiat to the adjudicatory judicial and quasi-judicial authority to classify all alcohol-based hand sanitisers as disinfectants attracting a GST rate of 18% - HELD THAT:- The impugned Press Release, does not indicate that the same is relatable to either Article 73 or Article 77 of the Constitution. Though that, by itself, may not be a ground to strike down the impugned Press Release, still, in the absence of any such indication or compliance with the provisions of Article 77 of the Constitution, we cannot simply accept that the impugned Press Release is indeed an instance of the exercise of executive power by the Union. In the absence of any compliance with the requirements of Article 77, the burden was on the Respondents to establish this aspect. The Respondents have failed to discharge this burden. However, even though it is assumed that the impugned Press Release is an instance of the exercise of executive power by the Union still, the question is whether, in the purported exercise of such executive power, the Union is competent to direct judicial and quasi-judicial authorities to decide the issue of classification of products in a particular manner - Though there may not be a very distinct line separating legislative and executive functions, still the line separating the judicial functions from the executive and legislative functions is fairly clear. The executive cannot transgress on the functions within the exclusive province of the judicial or even quasi-judicial authorities. In the STATE OF JHARKHAND AND ANR VERSUS GOVIND SINGH [ 2004 (12) TMI 667 - SUPREME COURT ] the Hon ble Supreme Court has explained that after enacting a law or Act, the Legislature becomes functus officio so far as that particular Act is concerned, and it cannot itself interpret it. No doubt, the Legislature retains the power to amend or repeal the law so made and can also declare its meaning, but that can be done only by creating another law or statute after undertaking the whole lawmaking process. The issue of whether a product falls within a particular class after the law is already enacted and the classification is already made falls within the province of the judicial and quasi-judicial authorities created under the Act. Such powers must be exercised by the judicial and quasi-judicial authorities independently and without any goading from any party, including the executive. Any press release or executive instruction meant to influence or, worse still, require the judicial or quasi-judicial authorities under the Act to exercise their judicial or quasi-judicial functions in a particular manner would interfere with their judicial or quasi-judicial functions. This cannot be allowed. The executive powers of the Union do not extend to this. The impugned Press Release virtually expresses a firm view on the classification of alcohol-based hand sanitisers as disinfectants and not medicaments . The impugned Press Release urges the authority to levy tax at 18% based on the premise that alcohol-based hand sanitisers are disinfectants and not medicaments . Though we do not propose to quash the impugned show cause notice cum demand notice dated 17.04.2023 because such a show cause notice could have as well been issued by the Respondents in the absence of the impugned Press Release or independent of the impugned Press Release. The Petitioner has made out a case for quashing the impugned Press Release so that the judicial and quasi-judicial authorities under the Act can decide on the issue of classification and, consequently, the rate of tax independently without even remotely being influenced by the impugned Press Release - this petition partly allowed by setting aside the impugned Press Release dated 15.07.2020.

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• 2024 (11) TMI 521
  Challenge to interim order directing the release of goods upon depositing Rs. 4 lakhs - HELD THAT:- Considering the order passed by the learned Single Judge and also the fact that the liability of a sum of Rs. 22,35,932/- has been determined on the respondent No. 1 and also according to the learned counsel appearing for the respondent No. 1 that, the total goods value is of Rs. 12,83,354/-, it is deemed appropriate to dispose of the appeal by upholding the order passed by the learned Single Judge and additionally directing the respondent No. 1 herein to furnish a Bank Guarantee (from a Nationalised Bank) for an amount of Rs. 8,83,354/- in favour of the Joint Commissioner of Commercial Taxes (Vigilance) and keep the same valid during the pendency of the writ petition and also furnishing a personal bond, in terms of the format to be furnished by the appellants, of Mr. Chikka Aanjibabu, Proprietor of respondent No. 1, within two days to enable the appellants release the goods and conveyance in terms of the direction given by the learned Single Judge. The same shall be subject to the outcome of the writ petition. Appeal disposed off.

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• 2024 (11) TMI 520
  Challenge to assessment order - Disallowance of Input Tax Credit - denial only on the ground that the claims have been lodged beyond the period prescribed under Section 16(4) of the GST Acts - HELD THAT:- The impugned order passed by the respondent dated 27.07.2022 is set aside. In respect of other issues, the impugned order shall remain undisturbed. The learned assessing adjudicating authority/respondent would re-do the assessment by taking into account the amendment. The petitioner may submit their objection by way of reply, within a period of three weeks from the date of receipt of a copy of this order along with the amendment and other details. Petition disposed off.

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• 2024 (11) TMI 519
  Cancellation of registration of GST - violation of Section 29(2)(a) of the Central Goods and Services Tax Act, 2017 - HELD THAT:- Admittedly, respondent no. 2 is the proper person as envisaged under the said section and he has the necessary jurisdiction to make inquiry regarding the cancellation or suspension of registration of GST and he is also authorised to pass necessary orders. It is possible in the course of his work, a notice might have been issued under erroneous provision of law. Petitioner no. 1 is having the liberty to reply to the said notice. Petitioner no. 1 is also having the liberty to take up such contention including the jurisdictional aspect in its reply before respondent no. 2. Petitioner no. 1 can also plead any amendments which are required for the existing trade name. If petitioner no. 1 is able to show that the authorised person is not proceeding under the correct provision of law, the authorised person also has the liberty to initiate appropriate proceedings in accordance with law. What has been issued in the instant case is only a show cause notice, requesting petitioner no. 1 for clarification and supporting documents regarding the allegations made against it. It is for the authorities concerned (respondent no. 2) to hear the party concerned and pass orders in accordance with law. It would be premature for this Court to interfere in the said proceedings at this particular stage itself. Petition disposed off.

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• 2024 (11) TMI 518
  Challenge to impugned Notices on account of the fact that the same purport to club / consolidate / group the demand for more than one financial year i.e., for the tax period from 2017 to 2023 - HELD THAT:- The said issue came up for consideration in the case of M/S. BANGALORE GOLF CLUB VERSUS ASSISTANT COMMISSIONER OF COMMERCIAL TAXES, KORAMANGALA, BENGALURU [ 2024 (10) TMI 116 - KARNATAKA HIGH COURT ], in which, the co-ordinate Bench of this Court held This Court concludes that the show cause notices issued by the respondent are fundamentally flawed. The practice of issuing a single, consolidated show cause notice for multiple assessment years contravenes the provisions of the CGST Act and established legal precedents. As is clear from the aforesaid judgment of this Court, the issue in controversy involved in the present petition is directly and squarely covered by the aforesaid judgment and consequently, the impugned Notices deserve to be quashed by reserving liberty in favour of the respondents to issue separate / independent Notices for each assessment year in terms of Section 73 of the CGST Act, 2017. The impugned Notices at Annexures-A and B both dated 05.08.2024 and all further proceedings pursuant thereto are hereby quashed - Petition allowed.

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• 2024 (11) TMI 517
  Condonation of delay in filing the revocation application - compliance with all the requirements of paying the taxes, interest, late fee, penalty etc. due - HELD THAT:- The delay in Petitioner s invoking the proviso to Rule 23 of the Odisha Goods and Services Tax Rules (OGST Rules) is condoned and it is directed that subject to the petitioner depositing all the taxes, interest, late fee, penalty etc. due and complying with other formalities, the petitioner s application for revocation will be considered in accordance with law. Petition disposed off.

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• 2024 (11) TMI 516
  Maintainability of petition - availability of statutory remedy of Appeal - non-constitution of the Appellate Tribunal - HELD THAT:- It is not at all in dispute that the order impugned in this writ petition, which has been passed by the Authority under the Central Goods and Services Tax Act, 2017 (CGST Act)/Odisha Goods and Services Tax Act, 2017 (OGST Act) is appealable under Section 112 of the CGST/OGST Act, 2017. It is also not in dispute that because of non-constitution of the Appellate Tribunal as required under section 109 of the said Acts, the petitioner is deprived of its statutory remedy of Appeal and the corresponding benefit of subsections-8 9 of section 112 of the said Acts. Taking into account the aforesaid Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019 dated 03.12.2019 issued by the Government of India and subsequent clarification issued by the Central Board of Indirect Taxes and Customs (GST Policy Wing) vide Circular No.132/2/2020 dated 18th March, 2020, it is deemed proper in the interest of justice to dispose of this writ petition subject to fulfilment of terms imposed, with the consent of the parties. Subject to verification of the fact of deposit of a sum equal to 20 percent of the remaining amount of tax in dispute, or deposit of the same, if not already deposited, in addition to the amount deposited earlier under Sub Section (6) of Section 107 of the CGST/OGST Act, the petitioner must be extended the statutory benefit of stay under Sub-Section (9) of Section 112 of the CGST/OGST Act, for the petitioner cannot be deprived of the benefit, due to non constitution of the Tribunal by the respondents themselves - petition disposed off.

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• 2024 (11) TMI 515
  Challenge to assessment orders relating to assessment year 2017-18 and 2018-19, respectively - unaware about the issuance of the intimation, show cause notice and assessment orders because the same were posted on the portal but not otherwise communicated to him - violation of principles of natural justice - HELD THAT:- In view of the statutory mandate, the respondent cannot be faulted for posting the notices and orders on the GST portal. At the same time, it should be recognized that a small business person has been adversely affected without being provided an opportunity to contest the respective tax demand. The assessee has remitted 10% of the disputed tax amount under each assessment order, and this is the pre-deposit requirement even for a statutory appeal. The orders impugned herein are quashed and the matters are remanded for re-consideration. The petitioner is permitted to file a reply to the show cause notice within a maximum period of three weeks from the date of receipt of a copy of this order - Petition disposed off.

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• 2024 (11) TMI 514
  Seeking review of the Judgment and Order - interest for delayed filing of the returns - error apparent on the face of record or not - HELD THAT:- Review jurisdiction is to be exercised in a very limited manner where there an is error apparent on the face of the record. Review does not mean rehearing or appeal. There has to be finality to a litigation. This Court, based on the submissions, documents and evidences, has rendered the Judgment sought to be reviewed. Therefore, there are no error apparent on the face of the record which warrants this Court to reconsider this Judgment under review. There is no substance in this review petition and the same is hereby dismissed.

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• 2024 (11) TMI 513
  Provisional attachment of cash credit accounts of the petitioners - maximum period for attachment of cash credit accounts in terms of Section 83(2) of the CGST Act - HELD THAT:- In view of the admitted position that the order, subject matter of these proceedings has ceased to operate, the petition is disposed of reserving the right of the petitioner to impugn the fresh attachment order dated 13.12.2023 in accordance with law. The question of validity of repeated issuance of attachment orders under Section 83 of the CGST Act is left open. Petition disposed off.

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• 2024 (11) TMI 512
  Cancellation of registration due to the petitioner s delay in availing the appellate remedy provided under Section 107 of the Bihar Goods and Services Tax Act, 2017 - HELD THAT:- Section 107 of the Bihar Goods and Services Tax Act, 2017 (BGST Act) permits an appeal to be filed within three months and also apply for delay condonation with satisfactory reasons within a further period of one month. Here, the order impugned in the appeal was dated 14.03.2022. An appeal was to be filed on or before 13.06.2022 and if necessary with a delay condonation application within one month thereafter. The appeal is said to have been filed only on 03.12.2023, after about one year five months. There are no reason to invoke the extraordinary jurisdiction under Article 226, especially since it is not a measure to be employed where there are alternate remedies available and the assessee has not been diligent in availing such alternate remedies within the stipulated time. The law favours the diligent and not the indolent. The petitioner does not have any case that the show cause notice was not received by him, which is not produced herein. Further, the Government had come out with an Amnesty Scheme by Circular No. 3 of 2023, by which the registered dealers, whose registrations were cancelled were permitted to restore their registration on payment of all dues between 31.03.2023 to 31.08.2023. The petitioner did not avail of such remedy also. Petition dismissed.

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• 2024 (11) TMI 511
  Levy of GST under the reverse charge mechanism on the seigniorage paid by the petitioner to the Government - HELD THAT:- The recent judgment of the Division Bench of this Court in a batch of writ petitions, TVL. A. VENKATACHALAM VERSUS THE ASSISTANT COMMISSIONER (ST) [ 2024 (2) TMI 488 - MADRAS HIGH COURT] where it was held that It is made clear that there shall be no recovery of GST on royalty until the Nine Judge Constitution Bench takes a decision. In view of the above judgment, this petition is liable to be disposed of on the same terms.

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• 2024 (11) TMI 510
  Provisional attachment of cash credit accounts of the petitioners - maximum period for attachment of cash credit accounts - HELD THAT:- In view of the admitted position that the order, subject matter of these proceedings has ceased to operate, the petition is disposed of reserving the right of the petitioner to impugn the fresh attachment order dated 13.12.2023 in accordance with law. The question of validity of repeated issuance of attachment orders under Section 83 of the CGST Act is left open. Petition disposed off.

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• 2024 (11) TMI 509
  Levy of GST under the reverse charge mechanism on the seigniorage paid by the petitioner to the Government - HELD THAT:- The recent judgment of the Division Bench of this Court in a batch of writ petitions, TVL. A. VENKATACHALAM VERSUS THE ASSISTANT COMMISSIONER (ST) [ 2024 (2) TMI 488 - MADRAS HIGH COURT] where it was held that It is made clear that there shall be no recovery of GST on royalty until the Nine Judge Constitution Bench takes a decision. In view of the above judgment, this petition is liable to be disposed of on the same terms.

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• 2024 (11) TMI 508
  Seeking a direction for the disposal of rectification application - errors apparent on the face of the record - HELD THAT:- Since a rectification application was filed on 28.11.2023, it is just and necessary that the same be disposed of expeditiously. Therefore, without expressing any opinion on the merits of the rectification application, the petition is disposed of by directing the respondent to consider and dispose of rectification application dated 28.11.2023 in accordance with law with in a maximum period of six weeks from the date of receipt of a copy of this order. Before issuing orders, a reasonable opportunity shall be provided to the petitioner.

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• Income Tax

• 2024 (11) TMI 537
  Assessment u/s 153A - Addition u/s 68 - addition was supposed to be made on the basis that the amount shown has been received by the Assessee towards sale consideration of shares held by the Assessee was in fact received as loans - as decided by HC [ 2022 (4) TMI 1643 - ORISSA HIGH COURT] once it is found that the Assessee had duly disclosed the receipt of capital gains in the regular books of account and offered capital gains to tax which had also been accepted by the Revenue, there was no occasion to make addition on the basis of unexplained cash credit - HELD THAT:- As instant Special Leave Petition involves low tax effect. In view of the statement made, the Special Leave Petition is dismissed on the ground of low tax effect.

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• 2024 (11) TMI 536
  Disallowance of business expenses relating to business of money lending merely on the ground that no interest income has been earned in this year - Engagement of the assessee in the business of money lending - as decided by HC [ 2024 (7) TMI 1551 - DELHI HIGH COURT] AR has relied in regard to the previous or subsequent years about the money lending business of the assessee is not sustainable in the facts discussed from the perspective of ld. CIT(A) and we do not consider that there is any error in the sustenance by ld. CIT(A). HELD THAT:- The findings arrived at in this matter for the Financial Years 2014-2015 shall be restricted only to the said financial years. In the circumstances, we do not find it necessary to interfere with the impugned order. Hence, the Special Leave Petition is disposed of with the aforesaid observations. Pending application(s), if any, shall stand disposed of.

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• 2024 (11) TMI 535
  Unexplained money u/s 69A rws 115BBE - Cash amount recovered during the raid - source and ownership of the cash amount recovered - HELD THAT:- The assessee s explanation for the cash in hand is far-fetched. There is no credible explanation as to the cash found on the date of the search. According to the assessee, part of the cash found in the premises during the search operation conducted on 31.01.2018 was, in fact, withdrawn five to six years earlier during the FYs 2012-13 and 2013-14. It is also relevant to note that during FY 2014-15, the household drawing (expenses) was Rs. 2,60,000/- and the opening cash in hand as on 01.04.2014 is reflected as Rs. 31,37,000/-. Yet, Rs. 1,10,000/- was withdrawn from the bank during the said period. Clearly, there would have been no reason to withdraw this amount if the assessee s mother had Rs. 31,37,000/- in her possession as claimed. It is apparent from the above that the cash found in the premises cannot be traced to the bank accounts. The assessee has to travel six years prior to the date of the search for explaining cash withdrawal, without any credible explanation for the same. As fot the petitioner s wife is concerned, the petitioner has not produced her bank accounts to establish the source of the said funds (Rs. 15,84,000/-), which the assessee claimed belonged to his wife. As observed above, the question whether the source of the cash has been explained is, essentially, a question of fact. In the given facts, we are also unable to accept that the findings of the learned ITAT are perverse. No such question of law has been projected by the assessee as well. Decided against assessee.

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• 2024 (11) TMI 534
  Transfer pricing adjustments - Additions to the total taxable income without issuing a show cause notice as per the provisions of the Act and thereby not providing DSV India an opportunity of being heard - HELD THAT:- AO erred in disregarding the documentary evidence submitted by the Appellant to substantiate actual receipt of services and benefits derived therefrom and alleging that the Appellant has not submitted adequate documentation to substantiate the benefits received from availing of the intra- group services. The appellant also submitted a comprehensive Factual Paper Book containing detailed evidence including additional evidence which, according to the appellant, have not been considered either by the Ld. AO or by the Hon ble DRP Ld. DRP. Thus, we find it proper to send the matter back to the file of the Assessing officer with a direction to consider the details submitted by the appellant and decide the issues afresh by providing the appellant adequate opportunity of being heard to determine the correct income of the appellant. Appeal is allowed for statistical purpose.

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• 2024 (11) TMI 533
  Computation of short term capital gain on the basis of land development agreement cum GPA - physical possession could not be delivered during the assessment year - transfer could not be completed due to problems in handing over of the physical possession of the land to the developer - HELD THAT:- As per clause 8 of the said development agreement cum General Power of Attorney, the possession has already been handed over to the developer at the time of entering into development agreement cum GPA. In our understanding, the law has been fairly settled in the case of Potla Nageswara Rao [ 2014 (8) TMI 636 - ANDHRA PRADESH HIGH COURT] wherein it was held that the year of taxation would be the year, in which the registered development agreement cum GPA was executed, coupled with transfer of possession for the development of the property. In the present case, as per the development agreement cum GPA dt.27.06.2015 and the possession has already been handed over by the land owners to the developer and therefore, for all the requirements of law of transfer as per the pronouncement of Potla Nageswara Rao [supra] took place in the assessment year before us. In view of the above, the AO as well as the Ld.CIT(A) were correct in making the additions in the hands of the assessee in the year under consideration. AO has not examined the affidavit filed by the developer and also has not taken into account the permission granted by the local authorities on 05.01.2021 - The development agreement cum GPA dt.27.06.2015 is a registered document and there is a clear mention of handing over the possession by land owners to the developer. The above said facts mentioned in the said document cannot be merely disbelieve on the account of the affidavit filed by the developer at the request of the assessee. The law is fairly settled that the contents of the registered document shall prevail over the affidavit or the oral statement. In view of the above, we have no hesitation to say that the Assessing Officer was right in not entertaining the self-serving affidavit filed by the developer. Permission was accorded on 05.01.2021 - We are of the opinion that the grant of permission is nothing to do with the transfer of property. In the present case, we are only concerned with the transfer of the property and the income arising out of the said transfer. In view of the above, we are of the opinion that the grant of permission by local authorities on 05.01.2021 is nothing to do with transfer of the property. Furthermore, once the developers have decided to compensate owners on account of failure by the developer to raise construction beyond a period of time, then it is for the developer and for the land owners to inter-se decide the issue of delay in raising the construction. In the present case, first the development agreement cum GPA was entered into and thereafter, it was registered on 27.06.2015 and therefore, the year of taxation would be the assessment year 2016-17. On account of the above, we do not find any reason to interfere with the orders passed by the learned lower authorities. Thus, the appeals of the assessee s are dismissed.

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• 2024 (11) TMI 532
  Validity of reopening u/s. 147 - Undisclosed income - assessee has failed to establish the genuineness and creditworthiness of person from whom loan and advances was provided - reliance information from the Investigation Wing which too was based on analysis of the value of the property, gross total income shown by the assessee and presumed incapacity of the company M/s. Sneha Ferromet Pvt. Ltd who has provided such loan on the premise that the income of such company was meager - CIT(A) deleted addition HELD THAT:- There is nothing on record that some kind of investigation or in some inquiry any adverse material was found that the loan given by the said company was not genuine. The entire reason is based on certain hypothesis and presumptions that looking to the overall turnover of the company, it could not have given such loan. Nothing has been brought on record whether the company was asked to prove the source of the loan given to the assessee and the company has failed to substantiate the sources. Apart from that, this precise issue was raised during the course of the assessment proceedings u/s. 143(3) / 153A and also in response to the query raised on the basis of AIR information. Assessee had submitted all the details of the purchase of the property including the source of investments made and after examining these documents, the assessment was completed and no adverse inference was drawn. There is no tangible material coming on record post completion of assessment that investment has been made by the assessee from some undisclosed sources or the sources were not explained. Accordingly, we hold that the reasons recorded by the AO does not given jurisdiction, reopened the assessment completed u/s. 143(3) / 153A and same deserves to be quashed. Accordingly, the grounds raised by the assessee and cross objection filed by the assessee are allowed. Doubt the source of funds - Even on merits which has been challenged by the department in their grounds of appeal, it is seen that the entire addition in based on the reason that source of investment made in the purchase of property has not been explained. First of all, as stated above, the total value of investment in the two properties - If the AO is making the addition on account of investment, then, he has to examine the source of investment debited in the books of accounts and not the market value of the property of which has been added. Apart from that, in one of the property, major investment was done in the earlier financial year and not in this year. AO has not even examined the records filed before him while making the addition, because once the major investment has been made in the earlier year then, how the same can be added in this year? In so far as source of funds are concerned, the assessee had explained that same was trough loan taken from a company, M/s. Sneha Ferromet Pvt. Ltd. And in support assessee filed the confirmation, bank statement and return of income of the company and from the perusal of the bank statement, it is seen that the funds have come from clearing and has been given on various dates to the assessee. No questions have been asked about the source of the funds from the company by the AO. Once company had shown the source of giving loan from various transactions reflected in the bank statement and has given the details, we do not find any reason to doubt the source of funds. Onus which lied upon the assessee had been fully discharged to prove the source of purchase of the property - Assessee appeal allowed.

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• 2024 (11) TMI 531
  Disallowance of interest u/s 36(1)(iii) on interest-free loans given by the assessee - HELD THAT:- A perusal of the Balance Sheet of the assessee shows that the opening capital as on 01.04.2017 is Rs. 4,36,06,730.78 whereas the assessee has given interest free loans / advances of only Rs. 94,70,000/-. Hon ble Supreme Court in the case of South Indian Bank Ltd [ 2021 (9) TMI 566 - SUPREME COURT] has held that when the assessee having sufficient interest free funds of their own greater than the investments, proportionate disallowance of interest paid is not called for. As in the case of CIT vs. Reliance Utilities Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] has held that if there were funds available both interest free and overdraft and / or loans taken, then a presumption would arise that the investment would be out of interest free funds generated or available with the company, if the interest free funds are sufficient to meet the investments and accordingly upheld the decision of the Tribunal in deleting the disallowance. Since in the instant case also, the assessee has sufficient own capital which is much more than the amount of interest free loans given to the various parties, therefore, no disallowance of interest u/s 36(1)(iii) is called for. The first issue raised by the assessee in the grounds of appeal is accordingly allowed. Disallowance of proportionate interest - A perusal of the assessment order shows that the assessee has given interest on unsecured loans to the various parties ranging from 17% to 23%. While the AO has not doubted the unsecured loans, however, he has restricted such interest to 15% and thereby made the addition of Rs. 4,55,190/- being the excess interest paid. We find for assessment year 2016-17 the case was reopened, inter-alia the high interest expenses relatable to the exempt income and high interest expenses and low turnover. We find the AO in the order passed u/s 143(3) of the Act has not made any such disallowance. Similarly, for assessment years 2014-15 and 2017-18 also, no such disallowance has been made by the AO in the orders passed u/s 143(3) of the Act on account of excess interest paid. Therefore, following the rule of consistency itself, we are of the considered opinion that no disallowance of interest is called for. The second issue raised by the assessee in the grounds of appeal is accordingly allowed.

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• 2024 (11) TMI 507
  TDS u/s 194H - discount offered by the assessee to the distributor for its prepaid services - HELD THAT:- Appellant(s)/revenue submits the issue is no more res integra, in view of the judgment passed by Bharti Cellular Limited (Now Bharti Airtel Limited) [ 2024 (3) TMI 41 - SUPREME COURT ] held that the assessees would not be under a legal obligation to deduct tax at source on the income/profit component in the payments received by the distributors/franchisees from the third parties/customers, or while selling/transferring the pre-paid coupons or starter-kits to the distributors. Section 194H of the Act is not applicable to the facts and circumstances of this case. Accordingly, the appeals filed by the assessee-cellular mobile service providers, challenging the judgments of the High Courts of Delhi and Calcutta are allowed and these judgments are set aside. The appeals filed by the Revenue challenging the judgments of High Courts of Rajashtan, Karnataka and Bombay are dismissed. There would be no orders as to cost. Pending Applications, if any, shall stand disposed of. Decided in favour of assessee.

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• 2024 (11) TMI 506
  Levying penalty u/s 271C beyond period of limitation - whether the penalty proceedings were initiated on receipt of reference on 25.09.2014 or on issuance of the show cause notice on 04.08.2014? - HELD THAT:- The question as to when a penalty proceeding can be stated to be initiated is squarely covered in favour of the assessee by the decision of JKD Capital Finlease Ltd [ 2015 (10) TMI 1281 - DELHI HIGH COURT] considering that the subject matter of the quantum proceedings was the non-compliance with Section 269T of the Act, there was no need for the appeal against the said order in the quantum proceedings to be disposed of before the penalty proceedings could be initiated - initiation of penalty proceedings did not hinge on the completion of the appellate quantum proceedings. Initiation of proceedings - In the present case, the learned JCIT, after receipt of the reference for penalty proceedings, had not taken immediate steps for concluding the said proceedings. He issued the show cause notice almost a year after receiving of the reference. The expression initiated is not defined under the Act and must be construed in its normal sense. The word initiated is a past tense of the word initiate . The Shorter Oxford English Dictionary defines the word initiate as under: to begin, commence, enter upon, to introduce, set going, originate. In Webster s Third New International Dictionary, the word initiate has, inter alia, been defined thus: to begin or set going: make a beginning of: perform or facilitate the first actions, steps, or stages of: The Words and Phrases (Permanent Edition) defines initiate to mean: an introductory step or action, a first move; beginning; start, and to initiate as meaning to commence. In Om Prakash Jaiswal v. D.K. Mittal Anr [ 2000 (2) TMI 831 - SUPREME COURT] the Supreme Court had considered the meaning of the expression initiate any proceedings for contempt by referring to the dictionary meaning of the said word. The expression action for imposition of penalty is initiated must, thus, clearly refers to the date on which the first introductory step for such action is taken, it must necessarily mean the start of such action. It must mean the commencement of action for imposition of penalty. As noted above, the AO had found that it was the admitted case that the assessee had defaulted in deduction of TDS, which it was obliged to do. It had, accordingly, made a reference to the learned JCIT. This was obviously for the purposes of imposition of penalty. The reference, thus, clearly marked the first step for initiation of action for imposition of penalty. The Show Cause Notice issued subsequently was to provide the assessee an opportunity to show cause why penalty not be imposed. This was in the beginning of the action for imposition of penalty. The same had commenced earlier with the AO determining that there was a cause for such imposition. Thus, we find no infirmity with the decision of the learned ITAT that the penalty proceedings had been initiated at the earliest on 25.09.2014 and the order of penalty passed by the learned JCIT (TDS) was barred by limitation. Decided against revenue.

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• 2024 (11) TMI 505
  Rejection of waiver of interest u/s 234-B and 234-C - exemption under Section 80(P) (2) (a) (iii) disallowed - HELD THAT:- The order passed rejecting petitions for waiver of interest on the ground that the petitioner should have paid advance tax for three assessment years on the basis of Supreme Court Judgment in Assam Cooperative Apex Marketing Society Limited s case [ 1993 (2) TMI 8 - SUPREME COURT] Since the same stands overruled, the order dated 15.07.2002 passed by the respondents is not sustainable. As on today, it is settled that the Cooperative Society like the petitioner would be exempted from payment of tax, and therefore, there was no occasion for depositing advance tax. Hence, the waiver of interest under Section 234-B and 234-C of the Act for the assessment years 1996-97, 199798 and 1998-99 was wrongly rejected. Accordingly, the order dated 15.07.2002 is quashed and set aside. The petitioner society is entitled to claim the waiver of interest for the aforesaid period. Assessee appeal allowed.

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• 2024 (11) TMI 504
  Non deposit the deducted dues under the provisions of Section 194C - HELD THAT:- Taking into account that the amount Seventy One Lakh Eighty Three Thousand Seven Hundred Eighty Eight has already been deposited, in the opinion of this Court, the first prayer made in the writ petition no longer survives. Entitlement to interest in terms with Section 244A - In the opinion of this Court, the petitioner only in the year 2019 intimated the respondent authorities about the incorrect PAN number in the Form No. 16 A as enclosed as Annexure 10 to the writ petition. This Court has also taken note of that there are no other materials placed before this Court to show that had these amounts which were required to be deposited by the respondent No. 2, if were deposited, the petitioner would have been entitled to the refunds. In absence of such materials, the question of granting interest as claimed do not arise. Additionally, this Court further finds it relevant to observe that Section 244 A of the Act of 1961 cannot be made applicable to the present facts as the said provision appears to duly apply in respect to cases where the Department had delayed the payment of refunds. Moreover, the delay in depositing the amount by the respondent No. 2 would be a private contractual dispute between the petitioner and the respondent No. 2 Accordingly, this Court does not find any ground for issuance of a writ for payment of interest in terms with Section 244A.

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• 2024 (11) TMI 503
  TP Adjustment - comparable selection - functional dissimilarity - HELD THAT:-Infosys was engaged in providing variety of services including software, consulting, products application design, development, re-engineering, maintenance, system integration, package evaluation, implementation in business process management, etc. and further that its turnover was significantly higher than that of the assessee in that case. The functional dissimilarities between the entities as pointed out by the learned Tribunal in Alcatel Lucent India Ltd. [ 2016 (8) TMI 1195 - ITAT DELHI ] are equally applicable in the facts of the present case. Zylog Systems India Limited is functionally dissimilar to the assessee as it owns substantial intangibles in the form of goodwill and product development cost. It was noted that the assessee does not hold any intangibles and earns its entire income from off-shore activities. As against the same, 85% of the revenue of Zylog was from on-site operation and therefore, cannot be included as a comparable entity for benchmarking the ALP of the international transactions in question. Larsen Toubro Private Limited as engaged in diversified business. In Principal Commissioner of Income Tax v. Alcatel Lucent India Ltd. (supra), this court did not interfere with the decision of the learned Tribunal to exclude Larsen Toubro as a comparable entity in similar circumstances. Acropetal Technologies Limited is to be excluded as noted that the activities of Acropetal were in three distinct segments engineering design service, IT services and health care. In addition, the said entity had also acquired two US based companies, which had resulted in an increase of 43.66% in its sales during the relevant period. Indisputably, the functional differences as pointed out by the learned Tribunal cannot be considered as inconsequential. Inclusion of foreign exchange currency fluctuation and operating revenue - Tribunal had accepted the same. Concededly, the said issue is covered by the decision of this Court in Rampgreen Solutions Pvt. Ltd. [ 2015 (8) TMI 931 - DELHI HIGH COURT ] We find no infirmity in the decision of the learned Tribunal in this regard as well. No substantial question of law arises in the present appeal.

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• 2024 (11) TMI 502
  Validity of reopening assessment u/s 147 - failure to issue any notice u/s 143 (2) - HELD THAT:- As no notice under Section 143 (2) of the Act had been issued and, therefore, the question of notice being deemed to be considered as a valid notice under Section 292BB of the Act does not arise. Assessee appeal allowed.

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• 2024 (11) TMI 501
  Revision u/s 263 against dead person - petitioner received two notices u/s 226 (3) attaching two bank accounts of the petitioner with respect to the demands raised consequent to the assessment order - HELD THAT:- When the original assessee passed away on 11.07.2013 and after his demise, he was declared as an insolvent by order and in which the petitioner was also one of the legal heirs and that the Official Assignee has taken charge of the entire estate of the original assessee, i.e. the deceased/petitioner s husband under the provisions of the Presidency Towns Insolvency Act, 1909, issuing notices and assessment orders one after another to the petitioner in the name of the dead person, who is the original assessee, by the respondents are not sustainable. If at all there is any other claim against the original assessee, the respondents ought to have proceeded against the Official Assignee as per the relevant provisions since the original assessee was already declared as an Insolvent by this Court (Insolvency Court). As respondents submitted that some portion of the assets have also been transferred or mutated in the name of the petitioner or the other legal heirs and that notices were also issued against the other legal heirs of the deceased. If that is the case of the respondents, the right course available to the respondents is to file a petition before this Court (Insolvency Court) to set aside the same and seek for a direction against the Official Assignee to take over the assets in accordance with law. Once the assets were taken over by the Official Assignee and the assessee was declared as an insolvent, the respondents can very well approach the Official Assignee for seeking their remedy. It is upto the Official Assignee to consider the claims and distribute the proceeds in accordance with law. Accordingly, the impugned orders passed by the respondents are quashed and these writ petitions are allowed.

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• 2024 (11) TMI 500
  Estimation of income - bogus purchase - accommodation/fictitious bills taken from certain entities/parties - HELD THAT:- AO has neither rejected the books of accounts nor has specified as to under which Section of the Act, he is making the addition. Even FAA has not rejected the books of accounts. Therefore, in our considered opinion, the bills may be bogus but the purchases are genuine and the sales have been accepted on such purchases. Therefore, the addition @12.5% of the alleged bogus purchases, should meet the ends of justice. We accordingly direct the AO to restrict the addition to 12.5% of the alleged bogus purchases. Appeal of the assessee is partly allowed.

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• 2024 (11) TMI 499
  Additional claim of deduction of expenditure against the unaccounted cash receipts from sale of spent solvents / scrap - assessee submitted that the deduction towards expenditure incurred for handling and disposal of spent solvents / scrap, as per the very same seized material may be allowed as a deduction against the unaccounted cash receipts - HELD THAT:- The process of collecting and disposal of spent solvents / scrap requires various other expenditure like transportation, packing, and other necessary items for safe handling of hazardous waste without any environmental impact. If we consider the other expenditure required for the disposal of spent solvents / scrap, in our considered view, the AO needs to consider transportation, packing, and other materials necessary for handling the disposal of spent solvents / scrap. Although there is no direct evidence for incurring these expenditures, the possibility of incurring these expenditures cannot be ruled out. This fact is further strengthened by the disbursal of the cash received from sale of spent solvents / scrap to various employees which accounted for 80% of the total amount received from sales, which is evident from the affidavits filed by the employees, wherein they claimed that the amount received from the head office has been utilized for making payments and incurring other expenditures. Although there is no direct evidence for incurring 80% of the amount towards expenditure, going by the nature of the material, in our considered view, there needs to be certain amount of expenditure for other expenses like transportation, packing etc. Since there is no direct evidence regarding other expenditures, in our considered view, the only possible way is to estimate a reasonable amount of expenditure against unaccounted receipts from sale of spent solvents / scrap. Therefore, considering the fact that the appellant has already disbursed 80% of the amount received from unaccounted cash receipts in the name of various employees, and also going by the nature of the material, in our considered view, at least 60% of the receipts need to be considered as expenditure against unaccounted receipts from the sale of spent solvents / scrap. Thus, out of the additional income offered by the assessee and assessed by the AO towards unaccounted receipts from sale of spent solvents / scrap, the assessee gets relief to the extent of 60%, and the balance amount of 40% of unaccounted cash receipts is hereby sustained for both the assessment years. Addition made on account of deemed dividend u/s 2(22)(e) - consequent dividend distribution tax under Section 115Q - as argued transactions between the appellant company and two other associated concerns are trade advances, which are in the nature of commercial transactions effected in the ordinary course of business and does not fall under loans or advances for the purpose of Section 2(22)(e) - HELD THAT:- Having accepted the factum of purchases and payment of trade advances against the purchases, the AO/CIT(A) could not have imposed an imaginary and artificial limit on the quantum of payments that can be regarded as trade advances by sitting in the arm-chair of the businessman - entire amount of payments made against purchases has to be regarded as trade advances without any artificial limitation on the quantum of such trade advances. As a result, the amounts paid to recipient company in excess of 200% of the purchases also have to be regarded as trade advances which are in the nature of commercial transactions only and they cannot be characterized as loans or advance constituting deemed dividend within the meaning of section 2(22)(e). The addition made by the AO and upheld by the CIT(A) towards deemed dividend is therefore wholly untenable and needs to be deleted. Transactions of payments made by the appellant to the recipient companies have arisen due to business exigencies and the said transactions therefore bear commercial character. The appellant company and the recipient companies are associate concerns of the same group with a common Managing Director and substantial shareholder Sri.M.S.N Reddy. The group companies, including the said companies, are engaged in similar line of business of manufacture of Active Pharmaceutical Ingredients (API). As mentioned by the AO himself in the assessment order he business activities of the group companies are inter-related and inter-dependent since each company is making sale of raw materials, engineering materials and intermediates to the other associate companies, in view of the fact that the manufacturing process is fragmented into different stages and different group companies are handling the manufacture at different stages. In view of existence of such inter-dependency among the associate concerns, the said companies provide funds to each other on a need basis as a measure of business expediency as and when there is requirement of funds for the purpose of business in order to provide the required support to the business of the other associate concerns. The business expediency for making huge payments to MSN Laboratories Pvt. Ltd is revealed by this crucial fact also in addition to the explanation furnished in the preceding paragraph. Therefore, the payments made by the appellant to MSN Laboratories Pvt. Ltd which are evidently imbued with business expediency cannot be considered to be falling under the ambit of advance or loans under section 2(22)(e) so as to constitute deemed dividend - addition made by the AO, to the extent upheld by the CIT(A), towards deemed dividend u/s 2(22)(e) in the hands of the appellant for the purpose of levy of dividend distribution tax without the satisfaction of the said basic condition laid down in the section is unwarranted and untenable. Whether current adjustment account transactions do not represent loans or advance for the purpose of deemed dividend? - There is a series of debits and credits in the concerned ledger accounts, which clearly indicate that the transactions were effected in the normal course of business and the concerned group companies have given funds to and received funds from each other as and when required for the purpose of the business of the said group companies. It needs to be borne in mind that such transactions between the group companies cannot be considered to be in the nature of loans or advance to the group companies. An account containing such series of debit and credit entries reflecting movement of funds both ways between the associate/group companies as per their business requirements has to be construed to be in the nature of a Current Adjustment Account unlike the transactions in the nature of loans or advances to a shareholder or to a concern in which the shareholder has substantial interest, the movement of funds in a current adjustment/ accommodation account is in either direction on a need basis. Therefore, transactions which are in the nature of current adjustment account transactions cannot be termed as loans or advances falling within the ambit of deemed dividend u/s 2(22)(e) of the Act. Current account transactions between two group companies cannot be regarded as loans or advances as defined u/s 2(22)(e) of the Income Tax Act, 1961. Therefore, we are of the considered view that the provisions of deemed dividend u/s 2(22)(e) are not applicable to the transactions between the appellant company and recipient companies, as the said transactions bear the character of current adjustment account transactions due to two-way movement of funds on a need basis. Thus, the addition made by the AO towards deemed dividend in the hands of the appellant for the purpose of levy of dividend distribution tax to the extent upheld by the LD.CIT(A) is not warranted and therefore, deleted for this reason also. Deemed dividend not attracted when payments to recipient company were utilized for its business and not diverted to or utilized for the benefit of the common substantial shareholder - In view of the said incontrovertible fact and having regard to the decision of Jayant T Kotak [ 2020 (3) TMI 1203 - GUJARAT HIGH COURT] and [ 2021 (8) TMI 835 - SC ORDER] we are of the considered view that the payments made by the appellant company to the recipient companies during the year do not fall under the scope of deemed dividend u/s 2(22)(e) of the Act. Therefore, the addition made by the AO towards deemed dividend in the hands of the appellant for the purpose of levy of dividend distribution tax, to the extent upheld by the LD.CIT(A) is not warranted for this reason also and thus, deleted. Thus transactions between appellant Company and two other recipient Companies do not come under the provisions of section 2(22)(e) of the Income tax Act, 1961 and consequently, the AO/CIT(A) is erred in levying dividend distribution tax in the hands of the assessee for both assessment years. We, direct the Assessing Officer to delete addition made u/s 2(22)(e) and consequent levy of Dividend Distribution Tax u/s 115-O r.w.s. 115Q.

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• 2024 (11) TMI 498
  Adjustment of refund granted earlier - Calculation of interest u/s. 244A - calculation of refund due to the assessee after adjusting the refund already granted - HELD THAT:- As relying on Union Bank Of India [ 2016 (8) TMI 688 - ITAT MUMBAI] another Co-ordinate Bench of the Tribunal in Grasim Industries Ltd. [ 2021 (2) TMI 526 - ITAT MUMBAI] rendered similar findings and held that the refund granted be first adjusted against the interest component and consequently shortfall of refund be regarded as shortfall of tax and that shortfall should then be considered for the purposes of computing further interest payable to the assessee under section 244A of the Act till the date of grant of such refund. From a careful perusal of the afore-noted decision, we further find that the Co-ordinate Bench rejected the argument of the Revenue that the afore-stated methodology will result in awarding interest on interest. We allow the grounds raised by the assessee and direct the AO to first adjust the refund granted against the interest component and then adjust the balance amount against the principal/tax component and any shortfall thereafter shall be considered for computation of interest payable to the assessee u/s 244A of the Act till the date of grant or crediting of refund. Accordingly, the impugned order on this issue is set aside and grounds raised by the assessee are allowed.

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• 2024 (11) TMI 497
  Taxability of receipts towards sale of software products - royalty receipts - income from sale of shrink-wrapped software - Income deemed to accrue or arise in India - sale of copyrighted article OR transfer of copyright right - HELD THAT:- As decided in the case of Engineering Analysis Centre of Excellence Private Limited [ 2021 (3) TMI 138 - SUPREME COURT] which held that payments made by resident Indian end users to non-resident software manufacturers are not royalties. Receipts on account of receipts for software are not exigible to tax in India. OECD Commentary is significant, as the Contracting States to which the persons deducting tax/assessee s belong, can conclude business transactions on the basis that they are to be taxed either on income by way of royalties for parting with copyright, or income derived from licence agreements which is then taxed as business profits depending on the existence of a PE in the Contracting State. Decided in favour of assessee.

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• 2024 (11) TMI 496
  Unaccounted transaction of the assessee s investment in film financing business - Diary seized during the course of search - seized documents were confronted to the assessee and a statement on oath was recorded u/s 132(4) of the Act, and called upon the assessee to explain the contents of the promissory notes and other seized documents - HELD THAT:- In the present case, the appellant at the time of search very clearly explained that he arrange finance through lenders and given to film producers and the purpose of keeping the pro-notes in his possession is that, at the time of discussion with the producers, the lenders was not known and because of this reason in few pro notes the name of the lender is absent. Argument of the assessee that he is acting as a middlemen/agent between financiers and borrowers appears to be bonafide and acceptable. AO and the CIT (A) rejected the explanation of the assessee on the presumption that no borrower would execute pro-note in advance without mentioning any details. However, fact remains that in many cases, business is carried out on the basis of mutual trust and respect. Especially in the field of financing, more particularly in the field of film financing, it is mostly unorganized sector and transaction happens through mutual trust and belief and going by the place of business where the appellant operates, it is very famous for film financing and thus, in our considered view, the arguments advanced by assessee in light of various evidences including the statement recorded from the assessee during the course of search that the assessee is only a middlemen and arrange finance to film producers through associates/lenders is bonafide and needs to be accepted. How to quantify the income of the appellant? - Considering the nature of the business of the assessee and also amount of business carried out by the assessee for all these years, in our considered view, a reasonable amount of expenditure needs to be estimated. The assessee has earned 6% margin on total loans given to film producers. Against this for various expenditure, the assessee must have incurred 1% income generated from his finance business. Therefore, considering the totality of the facts and circumstances of the case and also the nature of the business, we are of the considered view that out of 6% margin claimed to have been earned by the assessee, a deduction of 1% towards expenditure needs to be allowed. If we deduct 1% towards the expenditure, then the net income earned by the assessee from the film finance business is 5% on total loans given to film producers and production houses. Therefore, we are of the considered view that 5% net profit on total amount of loans given by the appellant as quantified by the Assessing Officer appears to be reasonable. Addition towards gift received from brother-in-law - assessee could not establish relationship with donor and also creditworthiness of the donor - It was the argument of the assessee that, he has filed confirmation letter from the donor along with the ledger extracts and assessee further contended that the gift has been received through proper banking channels - HELD THAT:- Although, the assessee claims to have received gift through cheque, but the Assessing Officer recorded clear findings that the assessee has received gift in cash. Further, except confirmation letter and ledger account, no other details has been filed including relationship with the donor and creditworthiness of the donor. Therefore, we are of the considered view that there is no error in the order of the learned CIT (A) to sustain the addition made by the Assessing Officer towards gift received from brother-in-law. Decided against assessee. Gift claims to have been received from brother-in-law - Addition on the ground that except filing confirmation letter and ledger account, the assessee could not furnish any other evidence and also failed to establish relationship of the said person with the assessee and the creditworthiness of the donor - AY 2011-12 - HELD THAT:- The assessee has furnished all evidences including confirmation and relevant bank account statement of the donor and the assessee. The Assessing Officer ignored the evidences filed by the assessee and made addition u/s 56(2)(vii) of the Act, as income from other sources. We do not subscribe to the reasons given by the Assessing Officer for the simple reason that first of all, the assessee is able to establish identity of the donor and also proved genuineness of the transaction by filing confirmation letter from the donor. Secondly, assuming for a moment, the assessee is not able to prove the gift with relevant evidences, but the amount received from Shri B Girish cannot be treated as unexplained credit or income from other sources u/s 56(2)(vii) for the subject A.Y for the simple reason that the amount has been received in financial years 2007-08 and 2008-09. If at all, the addition is required to be made, then the same can be made for the A.Ys 2008-09 and 2009-10 but not for the A.Y 2011- 12. Therefore, we are of the considered view that the Assessing Officer is erred in making addition towards gifts claims to have been received from brother-in-law. The learned CIT (A) without considering the relevant facts simply sustained the addition made by the Assessing Officer - Decided in favour of assessee. Unexplained cash found during the course of search - HELD THAT:- It is an admitted fact that the cash book maintained by the assessee was not updated as on the date of search. Since the date of search was in between the financial year and there is a time for appellant to update the cash book, the explanation offered by the assessee with regard to the availability of cash balance as on 30/04/2011 as per updated cash book needs to be accepted. If we accept the source of cash found during the course of search to the extent of Rs. 5 lakhs, but still there is unexplained cash found at the time of search at Rs. 24,43,250/- and the assessee could not explain the source for the same. Therefore, we are of the considered view that out of total cash found during the course of Rs. 29,43,250/-, the appellant is able to explain the cash in hand available as on the date of search for Rs. 5 lakhs only. The remaining amount of cash of Rs. 24,43,250/- is still unexplained. Thus, we direct the Assessing Officer to restrict the addition to the extent of Rs. 24,43,250/- towards cash found and seized during the course of search. Unexplained investment in jewellery - HELD THAT:- In the present case, going by the amount of jewellery found during the course of search, it is well within the parameters prescribed by the CBDT for seizure of jewellery. No doubt, the Department has not seized jewellery. However, when it comes to explanation of the source for the said jewellery, it is a customary in India that every household will have certain quantity of jewellery in family and the same has been acquired out of their savings and known source of income. Since going by the quantity of jewellery found in the present case, in our considered view, the same is within the parameters prescribed by the CBDT for not seizure of the jewellery and also the assessee is able to explain the source out of his known source of income. Therefore, we are of the considered view that the AO is erred in making addition towards jewellery found during the course of search as unexplained investment. CIT (A) without appreciating the relevant facts simply sustained the addition made by the AO. Thus, direct the AO to delete the addition made towards the jewellery found during the course of search.

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• 2024 (11) TMI 495
  Assessment order passed in the name of a non-existing entity - Merger of companies concluded - assessment order passed in the name of entity, Genpact India, which had merged with Genpact India Private Limited - HELD THAT:- The issue raised by the assessee in ground no.1 is exactly similar to the issues considered by the coordinate Bench in assessee s own case [ 2020 (7) TMI 712 - ITAT DELHI] for AY 2014-15 held that as the consequence of the scheme of amalgamation approved under Section 394 of the Companies Act 1956 is that the amalgamating company ceased to exist and upon the amalgamating company ceasing to exist, it cannot be regarded as a person under Section 2(31) of the Act 1961 against whom assessment proceedings can be initiated or an order of assessment passed. Thus as the amalgamating company i.e. Genpact India was not in existence at the time of conducting assessment proceedings as well as on the date of passing Assessment Order. Once it is found that assessment is framed in the name of non-existing entity, it does not remain a procedural irregularity of the nature which could be cured by invoking the provisions of Section 292B - Decided in favour of assessee.

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• 2024 (11) TMI 494
  Delay in filing appeal before FAA by about 2 years 8 months and 6 days - delay in filing the appeal is deliberate/intentional or bonafide reasonable cause - HELD THAT:- We note that the rectification application was processed on 3.5.2021 raising a demand during the Covid 19 pandemic period. The DGM and the Manager handling the tax matters left the organisation and management was informed that tax demand would be nullified in the rectification proceedings. However the rectification order and the demand came to notice of assessee during audit of FY 2022-23. Accordingly we note that assessee has sufficient cause for the delay in filing appeal before the FAA. Considering the facts of the case and in the interest of justice, we remit the issue to the Assessing Officer for fresh consideration and decision as per law, subject to payment of costs of Rs. 50,000/- - Appeal by the assessee is allowed for statistical purposes.

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• 2024 (11) TMI 493
  Assessment u/s 153A - Addition u/s 68 - Treatment of share capital as unexplained cash credit - incriminating documents during a search or not? - HELD THAT:- AO has made the addition based on the general statement that unaccounted cash was introduced as share capital without referring to any specific documents. The documents produced by the Ld DR as incriminating material was the copy of cash book and ledger account of Shri NKV Krisha and Preetha ji, which are entries of regular books of account. We therefore hold that addition of share capital has not been made based on incriminating material found during search. AO in the assessment order u/s 153A has assessed income at Rs 9,40,000/- against returned loss of Rs 60,000 , thus making only addition of share capital of Rs 10,00,000 u/s 68 of the Act. Therefore, in view of case of Abhisar Buildwell (P) Ltd [ 2023 (4) TMI 1056 - SUPREME COURT] addition cannot be sustained in present case without there being incriminating material. We accordingly delete the addition of share capital u/s 68 of Income Tax Act made by the AO - Assessee appeal allowed.

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• 2024 (11) TMI 492
  Disallowance of depreciation claimed on Plant Machinery on amount of ECB as waived during the previous year - AO was of the opinion that the treatment of asset of the said waiver as capital receipt is not correct because as per Section 43(1) of the Act, actual cost of plant and machinery should be cost borne by the assessee and depreciation should be given on actual cost only. HELD THAT:- While calculating the disallowance of depreciation, the AO has adjusted cost of plant and machinery by reducing the amount of ECB waived off during the year and has calculated the depreciation on the adjusted amount of cost of plant and machinery imported. The re-computation of depreciation has been done from AY 2009-10 to AY 2015-16 and the same has been disallowed. The disallowance has been made by invoking the provision of Section 43(1) and 41(1) of the Act. It is also a fact that, purchase of capital asset is a different transaction from availing a loan in the form of ECB. The waiver of loan is on capital account and the ratio laid down in the case of Mahindra Mahindra [ 2018 (5) TMI 358 - SUPREME COURT] squarely applies wherein, as held that waiver of loan in respect of capital equipment cannot be taxed u/s 41(1) of the Act. Since the assets were purchased in AY 2009-10, therefore provision of Section 43(1) of the Act are not applicable as in that year, the cost of asset was not directly or indirectly met by any other person. Also decided in Tata Iron Steel Co [ 1997 (12) TMI 5 - SUPREME COURT] we find it difficult to follow how the manner of repayment of loan can affect the cost of the assets acquired by the assessee. What is the actual cost must depend on the amount paid by the assessee to acquire the asset. The amount may have been borrowed by the assessee, but even if the assessee did not repay the loan, it will not alter the cost of the asset. If the borrower defaults in repayment of a part of the loan, the cost of the asset will not change. What has to be borne in mind is that the cost of an asset and the cost of raising money for purchase of the asset are two different and independent transactions. Even if an asset is purchased with non-repayable subsidy received from the Government, the cost of the asset will be the price paid by the assessee for acquiring the asset. the manner or mode of repayment of the loan has nothing to do with the cost of an asset acquired by the assessee for the purpose of his business. We hold that the questions were rightly answered by the High Court in favour of assesee. Appeal of revenue dismissed.

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• 2024 (11) TMI 491
  Disallowance u/s. 14A - computation of disallowance taking average investments that have yielded the exempt income earned by the assessee - considering the investments on which it had earned exempt income and excluded those investments which were capable of generating exempt income - CIT(A) held that the investments, which yielded exempt income, are only to be considered for the purpose of disallowance u/s. 14A r/w Rule 8 D(2) and to exclude such investments which did not earn exempt income - HELD THAT:- We notice that the ld. CIT(A) has followed the decision rendered of Vireet Investments Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI ] to hold that only those investments which have yielded exempt income should only be considered for computing the average value of investments for the purpose of Rule 8D. Further, he has followed order rendered in M/s. Nirved Traders Pvt. Ltd. [ 2019 (4) TMI 1738 - BOMBAY HIGH COURT ] holding that the disallowance cannot exceed the exempt income. No reason to interfere with the decision so rendered by the ld. CIT(A) on this issue. Decided in favour of the assessee. Allowable business expenditure - penal charges paid to NHB - HELD THAT:- According to the letter dated 08.10.2020 issued by National Housing Bank (NHB) and addressed to the assessee company, an amount has been directed to be paid as penalty for violating the various non-compliances/directions. Similarly, another letter dated 26.02.2021 issued by the NHB and addressed to the assessee company, penalty in respect of various non-compliances, has further been imposed upon the assessee. As per these two letters issued by the NHB, the total amount is the penal charges, which are said to have been paid by the appellant assessee are incidental to the business of the assessee and cannot be held to be an offence or infraction of law. CIT(A) has thus rightly held that such penal charges are to be allowable as business expenditure Decided in favour of the assessee.

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• 2024 (11) TMI 490
  Penalty u/s 271(1)(C) - notice issued u/s 274 r/w section 271(1)(c)of the Act is a defective one - as submitted that the charge has not been specified in the notice - HELD THAT:- We note that assessee has duly raised issue against the assumption of jurisdiction for the levy of section 271(1)(c) that in the penalty notice, relevant limb was not specified whether the penalty proceedings were initiated for concealment of income or furnishing of inaccurate particulars of income. When the same was not so specified in the penalty notice it has been held in the case laws cited before us that mention of the same in the assessment order or penalty order cannot cure fatal short-coming. When the charge has not been specified in the notice, it is an omnibus notice. In such circumstances as decided in the case of PCIT vs. Sahara India Life Insurance Co. Ltd. [ 2019 (8) TMI 409 - DELHI HIGH COURT] has held that the penalty order passed is liable to be quashed on account of this defect which is fatal. Full Bench of Hon ble Bombay High Court in the case of Mr. Mohd. Farhan A. Shaikh [ 2021 (3) TMI 608 - BOMBAY HIGH COURT (LB)] has held that no specification of charge in the penalty notice leads to same become void and penalty on that count is to be deleted. Thus as undisputed proposition that relevant limb of the penalty notice was not specified as to whether penalty was for concealment or furnishing of inaccurate particulars of income, we direct that the penalty in this case is liable to be deleted - Decided in favour of assessee.

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• 2024 (11) TMI 489
  Disallowance of provision made towards obsolete/bad stock as not claimed as a deduction in the year of write off in the computation of income - HELD THAT:- The assessee has claimed the reversal of provision as a deduction for the reason that the amount was offered to tax in the year in which the provision was created. In our considered view the claim of the assessee has merits and is supported by the verification carried out by the AO while allowing the claim for AY 2018-19. The findings of the AO for 2018-19 also substantiate the fact that the reversal made for the year under consideration is also part of the provision originally made in AY 2015-16. We are of the view that the claim of the assessee against the reversal of provision is an allowable claim for the reason that the same stands offered to tax in the year in which the provision was created. Accordingly, the claim of the assessee stands allowed.

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• 2024 (11) TMI 488
  Addition on account of excess pre-commencement expenses - Determination of the commencement date of business operations - preliminary expenses prior to commencement of the business was eligible deduction u/s 35D of the Act i.e. ( 1/5th of amount for five years) and not whole of amount u/s 37(1) - HELD THAT:-Provident Fund has been deducted from the month of June, 2008 onwards. On appreciation of the above documents, it is evident that business of the assessee was duly set up and commenced from June, 2008 and therefore, finding of the Assessing Officer that business of the assessee commenced only with effect from acquisition of the equity research unit of BNP Paribas Solutions under the slump sale agreement, is not found to be correct. Accordingly, we uphold the finding of the Ld. CIT(A) on the issue in dispute. The ground of appeal of the Revenue is accordingly dismissed.

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• 2024 (11) TMI 487
  Disallowing interest expenditure claimed u/s 36(1)(iii) - Verification of assessee-firm have interest-free funds and the amount overdrawn by the partners - HELD THAT:- The assessee-firm have interest-free funds to the tune and the amount overdrawn by the partners was such fact is duly verifiable from audited accounts, copy furnished before us, therefore, the observation of CIT (A) with regard to the availability of interest-free funds with the assessee-firm is supported with the corroborative evidence. According to the findings of the co-ordinate Bench of this Tribunal in its own case wherein the decisions of Beekay Engineering Corporation [ 2010 (4) TMI 387 - CHHATTISGARH HIGH COURT] order of the hon ble Bombay High Court in the case of CIT v. Reliance Utilities and Power Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] are referred to along with certain other case law. In terms of observations of the hon ble courts in the said case laws referred to, the settled position of law emerges is that, if there is availability of sufficient interest-free funds with the assessee and to the extent of such interest-free funds are advanced without charging of interest, then the disallowance u/s 36(1)(iii) on such advances on account of notional interest is not justifiable. Apropos, the facts of the present case, admittedly, it is a proved fact apparent from the audited accounts of the assessee that the assessee had sufficient interest-free funds, as rightly observed by CIT(Appeals), also such interest-free funds are adequate to cover the amounts overdrawn by the partners, therefore, the addition made by AO u/s 36(1)(iii) apprehending that the assessee had utilised the interest-bearing funds for over withdrawal of capital by the partners, can be construed as misreading of the facts by the AO, leading to an adverse inference. No merit in the ground raised by the Revenue in the present appeal, which cannot be substantiated by way of any cogent explanation or evidence, contrary to the documented facts furnished by the assessee. Decided in favour of assessee.

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• Customs

• 2024 (11) TMI 530
  Demand for non-payment of cess along with interest - appellant/exporter had exported Fabricated Mica - period of Limitation period for issuing Show Cause Notice - HELD THAT:- In this case it is an admitted fact that at the time of export of goods the appellant was liable to pay cess which appellant failed to pay, therefore, a Show Cause Notice under Section 28 was issue within time to the appellant for the export made during the period 05.05.2014 and 14.08.2014 on 13th May, 2016. As with effect from 2.4.2011 under Section 28 Show Cause Notice could have been issued within one year. Therefore, the contention of the appellant that Show Cause Notice is barred by limitation is not sustainable. Accordingly, we hold that demands confirmed against the appellant are within time. The appellant has taken the argument that the orders u/s 17(5) of the Customs Act, 62 is not passed therefore, the proceedings are not sustainable. We find that in this case there is no question of enhancement of payment of duty by the Adjudicating Authority by reassessing the goods under Section 17(4) of the Customs Act, 1962. Infact provision of Section 17(4) of the Customs Act are not involved in this case. Therefore, question of passing order under Section 17(5) of Customs Act does not arise. Accordingly, the said argument fails. In terms of Section 129 D(2) of the Customs Act, the proceedings against the appellant are not sustainable - We find that in this case the Show Cause Notice has been issued to the appellant under Section 28 of the Customs Act, 1962 for short payment or non payment of cess by the appellant. Therefore, the said argument also fails. Show Cause Notice does not demand interest from the appellant - We find that in this case, the Show Cause Notice is not proposing recovery of interest from the appellant and the case was relied upon by the Ld. Authorized Representative in support of demand of interest, and all those cases that Show Cause Notice has demanded the interest and therefore, it was held that the appellant is liable to pay interest. As there is no proposal of demand of interest in the Show Cause Notice, the demand of interest is set aside. We confirm the demand of cess payable by the appellant and no interest is payable by the appellant.

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• 2024 (11) TMI 486
  Revocation of Customs Broker License - certain exports facilitated by the respondent which were made by the exporters, who are allegedly found to be non-existent at their principal place of business - HELD THAT:- Admittedly, the DGFT had issued IEC to M/s Shree Enterprises. At the material time, the GST registration for the said entity was also valid. CESTAT referred to Section 79 of the Indian Evidence Act, 1872, which posits a presumption of genuineness of documents, that have been certified by an officer of the Central Government. The documents evidencing the issuance of IEC as well as the registration under the CGST Act /SGST Act (allocation of Goods and Service Tax Identification Number GSTIN) were undeniably documents, which emanated from the government authorities and therefore, the respondent cannot be faulted in relying upon the same. There is also no dispute that the documents such as the rent agreement and the electricity bill that were collected by the respondent from the entity in question and furnished to the CoC, are genuine documents. There are no allegations that the said documents are forged or fabricated. CoC had faulted the respondent for accepting such documents on the ground that the rent agreement had expired on 01.12.2020 and the goods were exported thereafter from February 2021 to May 2021. Similarly, the respondent was faulted for accepting the electricity bill furnished by the exporter in question (M/s Shree Enterprises) on the ground that it pertained to the month of June, 2020. CESTAT observed in our view rightly so that it was not necessary for the Custom Broker to keep a continuous surveillance at the physical address of an exporter. The KYC documents are required to be obtained at a time when a particular entity is onboarded as a client of the Custom Broker. It is also necessary for the Custom Broker to periodically verify the same. Plainy, the rent agreement and the electricity bill could not be considered to be stale or were required to be disbelieved. The impugned order setting aside the order-in-original dated 17.10.2023 cannot be faulted.

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• 2024 (11) TMI 485
  Denial of adjournment request - Release of goods on the basis of forged documents leading to fraud - Customs clearance of imported mobile phones with duplicate IMEI numbers - Failure to provide evidence of bona fide actions in releasing goods HELD THAT:- Perusal of the statement of Director of appellant, it is apparent that when he was asked about the Out of Charge order No. 1024532 written in the in Bond Register , he acknowledged that his staff had made a mistake, however, the same was a clerical mistake. But no evidence to support the said statement was produced nor is found annexed with the record of the appeal memo. The statement of appellant s Assistant Manager Shri Rupen Barua rather contains specific admission that release of goods from the warehouse on 11.07.2014 on the basis of the copy of Out of Charge order dated 13.01.2014 is unauthorized removal on the basis of unauthorized documents. He also acknowledged that date on Out of Charge paper has not been checked properly which has been a mistake on his part while ordering Shri Kripal to release the warehoused goods. This is also coming apparent from his statement that after the impugned transaction appellants have never warehouse the goods of CHA M/s. Swati Enterprises/importer M/s. Joon Exim. The said Shri Kripal also vide his statement has admitted of committing mistake of clearing the consignment from the warehouse without checking the documents properly. The admissions are the best evidence which need not to be proved in terms of 52 of Indian Evidence Act, 1972. Otherwise also, as already observed above, there is no evidence on record produced by the appellant to show any bona fide while getting the goods released which otherwise are proved/admitted to have been released based on the improper un-genuine Out of Charge order. The appellant instead of proving the bona fide, if any, has rather opted to either seek the adjournment after adjournment. The only apparent motive is an intent to delay the proceedings or to remain absent despite the last warnings. No reason to differ from the findings arrived at by the original adjudicating authority. Order is upheld and appeal is hereby dismissed on merits also for want of prosecution on part of the appellant.

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• Securities / SEBI

• 2024 (11) TMI 529
  PIL seeking several reliefs to deal with the menace of entities issuing financial instruments like Agro Bonds, Plantation Bonds, etc. (Financial Schemes) luring investors with promises of high returns but without any tangible securities leaving the investors in a lurch - SEBI instituted this Public Interest Litigation when there was no effective regulatory and statutory framework to control the mushrooming number of entities indulging in such financial schemes HELD THAT:- By orders made in this petition, the Deputy Commissioner of Police was appointed as the Investigating Officer and directed to file reports in sealed covers at the final hearing. However, we could find no such reports in the file, and ultimately, it turned out that the Deputy Commissioner of Police did not file any such Reports. Accordingly, we adjourned the matter to enable the learned A.P.P. to obtain instructions. We find that the Reserve Bank of India was directed to appoint three auditors to investigate the affairs of the first respondent Company. One of the auditors submitted its report to the Deputy Commissioner of Police. However, no inquiry report has been filed as directed in our order dated 16.06.1998. Therefore, this direction should be complied with within eight weeks of today by filing the inquiry report before the Company Court in company petition no. 226/1998. Official Liquidator oversees respondents nos.1 to 5 and 7 properties. He should take steps in the best interest of the investors, make reports to the Company Court, and hereafter act under the orders and guidance of the Company Court. The issue of attachment, sale, etc., of the assets of respondents nos.1 to 5 and 7 will now be considered by the Company Court in Company Petition No. 226/1998. The further issues of repayment of the invested amounts or at least proportionate invested amounts will also be dealt with in the Company Petition in terms of the procedure prescribed. This will involve inviting of claims, adjudication of claims, formulation of schemes, etc. The pending notices of motion and civil applications do not survive and are disposed of. However, this does not preclude any parties from filing similar notices of motion, interim applications, etc., in Company Petition. This petition is accordingly disposed of after detagging the Company Petition

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• Insolvency & Bankruptcy

• 2024 (11) TMI 484
  Suspension of AFA pending adjudication of the show cause notices - Restoration of Authorization for Assignment -validity of Clause 23A provided in the Schedule to the Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 - Clause 23A of the Bye-Laws of ICSI Institute of Insolvency Professionals - It was held by High Court that The suspension of the petitioner s AFA is legal as it is the consequence of initiation of disciplinary proceedings against him. The same is duly provided by Clause 23A of the 2016 Regulations and the Bye-Laws in that regard. HELD THAT:- It is not required to issue notice in the present special leave petition and, hence, the same is dismissed.

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• 2024 (11) TMI 483
  Appropriate Forum - Maintainability of petition or remedy is to approach the Debt Recovery Tribunal (DRT) - petitioners raised the grievance that despite the debt of the corporate debtor having been restructured and resolution plan being approved by the CoC, of which the respondent no. 1/IOB was the signatory, the proceedings are still continuing before the learned DRT - HELD THAT:- Unhesitatingly, the petitioner is approaching this Court for a relief which cannot be entertained since the matter is already pending before the learned DRT. The plea by the learned counsel for the petitioners that the decision by the Supreme Court in the case of Celir LLP v. Bafna Motors (Mumbai) Pvt. Ltd and Ors. [ 2023 (10) TMI 48 - SUPREME COURT ], is binding on the right of redemption to the borrower requiring thirty days clear notice in terms of Section 13 (8) of the SARFAESI Act read with Rule 8 (6) of the Rules of 2002 and the publication of sale notice under Rule 9 (1) is an issue that must be addressed before the learned DRT. Likewise, whether the subject property/mortgaged property is agriculture in nature and thus exempted from the dragnet of the SARFAESI Act in terms of section 31 (i) is a plea that too be addressed before the learned DRT. There is some merit in the plea of the learned senior counsel for the petitioner that the decision in the case of Lalit Kumar Jain v. Union of India [ 2021 (5) TMI 743 - SUPREME COURT ] was one wherein it was held that the approval of the resolution plan under Section 31 of the IBC would not automatically discharge a guarantor from his obligations, and yet at the same time, in view of the fact that the resolution plan has been accepted by the NCLT vide vide judgment dated 11.06.2024, the issue that arises for consideration is since the entire debt of the borrower has been restructured in the resolution plan, and certain conditions are attached to the assenting and dissenting secured creditors, whether the respondent no. 1 bank can proceed under the SARFAESI Act considering the overriding effect of the proceedings under the IBC in terms of section 238 of the IBC. The bottom line is all the aforesaid issues should be addressed before the learned DRT, which is the competent forum for now. The present writ petitions are disposed of with a direction that the learned DRT, Delhi shall consider the aforesaid objections raised by the petitioners while deciding the securitisation application in accordance with law.

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• 2024 (11) TMI 482
  Refund of amount deposited as part of a settlement under the MoU - maintainability of Application filed by the Appellant under Section 60(5) of the Insolvency and Bankruptcy Code - HELD THAT:- From the facts brought on the record, it is clear that insofar as dues of JDECL is concerned, 12A Application was filed which was allowed by the Adjudicating Authority approving the 12A and the CIRP of JDECL thus came to be closed. Entire debt of the Financial Creditor with JDECL was Rs.3 Crores, which CIRP stood closed and entire debt also discharged. MoU also indicates that Rs.25 Lakhs was to be paid with regard to debt of Corporate Debtor on execution of MoU and rest of the payments were made within 4 years as per the schedule given in revised MoU as noted above. No further payment with regard to dues of Corporate Debtor could be paid since the Resolution Plan could not be approved by the Adjudicating Authority, although CoC has approved the Resolution Plan for the Corporate Debtor. The Adjudicating Authority has returned a finding that Application was not maintainable under Section 60(5), which findings have been questioned before this Tribunal by the Counsel for the Appellant and are supported by submission of Counsel for the Respondent. In the facts of the present case, we are of the view that Application filed by Appellant was maintainable under Section 60(5)(c) since the questions arose out of are in relation to the Insolvency Resolution of the Corporate Debtors, UCL and JDECL - out of Rs.3,25,00,000/-, amount of Rs.3 Crores was paid to clear the debt dues of JDECL whose CIRP stood closed by allowing the Application under Section 12A. Thus, the CIRP was successfully closed of JDECL by payments of the entire debt, there is no question of refund of amount out of Rs.3 Crore which culminated in the closure of the CIRP of JDECL. Promoter/Director who succeeded in closure of the CIRP on payment of entire dues cannot be heard in saying that although CIRP is closed but amount paid to the CoC be refunded to them. The amount of Rs.3,25,00,000/- consist of two payments (i) Rs.3 Crores for 12A Application under JDECL and Rs.25 Lakhs for approval of the Plan of UCL. The CIRP of JDECL having been closed by allowing 12A Application, the said amount becomes non-refundable. The Appellant which is none else then entity brought into existence by Promoter/Directors and investors to resolve the debt of JDECL and Corporate Debtor cannot take double benefit, i.e., (i) closing of CIRP of JDECL by satisfaction of the entire debt and asking again the refund of the amount which was paid for closure of CIRP of JDEC. The prayer of the Appellant thus to refund amount of Rs.3 Crores is dishonest, unjust and has rightly been rejected. However, the amount of Rs.25 Lakhs which was paid on signing of the MoU and the approval of the Resolution Plan of Corporate Debtor could not take place, we are of the view that amount of Rs.25 Lakhs needs to be refunded to the Appellant by the Financial Creditors, Respondent No. 2, herein. The Impugned Order of the Adjudicating Authority dated 26.07.2022 need to be modified only to the extent that the amount of Rs.25 Lakhs which was paid by the Appellant on signing of MoU dated 07.08.2020 towards Resolution Plan of Corporate Debtor need to be refunded to the Appellant. Rest of the Order of the Adjudicating Authority is affirmed - appeal allowed in part.

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• 2024 (11) TMI 481
  Replacement of Resolution Professional - HELD THAT:- In the present case, from the facts which have been brought on the record, it is clear that the RP prior to filing of Section 94 application, has been representing the Corporate Debtor and the Personal Guarantor, before the Delhi High Court as a Counsel for the Corporate Debtor and the Personal Guarantor. Formation of opinion by the Financial Creditor on the ground that RP, who has represented the Corporate Debtor and the Personal Guarantor in the dispute between parties arising out of the same debt, cannot be said to be an irrational ground, to form an opinion under Section 98. Hence, the Financial Creditor filed an application for replacement of the RP. The scheme of Section 98, does not require that a particular ground has to be proved by debtor or creditor seeking replacement of the RP. The submission of the learned Counsel for the Appellant that Section 94 gives a vested right to the debtor to initiate insolvency resolution process either personally or through RP, hence, the said vested right cannot be taken away. Section 94, sub-section (1) is a provision, which permits a debtor to initiate insolvency resolution process. Thus, the debtor is fully entitled to initiate the insolvency resolution process, either personally or through RP. The Appellant, thus, was fully entitled to initiate the insolvency resolution process through RP, as was done in the present case. But, the stage under Section 98 sub-section (1) is subsequent to appointment of RP under Section 97 - Hence, Prabhat Ranjan Singh, was appointed by the Adjudicating Authority by order dated 06.12.2023 as per Section 97 of the IBC. The Adjudicating Authority did not commit any error in allowing the application filed by the Financial Creditor for replacement of the RP - there are no error in the order impugned - Appeal is dismissed.

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• 2024 (11) TMI 480
  Condonation of delay of five days in filing of the Appeal - sufficient cause for delay or not - HELD THAT:- The delay in filing of the Appeal is only five days and sufficient explanation was given by the Appellant/ Applicant. The Appeal has been filed by the Resolution Professional (RP), who is living in Mumbai and in the application, it was pleaded by the RP that due to health ailments, he was unable to seek timely legal advice in filing the Appeal and further it is stated in paragraph (ii) (e) that one of the annexures filed in the Company Petition No.696 of 2020 was dim and an endeavour was taken to file clear and legible copy, for which certain time was taken. There are sufficient cause has been shown for condonation of five days delay in filing of the Appeal. Delay condonation application allowed.

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• 2024 (11) TMI 479
  Admission of Section 9 application - Corporate Debtor failed to make repayment of its dues - debt and default on the part of the Corporate Debtor qua the Operational Creditor - pre-existing dispute surrounding the operational debt or not - HELD THAT:- The tone and tenor of both the Notice of Disputes clearly manifested existence of dispute prior to the date of the Section 8 demand notice basis which the present Section 9 application has been filed. This constitutes sufficient foundation of genuine pre-existing disputes between the two parties. The reply to demand notice captures the essence of these disputes and therefore the requirements of Section 8(2)(1)(a) stood fulfilled. The application filed by the Operational Creditor under Section 9 has been hit by Section 9(5)(ii)(d). It is well settled that in Section 9 proceeding, there is no need to enter into final adjudication with regard to existence of dispute between the parties regarding operational debt. In the present factual matrix, the defence raised cannot be viewed as moonshine, spurious, hypothetical or illusory. For such disputed operational debt, Section 9 proceeding under IBC cannot be initiated at the behest of the Operational Creditor. The Adjudicating Authority therefore clearly fell in error in admitting the Section 9 application while turning a blind eye to the Notice of Disputes which clearly establishes that there were serious differences between them in the nature of real pre-existing disputes. The ratio of Naresh Sevantilal Shah judgment [ 2021 (1) TMI 759 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI ] which has been relied by the Adjudicating Authority to set the cut-off date of the date of issue of first demand notice for taking cognisance of the notice of dispute is not applicable in the present case since in that case, the first Demand Notice had been followed by filing of a Section 9 application before the Adjudicating Authority which was dismissed on technical grounds because Operational Creditor had made an incorrect claim - In the present case, no Section 9 application was filed after issue of first Demand Notice. Hence reliance on Naresh Sevantilal Shah judgment is misplaced because the facts therein are clearly distinguishable. The Adjudicating Authority committed serious error in admitting Section 9 application in the facts of the present case. The Impugned Order dated 30.10.2023 initiating CIRP of the Corporate Debtor and all other orders pursuant to Impugned Order are therefore set aside. The Corporate Debtor is released from the rigours of CIRP with immediate effect - Appeal allowed.

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• 2024 (11) TMI 478
  Rejection of Section 9 Application - debt has become due and payable or not - dispute over payment of outstanding dues between the Appellant and the Respondent - HELD THAT:- There is no dispute between the Parties regarding the acceptance of bid of the Appellant for providing for e-Auction solutions. The Corporation has after Letter dated 08.02.2023 has again sent a same request to the Department on 14.02.2023 and 28.02.2023. It is clear that on basis of RFP between the Parties and Clause 3 of the Agreement Certification by the TPA was required for release of the quarterly bill. The Corporation on account of non-receipt of any Report or any Certification from TPA did not make any payment. The present is not a case where Corporation has defaulted in making payment to the Appellant. However, the payment could not be made in accordance with the RFP and Agreement between the Parties where payment was to be released after certification by TPA. The above indicates that there may be lapse of the Government of Goa in not appointing TPA so that TPA can verify the release of the quarterly payments to Appellant, but that cannot be a reason for put the Corporate Debtor in Insolvency by admitting Section 9 Application filed by the Appellant. On account of the lapse of Government of Goa in appointing TPA and non-payment of the dues of the Corporate Debtor, Appellant was free to avail the Clause 19 of the Agreement, but in the facts of the present case, when in spite of recommendation by Corporation to the DOIT to permit payment of 75% of the amount it is not the case that any sanction was granted by Department to pay the Appellant - the finding of the Adjudicating Authority agreed upon that no default can be said to have been committed by the Corporation so as to put it into Insolvency. When the RFP and Agreement provides a particular mode and manner of payment, non-payment by Appellant is a plausible contention raised by the Respondent in opposing Section 9 Application. There are no ground in the Appeal to interfere with the Order of the Adjudicating Authority rejecting Section 9 Application - present is a case which shows that Appellant has been put to prejudice on account of inaction in terms of the RFP and Agreement between the Parties. Appellant is still free to avail his remedy for payment of its outstanding dues in accordance with the Agreement between the Parties - appeal dismissed.

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• 2024 (11) TMI 477
  Acsertainment of unspent balance and security deposit payable to the subscribers and make provisions for the same in the resolution plan - payment of statutory dues - HELD THAT:- It appears that it having not filed a claim, a direction was sought that RP should ascertain the unspent balance and security deposit payable to the subscribers and make provisions for the same in the Resolution Plan and further direction was sought to allow the payment of statutory dues amounting to Rs.85,10,000/- to the Applicant. The above were the only two prayers made in the application. The RP has filed an affidavit in reply. The RP in the reply affidavit has pleaded that Resolution Plan has already been approved by the CoC. It is pleaded by the RP that the Applicant has not filed any claim inspite of letter written by the RP to the Applicant on 03.07.2019, asking the Appellant to file claim for any outstanding dues for period prior to CIRP. It was pleaded that Applicant cannot seek refund of any monies under an application filed before the Tribunal without following the due process prescribed under the Code. The payment towards the disincentive as imposed by the Appellant was liability of the Corporate Debtor, which remained outstanding on the date of commencement of the CIRP. Hence, the said amount has to be paid as per the Resolution Plan, in accordance with the IBC process. The prayer of the Appellant as made in IA 88 of 2020, which is levied as disincentive, dehors the IBC process, cannot be accepted. The Adjudicating Authority has rightly treated the liabilities as operational debt . The learned Counsel for the Appellant has further contended that amount of security deposit, balance of post-paid subscribers and unspent balance of prepaid subscribers of the company are held in trust by the Corporate Debtor and they are not part of the assets of the Corporate Debtor, hence the said amount are to be returned. There are no error in the order of the Adjudicating Authority, accepting the said outstanding dues as operational debt , to be paid as per the provisions of the Resolution Plan. The learned Counsel for the Appellant has relied on judgment of the Gujarat High Court in Baroda Spg. Wvg. Mills Co. Ltd. vs. Baroda Spg. Wvg. Mills Co-operative Credit Society Ltd. Ors. [ 1975 (4) TMI 61 - HIGH COURT OF GUJARAT ] and a judgment of Madras High Court in Kodak Ltd. vs. South Indian Film Corporation [ 1937 (1) TMI 18 - MADRAS HIGH COURT] in support of his submission that beneficial ownership in the balance security deposit and unspent balances of prepaid subscribers are the amounts held by the CD only under a constructive trust. In the above case, the Gujarat High Court had occasion to consider Sections 456, 511 and 530 of the Companies Act. In the facts of the above case, the amount, which was in the hands of the company, which came to it by way of deductions from the wages and salary payable to its employees, on the requisition of the society, of which the employees were the members. There is no material on record to accept the submission of the Appellant that the said amount of security deposit balances of post-paid subscribers and unspent balances of prepaid subscribers be accepted as CIRP cost. There is no foundation laid in the application, which was filed by the Appellant before the Adjudicating Authority regarding the CIRP cost and the submissions, which are sought to be advanced in these Appeal(s), cannot be accepted, it being not founded on any relevant materials. There are no grounds have been made out to interfere with the impugned order in these Appeal - appeal dismissed.

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• FEMA

• 2024 (11) TMI 476
  Ex post facto approval granted to the respondent for foreign investment - order passed by a public authority - investment in a new company, alleging it violated the FDI policy - ex post facto approval can be given to the proposal of the respondent no. 5 subject to conditions and compounding by the Reserve Bank of India. HELD THAT:- In the present case a committee was constituted vide letter dated 16.02.2010 issued by DEA then the petitioners and the respondent no. 5 were called to present their respective case before committee. As further stated that once the committee gave its report then no need was felt to call the parties again before FIPB. The said Committee accorded ex post facto approval to the respondent no 5. It is not stand of the respondents no. 1 and 2 that the petitioners no. 2 and 3 and the respondent no. 5 were called for personal hearing or accorded personal hearing on 04.08.2010 which reflects that reconstituted Committee accorded approval to the respondent no. 5 on its proposal for investment made in the respondent no. 6 only on basis of submissions oral and documentary and documents already submitted to Committee prior to reconstitution till 17.03.2010. The reconstituted Committee under chairmanship of Sh. Bimal Julka should have afforded or given a fresh personal hearing to the petitioners no. 2 and 3 and the respondent no. 5 before according ex post facto approval to the respondent no 5. Although four members were common in Committees on 17.03.2010 and 04.08.2010 but on both occasions, Chairpersons of the Committee were different and reconstituted Committee without affording fresh opportunity to the parties and despite fact that personal hearing was given by the earlier Committee has accorded the approval to the respondent no. 5 which was in gross violation of the right to personal hearing and in turn Principles of Natural Justice. The approval to the respondent no. 5 either should have been granted by the Committee which was chaired by Ms. L. M. Vas or a fresh personal hearing must have given by the reconstituted Committed under chairmanship of Sh. Bimal Julka and failure to do so was gross violation of Principles of Natural Justice. Any authority when conferred with a discretionary power must exercise that power after applying its mind to the facts and circumstances of the case. The authority should not act mechanically in exercise of discretion. Supreme Court in East Coast Railway V Mahadev Appa Rao [ 2010 (7) TMI 967 - SUPREME COURT ] observed that every order passed by a public authority must disclose due and proper application of mind by the person making the order. Even at risk of repetition, it is stated that the petitioner no. 1 was incorporated due to execution of Joint Venture Agreement between the petitioners no. 2 and 3 and the respondent no. 5. The respondent no. 5 set up the respondent no. 6 on or about 14.06.2005 and made foreign investment therein. The petitioners made complaints to the respondents no. 1 to 3 for violation of Press Notes No. 1 3. The respondent no. 1 passed an order dated 02.04.2007 holding that the respondent no. 5 had violated FDI Policy in setting the respondent no. 6. The respondent no. 5 vide order dated 11.08.2009 passed in LPA bearing no 387 of 2008. LPA was permitted to approach FIPB for appropriate relief. Thereafter the respondent no. 5 filed an application/proposal on 6.10.2009 for grant of ex post facto approval under Press Note No. 1 (2005 Series) for investment made in the respondent no. 6. FIPB in its meeting held on 18.01.2010 directed for constitution of a committee to examine rival contentions of the petitioners and the respondent no. 5 and said Committee was set up under Chairmanship of Ms. L. M. Vas. The Committee gave a hearing to the petitioners no. 2 and 3 and the respondent no. 5 on 17.03.2010 and written submissions were also submitted by them. The Committee was reconstituted under chairmanship of Sh. Bimal Julka and said reconstituted committee made recommendation on 04.08.2010 for grant of ex post facto approval and said recommendation was considered by FIPB in its meeting held on 10.09.2010 and thereafter the respondent no. 2 granted ex post facto approval to the respondent no. 5. The perusal of Approval dated 29.09.2010 reflects that the Department of Economic Affairs, FIPB (FC SECTION), Ministry of Finance conveyed to the respondent no. 5 about grant of ex post facto approval by the Government of India subject to certain terms and conditions. The clause 10 of said Approval detailed about circumstances which were necessary for grant of approval to the respondent no. 5. The ex post facto approval dated 29.09.2010 was result of deliberations made in FIPB on the basis of recommendation made by Committee constituted by FIPB to examine rival contentions of the petitioners no. 2 and 3 and the respondent no. 5 about foreign investment made by the respondent no. 5 in the respondent no. 6. The petitioners no. 2 and 3 were given personal hearing by the Committee and written submissions were also submitted by the petitioners no. 2 and 3. It cannot be said that ex post facto Approval dated 29.09.2010 was granted without any reason although those reasons may not be specifically mentioned in Approval dated 29.09.2010. The argument advanced by the learned Senior Counsel for the petitioners that Approval dated 29.09.2010 was without any reason or passed without reasons does not have legal force. The contrary arguments advanced by the learned Senior Counsel for the respondents no. 5 and 6 carry legal force. In view of the fact that reconstituted Committee which recommended grant of approval to the respondent no. 5 on 04.08.2010 was not the Committee comprising same Chairperson/members which heard the petitioners no. 2 and 3 and the respondent no. 5 on 17.03.2010. Accordingly grant of approval on 29.09.2010 by the respondent no. 2 to the respondent no. 5 needs fresh reconsideration again by the Committee which shall be hearing the petitioners no. 2 and 3 and the respondent no. 5 on the proposal of the respondent no. 5 and shall be taking decision on the proposal made by the respondent no. 5. Accordingly, the respondent no. 2/Ministry of Finance/FIPB is directed to constitute fresh/new Committee to hear afresh on proposal of the respondent no. 5 stated to have been made on 06.10.2009 vide application bearing Ref. No. 210/2009-FC.1 within six weeks from date of this judgment and said Committee shall hear the petitioners no. 2 and 3 and the respondent no. 5 on proposal of the respondent no. 5 and thereafter same committee shall take appropriate decision on the proposal of the respondent no. 5. It is made clear that there shall not be any change in composition of the Committee or reconstitution of the Committee in any circumstance. The new Committee shall afford opportunity of being heard to the petitioners and the respondent no. 5 which shall also include filing of written submissions if any by the petitioners no. 2 and 3 and the respondent no. 5.

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• Service Tax

• 2024 (11) TMI 528
  Service tax for Flying Training Institutes - Maintainability of the writ petition on the ground that an alternate remedy is available - Correctness of Instruction dated 11.05.2011 issued by the Director, Service Tax under the Ministry of Finance through its Department of Revenue - declaration that Course Certificate being issued by Flying Training Institutes cannot be held as recognized in law for the purposes of exemption from paying service tax - time limitation - as decided by HC [ 2023 (12) TMI 439 - BOMBAY HIGH COURT] court ruled in favor of the petitioner, setting aside the Instruction dated 11.05.2011, the show cause notice dated 18/21.10.2013, and the order dated 24.12.2014. The petitioner was entitled to a refund of the service tax paid under protest. HELD THAT:- There is gross delay of 237 days in filing the Special Leave Petition. The reasons assigned are neither satisfactory nor sufficient in law so as to be condoned. Hence, the application seeking condonation of delay is dismissed. Consequently, the Special Leave Petition also stands dismissed. The question of law, if any, is kept open. Pending application(s), if any, shall stand disposed of.

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• 2024 (11) TMI 527
  Notice issued for re-initiating the adjudication proceedings in respect of the Show Cause Notice as barred by limitation u/s 73 (4B) (a) and (b) of the Finance Act, 1994 - HELD THAT:- As there has been a gross delay on the part of the respondents in proceeding with the impugned SCN. As noted above, the concerned authority had taken no steps after 21.10.2009 till transferring of the case in the Call Book on 16.12.2015. Thus, even if it is accepted which this Court does not that the Call Book procedure is permissible in law, the delay in adjudication of the present case clearly exceeds a reasonable period. Therefore, reinitiation of the proceedings are required to be set aside. Section 73 of the Act as applicable prior to 06.08.2014 did not provide any specified time for determining the service tax payable. By virtue of Finance (No. 2) Act, 2014, Sub-section (4B) was introduced in Section 73 of the Act with effect from 06.08.2014. By virtue of Section 73 (4B) of the Act, the Adjudicating Authority is required to determine the amount of service tax due within a period of six months or one year from the date of notice as the case may be. However, there does not mean that the adjudication of Show Cause Notices issued prior to 06.08.2014, could remain open indefinitely. It is settled law that in absence of any specific time period prescribed for conclusion of proceedings, the same are required to be concluded within a reasonable period. In Union of India v. Citedal Fine Pharmaceuticals [ 1989 (7) TMI 100 - SUPREME COURT] had rejected the challenge to Rule 12 of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 as unreasonable and violative of Article 14 of the Constitution of India, inter alia, on the ground that it did not provide for any period of limitation for recovery of duty. In Sanghvi Reconditioners (P.) Ltd. v. Union of India [ 2017 (12) TMI 906 - BOMBAY HIGH COURT] had held that larger public interest requires the Revenue and its officials to adjudicate the Show Cause Notice as expeditiously and within a reasonable period of time. In the present case, it is apparent that the Show Cause Notice dated 24.10.2008 (the impugned SCN) has not been adjudicated within a reasonable period of time. More than 14 years have elapsed since issuance of the impugned SCN. It is also relevant to note that part of the demand sought to be raised pertain to a period more than twenty years prior to date of the impugned SCN. Clearly, the adjudication proceedings are now barred by limitation.The impugned notice dated 21.08.2023 is set aside. The respondents are restrained from proceeding with the initial impugned SCN.

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• 2024 (11) TMI 526
  Classification of services - provision of online information and database access or retrieval [OIDAR] service defined under section 65(75) of the Finance Act and made taxable under section 65(105)(zh) of the Finance Act - to be treated as support services of business or commerce (BSS) or online information and database access or retrieval (OIDAR). HELD THAT:- The order accepts the contentions of the appellant and holds that to be covered under OIDAR service, data or information belonging to the service provider should be provided to the service receiver but the appellant did not provide any data or information owned by Verio USA as Verio USA only provided infrastructure facilities in the form of server space and other facilities which are necessary for the appellant to store the data. Accordingly, the order holds that services provided by Verio USA to the appellant are not taxable under OIDAR service. However, the order proceeds to hold that such services are in the nature of infrastructure support and are taxable under BSS. Thus, the order has confirmed the demand under BSS though the demand made in the show cause notice is for OIDAR service. A show cause notice is the foundation and since, the taxability under BSS was not proposed in the first show cause notice, the demand could not have been confirmed under the said category. In this view of the matter the demand confirmed under BSS cannot be sustained. It would, therefore, not be necessary to examine the contention advanced by the learned counsel for the appellant that even otherwise the services received by the appellant are not taxable under BSS. Demand of service tax under advertising service for the period after 18.04.2006 - As submitted by learned counsel for the appellant that the amount that has been appropriated is Rs. 54,09,868/- but the amount paid towards service tax on advertising service is Rs. 43,25,505/- and Rs. 1,27,004/- on the service received from Minik Enterprises. Thus, the total amount of service tax that was paid is Rs. 54,52,509/- but only an amount of Rs. 54,09,868/- has been appropriated. According to the learned counsel for the appellant, there is a short fall of Rs. 42,641/- in appropriation, Appellant also submitted that an amount of Rs. 20,17,511/- has been paid in excess on advertising service and, therefore, it may also be adjusted towards or refunded to the appellant. The aforesaid errors that have been pointed out by the learned counsel for the appellant can be pointed out by the appellant to the Commissioner by moving an appropriate application and in case such an application is filed, the Commissioner shall examine the same and pass an appropriate order. Penalty under section 78 of the Finance Act on the demand of service tax with respect to issue at serial no. 1 - The issue as to whether the demand of Rs. 1,68,440/- can be sustained or not is being remitted to the Commissioner. The imposition of penalty under section 78 of the Finance Act will, therefore, depend upon the decision to be taken by the Commissioner. This issue of penalty will, therefore, also have to be examined by the Commissioner. Benefit of section 80 of the Finance Act permitting waiver of penalty should also be extended to the appellant. This issue can also be examined by the Commissioner.

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• 2024 (11) TMI 525
  Demand of service tax invoking extended period of limitation - Service tax as payable on generator charges under the category of renting of immovable property service and car renting and maintenance charges under the category of rent-a-cab service Generator Charges - HELD THAT:- We find that the generator charges has been recovered by the appellant from the tenant for power cuts/failures, when there is a electricity failure. This electricity charges have been recorded by the appellant as providing electricity to that tenant from whom the appellant has lesser provider as a lessee. As the generator is owned by the appellant, therefore, the renting expenses are paid by the appellant and as the generator is a movable property, it can be put anywhere in the building. Therefore, the generator cannot be termed as Immovable Property . Accordingly, the same is not liable to pay service tax as the generator charges are under the category of renting of immovable property service . Therefore, the appellant is not liable to pay service tax on the generator charges under the category of renting of immovable property service . Rent-a-cab Service - With regard to demand under the category of rent-a-cab service , we find that the appellant is not engaged in the business of rent-a-cab service. Moreover, the appellant is recovering the amount for day to day for maintenance charges of vehicle of car renting, which is owned by the appellant for their own firm, wherein the appellant is one of the partner. In that circumstances, we hold that the appellant is not engaged in the business of rent-a-cab service. Therefore, no service tax is leviable under the category of rent-a-cab service . As the demand of service tax is not sustainable against the appellant, no penalty can be imposed on the appellant.

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• 2024 (11) TMI 524
  Demand of service tax - violation of the principle of natural justice - service tax liability was calculated on the basis of third party information received from the income tax department for the financial year 2014-15 2015-16, in which the appellant had reflected gross receipts as per FORM 26AS u/s 194H (Commission or Brokerage Service) of Income Tax, 1961 of the financial year resulted in short payment of service tax HELD THAT:- While passing the Order-in-Original the adjudicating authority has not considered the reply of the appellant which was duly filed and thereby violated the principles of natural justice. It appears that the adjudication order was passed without considering the reply of the appellant and it has been copy pasted from some other order wherein the service tax demand was only Rs. 2,85,148/- . It is a settled law that any order in violation of the principles of natural justice is non-est. We are of the considered opinion that this matter needs to be remanded back to the Original Authority, therefore, we set aside the impugned order and remand the matter back to the original authority with a direction to pass a fresh order after complying with the principles of natural justice and after affording adequate opportunity of hearing to the appellant and thereafter pass a reasoned order.

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• 2024 (11) TMI 475
  Demand of service tax - amount received as the consideration due to cancellation of an agreement - declared service as per section 66 (E) (e) of Finance Act 1994 or not? - Obligation to refrain from an act, or to tolerate (e) an act or a situation, or to do an act - invoking the extended period of limitation - Whether the appellant is providing the declared service contemplated under section 66 (E) (e) of Finance Act which became taxable w.e.f. 1st July, 2002 ? HELD THAT:- When a contract has been broken, the party who suffers by such breach is entitled to receive, form the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it. Such compensation is not to be given for any remote and indirect loss of damage sustained by reason of the breach. Compensation for failure to discharge obligation resembling those created by contract: When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract. Section 73 74 of Chapter VI of Indian Contract Act provides for compensation of loss or damage caused by breach of contract. Section 75 of Contract Act talks about compensation for party rightfully rescinding the contract. Apparently there were executed the agreements to purchase land which are absolutely out of the scope of service tax. Cancellation of these agreements has been made as per mutual consent of buyer/appellant and the sellers of eight Agreements to Sell subject to compensation to be paid to buyer of such amount as specifically agreed between the parties. These facts when read in the light of above discussion are sufficient for us to hold that the amount of compensation received by the appellant is not an amount for any act of obligation or toleration on part of appellant. Hence is wrongly held to be the amount of consideration for rendering declared service defined under section 66 E (e) of Finance Act, 1994. Liability has been fastened upon the appellant under Section 65B read with Section 66E(e) of the Finance Act for the period from July 2012 till March 2016 for the reason that by collecting the aforesaid amounts the appellant had agreed to the obligation to refrain from an act or to tolerate the non-performance of the terms of the contract by the other party. Similar issue has been considered and settled in favour of the assessee, in the order in the case of M/s. South Eastern Coalfields Ltd. [ 2020 (12) TMI 912 - CESTAT NEW DELHI ] held that service tax could not have been demanded from the appellant. In this connection it would also be pertinent to refer to the Circular dated 3-8-2022 issued by the Department of Revenue regarding applicability of goods and service tax on liquidated damages, compensation and penalty arising out of breach of contract in the context of agreeing to the obligation to refrain from an act or to tolerate an act or a situation, or to do an act . This Circular emphasizes that there has to be an express or implied agreement to do or abstain from doing something against payment of consideration for a taxable supply to exist and such an act or a situation cannot be imagined or presumed to exist merely because there is a flow of money from one party to another. It also mentions that unless payment has been made for an independent activity of tolerating an act under an independent arrangement entered into for such activity or tolerating an act, such payment will not constitute consideration and such activities will not constitute supply . Act of entering into sale cancellation agreement is not an act of rendering taxable declared service. Any amount received as damages, in lieu thereof, cannot be called as the taxable value. We draw our support from the decision of Hon ble Apex Court in the case titled as Union of India vs. Intercontinental Consultants and Technocrats Pvt. Ltd. [ 2018 (3) TMI 357 - SUPREME COURT ] Since the appellant has not rendered any activity which can be called as taxable declared Service, no question arises of any alleged evasion of service tax. We hold that extended period as has been invoked while issuing the impugned Show Cause Notice is also wrong. We don t find any positive evidence to support the alleged suppressions of facts on part of the appellant. The Show Cause Notice is held to be barred by time. Accordingly, the order under challenge is hereby set aside and the appeal is hereby allowed.

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• 2024 (11) TMI 474
  Classification of services - Service tax on the services provided by the appellant as a sub-contractor - show cause notice has been issued to the appellant is that the appellant have worked as a sub-contractor in respect of laying of the pipeline for water supply and drainage which falls under the service category of erection, commissioning and installation service and therefore, the appellant should have paid the Service Tax on the services provided by them to their principles - HELD THAT:- As we are of the view that services provided by the appellant to Shri Hindustan Fabricators sub-contractor in laying of the water supply pipeline and drainage pipeline, the demand raised in the impugned show cause notice does not survive. However, we take note of the fact that the appellant have also provided services to various other private parties. We are of the view that nature of services provided to this firm to other parties have not been discussed clearly in the impugned Order-In-Original and therefore, we are of the view that original Adjudicating Authority need to decide the matter afresh keeping in mind the decision of this Tribunal in case of M/s. Skyway Construction [ 2024 (6) TMI 1332 - CESTAT AHMEDABAD] .

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• 2024 (11) TMI 473
  Service tax leviability on penalty for not completing the contract within the stipulated time period - Obligation to refrain from an act or to tolerate an act or a situation - Declared Services - Whether the penalty recovered from the contractors for not completing the work/ contract within a stipulated time is liable to service tax as a declared service u/s 66 E (e)? - HELD THAT:- As per the plain reading of the above declared service under-sub Clause (e), the activity of not completing the contract within the stipulated time period as provided under contract does not fall under the aforesaid entry. It is a penalty which is imposed on the contractor for not completing the work within the stipulated time period. Therefore, such penalty is not the consideration towards any service. Accordingly, the same does not fall under the declared service as provided u/s 66 E (e) of Finance Act, 1994. This issue is no longer res-integra in the light of the decision cited by the appellant in the case of South Eastren Coalfields Ltd. [ 2020 (12) TMI 912 - CESTAT NEW DELHI ] it is clear that penalty towards non fulfillment of the condition of the contract will not fall under Section 66 E (e) of Finance Act, 1994, therefore the service tax under the said declared service cannot be recovered. Accordingly, service tax demand on this ground is set aside. Service tax on consideration recovered from the employees who have not complied with the condition of giving sufficient notice before leaving the job - This issue is also not res-integra as the same has been decided in the case of GE T D INDIA LIMITED [ 2020 (1) TMI 1096 - MADRAS HIGH COURT ] the employer cannot be said to have rendered any service per se much less a taxable service and has merely facilitated the exit of the employee upon imposition of a cost upon him for the sudden exit. The definition in clause (e) of Section 66E as extracted above is not attracted to the scenario before me as, in considered view, the employer has not tolerated any act of the employee but has permitted a sudden exit upon being compensated by the employee in this regard. Though normally, a contract of employment qua an employer and employee has to be read as a whole, there are situations within a contract that constitute rendition of service such as breach of a stipulation of noncompete. Notice pay, in lieu of sudden termination however, does not give rise to the rendition of service either by the employer or the employee. Towards conclusion raises the plea of availability of alternate remedy. However, since the matter involves an interpretation of the statutory provision in the light of undisputed facts available on record, we see no need to relegate the petitioner to statutory appeal. This plea is also rejected. The demand is not sustainable. Accordingly, the impugned order is set aside, appeal is allowed.

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• 2024 (11) TMI 472
  Appeal filed with a delay of 19 days - reason for delay was that there was confusion in date of receipt of the Order-In-Original - HELD THAT:- We find that Commissioner (Appeals) has rejected the appeal by rejecting the condonation of delay only on the ground that the appellant being a professional company was not supposed to delay in filing the appeal and they were suppose to file within the normal period of 60 days. This reasoning of Commissioner (Appeals) is weird and absurd, if this reason is accepted which in our view is completely against the statute which provide for condonation of delay, law is equal for all whether it is professional company or unprofessional company or any individual. Therefore, only deciding the condonation delay application considering the status of the company is clearly with a prejudiced mind. Therefore, we do not accept the reason given by the Commissioner (Appeals) for rejecting the appeal on ground of time bar. Accordingly, we set aside the impugned order and remand the matter to the Commissioner (Appeals) to decide before him on merit without going into the matter of delay in filing the appeal before him.

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• 2024 (11) TMI 471
  Cenvat Credit of Service Tax on the insurance premium paid to Deposit Insurance Credit Guarantee Corporation [ DICGC ] - commission paid to the brokers for underwriting the government security etc. and for making investments in securities to maintain mandatory Statutory Liquid Ratio in accordance with Banking Regulation Act, 1949 - HELD THAT:- The referral Bench has referred the issue to the Larger Bench because according to them the decision in South Indian Bank [ 2020 (6) TMI 278 - CESTAT BANGALORE - LB] has been passed without considering the decision of the Hon ble Constitution Bench of the Supreme Court in the matter of Commissioner of Customs (Import), Mumbai v. Dilip Kumar Company [ 2018 (7) TMI 1826 - SUPREME COURT] . It also observed that the decision of the Hon ble Karnataka High Court in the matter of Commissioner vs. PNB Metlife Insurance Co. Ltd. [ 2015 (5) TMI 68 - KARNATAKA HIGH COURT] relied upon by the Larger Bench in the matter of South Indian Bank [ 2020 (6) TMI 278 - CESTAT BANGALORE - LB] , has been rendered much prior to the decision of Dilip Kumar [ 2018 (7) TMI 1826 - SUPREME COURT] therefore the said referral Bench was not in agreement with the interpretation of the provisions given by the Larger Bench in the matter of South Indian Bank [ 2020 (6) TMI 278 - CESTAT BANGALORE - LB] Since now the Larger Bench vide its interim order in the matter of Bank of America v. Principal Commr., Mumbai [ 2024 (4) TMI 1149 - CESTAT MUMBAI] has confirmed the decision of the Larger Bench in the matter of South Indian Bank [ 2020 (6) TMI 278 - CESTAT BANGALORE - LB] and held that the earlier decision of Larger Bench needs no reconsideration, therefore we have no hesitation in holding that the issues involved herein are no longer res integra and is covered by the decision of Larger Bench in South Indian Bank (supra). There is no information about any further appeal filed by revenue against the aforesaid decision of the Hon ble Kerala High Court therefore it attained finality. Since the decision of the Larger Bench of the Tribunal in South Indian Bank [ 2020 (6) TMI 278 - CESTAT BANGALORE - LB] has been upheld by two Hon ble High Courts coupled with the fact that the another Larger Bench of the Tribunal in the instant Appeals vide Interim order [ 2024 (4) TMI 1149 - CESTAT MUMBAI] has once again upheld the decision in the matter of South Indian Bank [ 2020 (6) TMI 278 - CESTAT BANGALORE - LB] , therefore it can safely be concluded that the insurance service received by the appellants from the DICGC which covers a substantial portion of Cenvat Credit in issue herein, qualifies as an input service under the provisions of Rule 2(l) of the Cenvat Credit Rules, 2004. Commission/brokerage paid to brokers for underwriting government securities or for making investments in securities to maintain mandatory statutory liquid ratio and all other remaining issues - There is no dispute that as per Reserve Bank of India s regulations, the banks are required to comply with the cash reserve ratio (CRR) and Statutory Liquid Ratio (SLR) and in order to maintain money supply according to the monetary policy of India from time to time. This activity cannot be separated from the banking and financial service by bank to its customers since it is a statutory requirement. Tribunal in the matter of South Indian Bank (supra) has held that any activity, without which the existence of the assessee as provider of taxable service is jeopardized, cannot but be an essential input service and is eligible for credit. The same view is also followed by this Tribunal in the matter of Bank of Baroda Ltd. [ 2021 (9) TMI 536 - CESTAT MUMBAI] . In our opinion such services, which are necessary to fulfill statutory obligation, would certainly be qualified as input services and in the light of the settled legal position, we are of the view that the appellant is entitled for the Cenvat credit of the service tax paid by them for such services including the payment made to the brokers. Appellant-Bank of America, National Association has also made a submission that they have paid the service tax amount alongwith applicable interest even before the issuance of show cause notice in relation to the inadvertent availment of Cenvat Credit for a brief period but still the penalty has been imposed on them. This fact has not been denied anywhere by revenue, therefore we are of the view that in terms of Section 73(3) of the Finance Act, 1994 no penalty is to be imposed when short paid Service Tax is deposited alongwith interest prior to the issuance of show-cause notice. Therefore as the payment of service tax along with applicable interest has already been deposited before the issuance of show cause notice the penalty of Rs.25.53 lakhs is not liable to be imposed on the appellant and is accordingly set aside.

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• Central Excise

• 2024 (11) TMI 470
  Valuation of Goods under Section 4 i.e Transaction Value or under Section 4A i.e MRP based value - HELD THAT:- It is not in dispute that the issue involved in these appeals is covered by the decision of this Court in the case of JAYANTI FOOD PROCESSING (P) LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, RAJASTHAN [ 2007 (8) TMI 3 - SUPREME COURT] , where SC prescribes the ruling for proper valuation in 14 different but identical appeals in a single judgement. The appeals are dismissed.

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• 2024 (11) TMI 469
  Recovery of amount paid by the petitioner to the Department as interest in excess of actual interest liability - validity of Rule 8 (3) of the Central Excise Rules, 2002 which is declared ultra vires - HELD THAT:- An amount received on the basis of provisions of law, which has been declared ultra vires has to be treated as in contravention of provision of Article 265 of the Constitution of India and the same has to be refunded. The Supreme Court in Mafatlal s case [ 1996 (12) TMI 50 - SUPREME COURT ] has held that a person is entitled to receive the amount once the Court holds a person entitled to it and as a corollary the Department would not be entitled to keep the same with them. Therefore, even if an application is not moved, the department would be obliged to refund the amount to concerned person from whom the excess amount has been received unlawfully after the provision has been declared ultra vires. This Court holds that the amount kept by the respondents as excess amount of Rs. 3,66,649/- was unjustified and the Department ought to have refunded it back. The application for refund moved by the petitioner has wrongly been treated as an application under Section 11B of the Act and should have been treated as a simple application for refund in terms of the provisions having been declared ultra vires, if the amount therefore has to be returned to the petitioner. The respondents are directed to refund the amount alongwith interest @ 6% per annum from the date the same was deposited erroneously - appeal disposed off.

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• 2024 (11) TMI 468
  Penalty on co-noticees, when the case of main appellant involved demand of duty interest and penalty has been settled under SVLDRS-2019 - HELD THAT:- As of now it is settled that once the duty demand case is settled under SVLDRS-2019, as per Scheme itself, there is a waiver of penalties on the main assessee against whom the demand was confirmed as well as on other co-noticees. Reliance placed in the case of Anil K Modani [ 2024 (1) TMI 444 - CESTAT MUMBAI ] where it was held that Even though the appellants herein could not, at the time of existence of the scheme have derived the benefits from the coverage by the scheme, the intent and purpose of the scheme being collection of the duty or some percentage thereof, and forgoing interest, fine and penalty, the disposal of the application of M/s JSW Ispat Steel Ltd renders the continuance of the penalty against the three appellants to be not in conformity with the relief scheme. Accordingly, they are eligible for erasure of the penalties against them. In the case of Subhash Panchal [ 2024 (5) TMI 1484 - CESTAT AHMEDABAD ] it was held that it is settled that once the main case of duty evasion is settled under SVLDRS 2019 the penalty on the Co-appellant shall not survive. 4. Accordingly, the penalty is set aside. In view of above judgments given by the two coordinate Division Benches, the penalties imposed on the co-noticees in a case where the main noticee against whom the demand is confirmed, the case is settled under SVLDRS then in respect of other co-noticees penalty will not sustain even if they have not filed a declaration under SVLDRS-2019 and decision on the issue of SVLDRS-2019 in the case of Four R Associates and others reported as [ 2023 (11) TMI 9 - CESTAT CHENNAI ] given by Single Member Bench whereas the aforesaid cited decisions are given by Division Bench. Therefore, Division Bench judgment will prevail over Single Member Bench. The penalties on the appellants are not sustainable. Hence the same are set aside - Appeals are allowed.

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• 2024 (11) TMI 467
  Recovery of CENVAT Credit under Section 11A of Central Excise Act, 1944 read with Rule 14 of Cenvat Credit Rules, 2004 - requirement to file application under Section 11B of Central Excise Act, 1944 for refund of debited cenvat credit - HELD THAT:- The appellant had paid appropriate central excise duty on goods cleared by them from 01.03.2005 to 12.05.2005 and after six months of the payment of the appropriate duty, officers of the Department of Revenue through oral direction on 21.01.2006 made the appellant debit Rs.5,48,144/- in their cenvat account. The said debit was not assessed to duty through any proceedings. Therefore, the appellant had taken suo moto credit of the said amount. In the present case, it is noted that the amount debited in cenvat account by the appellant at the instance of officers of Department of Revenue was not adjudicated upon, was not assessed to duty nor was appropriated. It is further noted that sub-rule (4) of Rule 3 of Cenvat Credit Rules, 2004 provides for manner of utilization of cenvat credit. As per the said provisions, cenvat credit can be utilized for payment of any duty of excise on final product, or on removal of partially processed goods, or on removal of capital goods as such, or for payment of service tax. The debit involved in the present appeal was not in respect of any of such requirements as provided under sub-rule (4) of Rule 3 of Cenvat Credit Rules. The present appellant was eligible to take suo moto cenvat credit of Rs.5,48,144/- and there was no need for them to file application for refund under Section 11B of Central Excise Act, 1944. The impugned order is set aside - appeal allowed.

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• 2024 (11) TMI 466
  100% EOU - demand of differential duty on the goods cleared into DTA - denial of benefit of N/N. 30/2004-CE dtd. 09.07.2004 and benefit of Sr. No. 3 and Sr. 4 of the N/N. 23/2003-CE dtd. 31.02.2003 - non-inclusion of SAD under Sr. No. 2 of N/N. 23/2003-CE for clearances of final products - Extended period of limitation - HELD THAT:- It is found that during the disputed period Appellant have imported certain quantities of raw materials viz. HDPE granules, PP granules, Nylon yarn etc. and also procured domestically. The finished goods were manufactured and cleared for export as well as in DTA. The present demand of differential duty pertains to clearance of finished goods namely HDPE/PP Ropes, Nylon Ropes, Polyester Rope in DTA by availing benefit of concessional rate of duty in terms of Notification No. 23/2003-CE dtd. 01.03.2003 from time to time. During the period from 01.07.2006 to 28.02.2007, Appellant cleared their final products viz. HDPE/PP Ropes (CTH 56074900), Nylon Ropes (CTH 56075040), Polyester Ropes (CTH No. 56075090) etc. in DTA by paying concessional central excise duty by availing benefit under Sr. No. 4 of Table to N/N. 23/2003-CE dtd. 31.03.2003 by considering the same as having been wholly exempted from central excise duty portion under Notification No. 30/2004-CE dtd. 09.07.2004 and wholly manufactured from the raw materials manufactured or produced in India. We find that Notification No. 30/2004-CE dtd. 09.07.2004 exempted goods falling under heading No. 5607 from whole of the duties of excise if such goods were manufactured by a unit other than EOU and if no credit of duty paid on the inputs used in the manufacture of the same was taken. The condition provided in clause (iii) of condition No. 4 of Notification No. 23/2003-CE dtd. 31.03.2003 as mentioned above stand fulfilled. Further it is an undisputed fact that the Appellant have fulfilled condition No. 4(ii) of Notification No. 23/2003-CE. However as regard the condition No. 4 (i) the Ld. Commissioner held that appellant have imported raw materials viz. Nylon yarn, Polyester yarn, lead wire, HDPE granules etc, without payment of customs duties and used the same along with other indigenously purchased raw materials for manufacture of final products - It is found that the Adjudicating authority has assumed that since the raw material was imported, the same would have been used in the manufacture of goods cleared into DTA. In this context it is found that neither show cause notice nor impugned order relied on any concrete evidence to established that the imported raw material was used in the manufacture of goods cleared into DTA. The submission of appellant agreed upon that no part of the goods manufactured from the imported raw material were cleared into DTA. Clearly, the denial of benefit under Sr. No. 4 of Notification No. 23/2003-CE is incorrect. It is found that all the condition of Sr. No. 4 are duly fulfilled by the appellant. In the present matter denial of benefit of Sr. No. 4 of Notification No. 23/2003-CE for the period prior to 06.07.2007, on the ground that goods procured from domestic suppliers who had availed the deemed export benefit in such supply, is also legally not sustainable - the appellant have complied with the Explanation II to Notification No. 23/2003-CE. Further we have also gone through the statement dtd. 21.06.2011 of Muneshwar Nath Modi, Director of Appellant wherein he stated that appellant did not receive any supply form 100% EOU or SEZ till 27.04.2007. Therefore demand for the period prior to 28.04.2007 will not sustain in this matter. The goods in question manufactured by the appellant did not find mention in any Schedule of the Dadra and Nagar Haveli VAT Regulation, 2005. Therefore, applicable VAT rate on goods manufactured by the appellant was 12.5% under Dadra and Nagar Haveli VAT Regulation, 2005. Therefore, the goods in question were not exempted from the payment of sales tax or VAT when sold to a customer in the said Union Territory. In this case it is not disputed that such goods when sold in DTA had not been exempted by the State Govt. by any Notification. Notifications issued under Rule 19(1) or Rule 19(2) is not an exemption from payment of duty even though it allows the goods to be removed without payment of duty. On the same analogy, Section 8(5)(a) of the Central Sales Tax Act subject to various conditions including production of C form. This does not means that the goods cleared without payment of sale tax by availing the concession under Section 8(5)(a) have become exempted from payment of sale tax. In fact, if the buyer who fails to produce the C Form, Central Sales Tax is payable on the goods sold to such buyer. In this matter the benefit cannot be denied to the entire quantity of goods cleared into DTA. The Ld. Commissioner in the impugned order has denied the benefit of Sr. No. 3 of the Notification No. 23/2003-CE for the entire qty. of goods cleared to DTA during the period 01.03.2007 to 06.07.2007. The documentary evidences produced by the appellant clearly show that there is very less quantity of the imported raw material as compared to the quantity of finished goods manufactured and exported - in the present matter the benefit of Sr. No. 3 of Notification No. 23/2003-CE was denied for the period 07.07.2007 to 29.02.2008 on the ground that the imported raw material has been used in the manufacture of export goods only and not in the manufacture of goods cleared to DTA. Further the goods procured from DTA on which DTA supplier has availed the deemed export benefit and goods procured from another EOU have also not been used in the manufacture of goods cleared to DTA. As regard the demand for the period 25.08.2009 to 31.05.2011 we find that after 20.08.2009 the department in the present matter accepted the fact that the appellant were maintaining records by which it can be easily established that finished goods manufactured were from imported raw material or from indigenous raw materials. Further it is also found that the benefit of notification No. 8/1997-CE (at present 23/2003-CE) also cannot be denied on the ground that export goods and DTA cleared goods were manufactured on common manufacturing lines and by using common inputs. In this context it is found that the said position has also been clarified by the Board through circular No. 85/2001 dtd. 21.12.2001. The impugned order demanded SAD for the period September 2009 to December 2009 with respect to Nylon rope cleared to DTA by the appellant on the ground that the Nylon rope was cleared without payment of Central Sale Tax. It is found that during the disputed period Appellant have claimed benefit of Sr. No. 2 of Notification No, 23/2003-CE. In this context it is already discussed, that the goods in question were not exempted from sales tax/VAT. Hence, demand of SAD in the present matter is not correct. The appellant have substantiated that separate records were maintained, it was ensured that domestic raw materials alone were consumed for manufacture of finished goods cleared into DTA . Therefore denial of benefit of Sr. No. 3 by the Ld. Commissioner in the present matter is also not correct - the appellant is entitled for benefit of exemption Notification No. 23/2003-CE. Time Limitation - HELD THAT:- The Show Cause Notice dated 2.8.2011 fails to prove that the appellant have acted with any malafide intent. Even the Show Cause Notice does not give any evidence to show that the appellant have acted with malafide intent. There is nothing on record to show the existence of fraud, collusion or suppression of materials facts or information. There is no iota of evidence on record to prove that the appellant have wrongly availed the exemption benefit under Sl. Nos. 3 and 4 of Notification No. 23/2003-CE specifically with intent to evade payment of duty. Therefore, as the ingredients of proviso to Section 11A(1) of the Central Excise Act, 1944 are not present in the present matter, hence the larger period of limitation is not invokable in the facts of the present matter - the issue involved in this matter is purely involves interpretation of statutory provisions. Hence, invocation of extended period of limitation is incorrect. It is well settled that where the issue involved is purely legal in nature, extended period of limitation cannot be invoked. The impugned order is set aside - appeal allowed.

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• Indian Laws

• 2024 (11) TMI 465
  Appointment of a sole arbitrator in terms of arbitration clause stipulated in the agreements to adjudicate upon the disputes between the petitioner and the respondents - sub-sections (6) and (12) of Section 11 of the Arbitration and Conciliation Act, 1996 - HELD THAT:- In Khardah Company Ltd. v. Raymon Co (India) Pvt. Ltd., [ 1962 (5) TMI 32 - SUPREME COURT] it was held that an assignment of a contract might result by transfer either of the rights or of the obligations thereunder. But there is a well-recognized distinction between these two classes of assignments. As a rule, obligations under a contract cannot be assigned except with the consent of the promisee, and when such consent is given, it is really a novation resulting in substitution of liabilities. On the other hand, the rights under a contract are assignable unless the contract is personal in its nature, or the rights are incapable of assignment either under the law or under an agreement between the parties. Since at the stage of consideration of a prayer under Section 11(6) of the 1996 Act the Court has to confine itself to the examination of the existence of an arbitration agreement (vide sub-section (6-A) of Section 11), it would not be appropriate to delve deep into the issue as it could well be considered by the arbitrator on the basis of evidence led by the parties. More so, when existence of arbitration agreement in the license agreement and share subscription agreement is not in dispute. It is deemed appropriate to refer the matter to the Delhi International Arbitration Centre for appointment of a sole arbitrator to adjudicate upon the dispute between the parties.

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• 2024 (11) TMI 464
  Rent or occupation charges and CAM charges - HELD THAT:- The learned court below be suitably approached by the parties so that hearing of both the suits are expedited. Although the respondent shall make payment of occupation and other charges at the above rate in modification of the impugned judgement and order, it is absolutely clear that the said order would not stand in the way of the appellant prosecuting their suit for eviction of the respondent and moving the court for any interim order in aid of it. Appeal disposed off.

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