TMI Tax Updates - e-Newsletter
November 17, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Service Tax
Indian Laws
Highlights / Catch Notes
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GST:
Refund of the CGST and 50% of the IGST paid - reducing benefit of exemption / incentive scheme from central excise era - Scope of the amendments - Alteration / Amendment in the writ petition after the Judgement was reserved - The proposed amendments if permitted would in fact change the very nature and character of the Writ Petition and introduce an entirely different Cause of action, which is not permissible. - Petition dismissed - HC
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Income Tax:
Unexplained cash - determination of income - Cash found from the residence and locker of the assessee during the course of search conducted by the CBI - Not a single transaction is through banking channel and everyone has given cash only to the assessee either for her treatment or for safe custody which is unbelievable. - Additions confirmed - AT
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Income Tax:
Business income v/s undisclosed income - If the assessee had shown income u/s.44AD which is presumptive basis for taxation and looking to the nature of bank account entries and regular cash deposits and withdrawals this shows that assessee was doing some kind of business activities and preponderance of probabilities for such activities is definitely goes in favour of the assessee. - AO directed to accept the return of income as business income. - AT
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Income Tax:
Revision u/s 263 - exemption u/s 54B - Investment in / purchase of agriculture land in the name of son - AO following the decision of HC allowed the deduction - The revenue has not brought to our notice any contrary judgment by the Hon'ble jurisdictional High Court or Hon'ble Supreme Court as a binding precedence. Therefore, under these facts, it cannot be construed that the order passed by the assessing officer is prejudicial to the interest of the revenue. - AT
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Income Tax:
Nature of loss - capital loss or trading loss - Material (silver) loan taken by assessee - At time of return of Material, price has gone high and resulted in loss - n the present case the assessee was able to carry on its business activities with the assistance of the material loan without which it was not possible for it to carry on the business. - the assessee is eligible for deduction under the provisions of section 37/28 of the Act as the case may be. - AT
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Income Tax:
Suppression of commission income - even when I find the elaborate exercise undertaken by the Ld. AO to be quite appealing, it is not appropriate to adopt the data belonging to some other assessee while computing the addition in the hands of the assessee. - AT
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Income Tax:
TP Adjustment - Working capital adjustment - Making a working capital adjustment is an attempt to adjust for the differences in time value of money between the tested party and potential comparables, with an assumption that the difference should be reflected in profits - we direct the TPO/A.O with similar directions to grant Working Capital Adjustment. - AT
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Indian Laws:
Dishonor of Cheque - vicarious liability - Complaint against the CEO (Petitioner) - the Petitioner had resigned on 15.06.2016 and was no longer responsible for the conduct of business of Accused No. 1 Company, on the date of the commission of the alleged offence, she cannot be arrayed as an Accused in the proceedings emanating out of the complaint referred to above. Form No. DIR-11 clearly evidences the resignation of the Petitioner on 15.06.2016 and the cheque in question is admittedly issued on 28.10.2016, which is post her resignation. It cannot therefore be said that the Petitioner was in-charge of and responsible for the conduct of day to day business/affairs of the Company, as contemplated in Section 141 of the NIA for being proceeded against - HC
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Service Tax:
Classification of services - Maintenance and Repair service or otherwise - no repair or maintenance service has been rendered by the assessee and whatever repair service has been undertaken is clearly incidental to the main service of hiring of workover rigs. The said service could not be taxed under the category of ‘Maintenance, Management and Repair service'. - AT
Articles
Case Laws:
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GST
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2020 (11) TMI 475
Refund of the CGST and 50% of the IGST paid - reducing benefit of exemption / incentive scheme from central excise era - Scope of the amendments - Alteration / Amendment in the writ petition - vires of Section 174(2)(c) of the Central Goods and Services Tax Act, 2017 and Notification No.21/2017-C.E., dated 1807-2017 - direction to Respondents to fix a special rate of refund eligible to the Petitioner to entitle them to refund equivalent to that available under the erstwhile regime which should also be granted under the budgetary support scheme - HELD THAT:- In the matter at hand, the Writ Petition was finally heard on 03-09-2019 and Judgment reserved. In the interim, the Petitioner filed an application being I.A. No.02 of 2019, wherein it was averred that the Hon ble Supreme Court took up the entire batch of appeals filed by the Respondent against the Judgments passed by the Hon ble High Court of Gujarat, Jammu and Kashmir, Guwahati and Sikkim on the issue of curtailment of central excise duty exemption, on 04-09-2019 in the Miscellaneous List. The appeal filed by the Respondent against the Judgment of this High Court dated 21-11-2017 was heard on 05-09-2019 and Judgment reserved. Subsequent thereto, the amendment application being I.A. No.03 of 2020 was filed on 06-06-2020, seeking to incorporate amendments. - By the proposed amendments the Petitioner seeks to challenge the vires of Section 174(2)(c) of the Central Goods and Services Tax Act, 2017 and Notification No.21/2017-C.E., dated 1807-2017, on the ground that it takes away the vested rights of the Petitioner by reducing the exemption/benefits to the Petitioner. The prayers in the Writ Petition are confined to enabling the Petitioner to claim full refund of the CGST and 50% of the IGST paid through the electronic cash ledger. It cannot be said that the Petitioner was unaware of the provision of the statute the vires of which they now seek to assail, nor was it inserted at some point later in time to the filing of the Writ Petition. The question of the Petitioner s inability to raise the matter in spite of due diligence, before the matter was heard or was taken up for hearing, therefore, does not arise. In view of the questions involved in the instant Writ Petition it cannot be said that the amendments are necessary for determining the real question in controversy between the parties considering the prayers of the Petitioner referred above. The proposed amendments if permitted would in fact change the very nature and character of the Writ Petition and introduce an entirely different Cause of action, which is not permissible. The Petition stands rejected and dismissed.
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Income Tax
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2020 (11) TMI 474
Unexplained cash - determination of income - Cash found from the residence and locker of the assessee during the course of search conducted by the CBI - explanation of the assessee that the amount so found at the locker and the residence was given to her by her mother, mother-in-law, son, daughter and son-in-law, father-in-law of the daughter, sister and brother-in-law, etc., was not accepted by the AO certain amounts received as cash gift on silver wedding anniversary, amount received at the engagement and marriage of son, etc. - CIT-A deleted part addition - HELD THAT:- We find some force in the argument of the ld. Counsel that out of the total addition of ₹ 21,10,000/-, an amount to the extent of ₹ 5,20,000/- should be accepted as explained. Although the Tribunal in the case of husband of the assessee has held that the amount of ₹ 4,60,000/- belonged to the wife of the assessee while deleting the addition in the hands of Shri Tribhuvan Singh, husband of the assessee, however, in absence of any appeal filed by the Revenue against the order of the CIT(A) deleting the amount of ₹ 5,20,000/-, we find force in the argument of the ld. Counsel that the addition to the tune of ₹ 5,20,000/- stands deleted and, therefore, no adverse view should be taken. Balance ₹ 15,90,000/- is concerned, we do not find any force in the argument advanced by the ld. Counsel for the assessee. A perusal of the explanation given by the assessee before the AO while explaining the source of cash found shows that the assessee has tried to explain the source being amount received from different family members, close relations and amount received at the time of silver wedding anniversary and amount received at the time of engagement and marriage of her son. The assessee neither at the level of the AO nor before the CIT(A) was able to produce the so-called jewelers to whom the mother-in-law and mother of the assessee has sold jewellery - Find force in the argument of the ld. DR that if some cash portions were real gift, at least some document like gift deed or gift letter or some scribbling to that effect would have been found in the house or in possession of the assessee or her husband - nothing of that sort was found. The so-called long list containing names of different persons who had given gifts at the time of engagement or marriage of the son or at the time of silver wedding anniversary cannot be believed in absence of any iota of evidence found at the time of search and, therefore, we concur with the finding of the CIT(A) on this issue that this is nothing, but, an afterthought. Not a single transaction is through banking channel and everyone has given cash only to the assessee either for her treatment or for safe custody which is unbelievable. No infirmity in the order of the CIT(A) sustaining the addition of ₹ 15,90,000/-. Thus, in sum and substance, the assessee gets relief of ₹ 5,20,000/- and the balance amount of ₹ 15,90,000/- sustained by the CIT(A) is confirmed. The grounds raised by the assessee are accordingly partly allowed.
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2020 (11) TMI 473
Penalty levied u/s 271AAB - disclosure made during the search u/s 132(4) - assessee was required to pay penalty at the rate of 10% of undisclosed income - HELD THAT:- Consistent with the view taken by us in the case of Smt. Rashmi Jalan [ 2020 (10) TMI 353 - ITAT KOLKATA] we hold that the show cause notice issued u/s 274 r.w.s. 271 of the Act proposing levy of penalty u/s 271AAB of the Act is defective as it has not specified the charge and consequently the penalties in both the cases levied are bad in law. Hence the penalty levied in both the cases is hereby quashed. - Decided in favour of assessee.
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2020 (11) TMI 472
Business income v/s undisclosed income - AO held that the assessee could not substantiate her business activities nor could explain the cash deposits in the bank account - HELD THAT:- From a bare perusal of the bank statement which was basis for the addition, it is seen that assessee has received cash from various vendors/ purchasers outside the Delhi and the narration given in the account mentions by cash- Jhansi- Shipri Bazar , by cash cashupl-Solapur , by cash cashupl- Jodhpur , by cash Ajmer , and likewise wherein cash amount has been deposited in her bank account on various dates. One very glaring feature from the perusal of the bank account is that the assessee has been paying VAT and such entries are appearing all throughout the year on various dates. Payment of VAT does indicate purchase and sale of some goods, items or services. All these factors thus, go to show that some kind of business activity was carried out by the assessee. If the assessee had shown income u/s.44AD which is presumptive basis for taxation and looking to the nature of bank account entries and regular cash deposits and withdrawals this shows that assessee was doing some kind of business activities and preponderance of probabilities for such activities is definitely goes in favour of the assessee. Assessing Officer has tacitly accepted the business income by accepting the return of income from the same deposits - we direct the Assessing Officer to accept the return of income as business income.
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2020 (11) TMI 471
TP Adjustment - comparable selection - HELD THAT:- Exclusion of companies Non comparable on the basis of turnover filter and functionally dissimilar with that of assessee engaged in developing software solutions for its customers in USA. Deduction u/s 10A - CIT(A) directing deduction of Satellite link charges from Total turnover also while computing deduction - HELD THAT:- HELD THAT:- The Hon'ble Supreme Court has settled this issue in the case of CIT vs. HCL Technologies Ltd [ 2018 (5) TMI 357 - SUPREME COURT] when the object of the formula is to arrive at the profit from export business, expenses excluded from export turnover have to be excluded from total turnover also. Otherwise, any other interpretation makes the formula unworkable and absurd. Hence, we are satisfied that such deduction shall be allowed from the total turnover in same proportion as well.On the issue of expenses on technical services provided outside, we have to follow the same principle of interpretation as followed in the case of expenses of freight, telecommunication etc., otherwise the formula of calculation would be futile.
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2020 (11) TMI 470
Revision u/s 263 - exemption u/s 54B - Investment in / purchase of agriculture land in the name of son - as per CIT AO passing of the order without making requisite enquiry/investigation in respect of deduction u/s 54B - HELD THAT:- It is settled position of law that the provisions of section 263 of the Act can be invoked when twin conditions i.e. the assessment order is erroneous and prejudicial to the interest of Revenue are satisfied. In the present case under the identical facts in BALMUKUND MEENA [ 2017 (2) TMI 1103 - MADHYA PRADESH HIGH COURT] has ruled in favour of the assessee regarding availability of deduction u/s 54B of the Act where the investment in new asset is made in the name of son of the assessee. The revenue has not brought to our notice any contrary judgment by the Hon'ble jurisdictional High Court or Hon'ble Supreme Court as a binding precedence. Therefore, under these facts, it cannot be construed that the order passed by the assessing officer is prejudicial to the interest of the revenue. As the assessment order is in accordance with the ratio laid down by the Hon'ble jurisdictional High Court, thus, we are of the considered view that in the light of the judgment of the Hon'ble jurisdictional High Court, Ld. Pr. CIT was not justified in invoking the provision of section 263 - Decided in favour of assessee.
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2020 (11) TMI 469
Eligibility to claim deduction u/s 80IA - disallowance of deduction as assessee is a contractor not a developer - HELD THAT:- As the deduction u/s 80IA of the Act for the relevant projects i.e. Thural and Dehra has already been allowed in the earlier years [ 2020 (4) TMI 520 - ITAT CHANDIGARH] and this year being a subsequent year, the findings arrived for the same project in earlier years will mutatis-mutandis apply to the subsequent assessment year also with the condition that the total number of years for claiming deduction will be subject to the other conditions relating to the time period of claiming deduction and percentage of the deduction as provided u/s 80IA of the Act. Appeal of the assessee stands allowed.
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2020 (11) TMI 468
Nature of loss - capital loss or trading loss - Material (silver) loan taken by assessee - At time of return of Material, price has gone high and resulted in loss - HELD THAT:- In the present case the loan was not obtained by the assessee under the normal prevailing market practices. Generally, the loans are obtained in cash which are subject to interest and repayable over a certain period of time as agreed between the parties. In the case on hand the assessee has taken a material loan in the form of silver with the understanding that it has to return the silver only to the parties concerned at the end of the agreement. The agreement in question came to an end in the year under consideration. The loan liabilities whether material loan/cash loan was utilized for the purpose of the business activities of the assessee. In the present case the assessee was able to carry on its business activities with the assistance of the material loan without which it was not possible for it to carry on the business. Therefore in our considered view such business loss has been incurred in the course of the business and therefore the assessee is eligible for deduction under the provisions of section 37/28 of the Act as the case may be. Transaction as a colourable device to reduce its tax liability by making the book entry of the impugned loss - Regarding the physical delivery of the material loan to the parties, we note that the assessee before us has filed insurance receipts which is placed on record justifying that the assessee has taken the insurance for the transportation of the silver. Indeed the quantity of the silver was huge and therefore the assessee must have utilized services of some transporters. Items of silver being precious items, the argument of the assessee cannot be neglected in totality. However, there are other clinching evidences supporting the material loan transaction including the agreement, payment of interest which cannot be ignored. Even for the sake of assuming, the material loan has not been returned by the assessee on the termination of the agreement, but the assessee has revalued its current liability at the market rate and any loss thereon as a result of revaluation has to be allowed to the assessee being arising in the course of the business activities. All the transactions having impact on the reduction of tax liability cannot be regarded as colourable device. As such Revenue needs to see the transaction in its entirety as decided in BANYAN AND BERRY [ 1995 (12) TMI 12 - GUJARAT HIGH COURT] . Also relying on MCDOWELL COMPANY LTD. AND OTHERS [ 1976 (10) TMI 103 - SUPREME COURT] we hold that the impugned transaction cannot be regarded as colourable device merely on the reasoning that there is reduction in the tax liability in the hands of the assessee. - Decided against revenue.
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2020 (11) TMI 467
Unexplained Capital - CIT(A) rejected above source of income as it will not increase cash flow to the assessee - HELD THAT:- We do not agree with Ld CIT(A) but it is one of the source that can increase cash balance of the assessee during this assessment year. We noticed that Ld CIT(A) has sustained addition to the extent of ₹ 1,12,500. Since there is evidence that assessee has encashed the deposit along with interest and there is a established source for the assessee, accordingly we deem it fit to delete the addition sustained by the Ld CIT(A). Accordingly the ground No. 1 raised by the assessee is allowed. Reasonable profit - Additions are relating to business income of proprietary concerns run by the assessee - HELD THAT:- After disallowance made by AO, the total profit determined by AO in travel business is ₹ 3,01,011/ which is equal to 27.45%. In our view, this is too high. We doubt that any travel business can fetch real profit at that level. We observed that even presumption tax (under section 44AD) proposes only 8% as reasonable profit. It clearly indicates that assessing officer has made this assessment in overzealous. The various courts have held that only real and actual income alone can be taxed and unrealistic or highly presumptive income cannot be proper to tax - reasonable profit expected in this line of business could be 8 to 10%. Since assessee has already declared 7.79% as its income, we direct assessing officer to estimate the total income at 10%. Therefore, we direct assessing officer to sustain the profit @ 2.21% of travel business. Addition in respect of sundry creditors and ad hoc disallowance of expenditure - CIT(A) already directed the assessing officer to consider the real and actual expenditure and redo the actual profit after allowing the real expenditure incurred by the assessee for the purpose of business. After verifying the profit and loss account, the expenses claimed by the assessee seems to be reasonable and we do not see any reason to disturb the profit declared by the assessee. Even the sundry creditors was disallowed only due to non availability of information from assessee and otherwise, no business will be carried out without any creditors, as far as in this case, assessee submitted before Ld CIT(A) that he has received the booking advance, which is accounted as creditors. Accordingly, We direct assessing officer to delete addition in respect of sundry creditors and ad hoc disallowance of expenditure. In short we direct assessing officer to estimate 2.21% of travel business only. Marriage gift received in the marriage of the assessee - HELD THAT:- After considering the affidavit, in our view, in the Indian marriages it is common in marriages to receive and give Shagun or marriage gifts. Therefore we do not see any reason to retain this addition. Accordingly we direct assessing officer to delete this addition. Marriage expense - Assessee accepted the estimation of income and submitted that assessee s parents has incurred the above said expenditure. However they ve not submitted any new submission before us. However they submitted that assessee s mother has withdrawn ₹ 50,000 from postal account. In our view, It is common in the Indian marriages to receive gifts from parents and relatives. We do not see any reason to retain this addition. Accordingly we direct assessing officer to delete this addition. Valuation difference determined by the assessing officer after obtaining valuation report from DVO in the year 2006 - HELD THAT:- AO himself confirms that the construction was completed in two years and in this AY, AO makes the addition based on DVO report and whole addition was made only in this AY. He submitted that it amounts to double addition. After considering the Ld AR submission, we are inclined to accept and AO cannot make the difference of valuation from the valuation report and actual cost declared by assessee in his statement of affairs since the construction was carried in two years. Accordingly, the ground raised by the assessee is accordingly allowed.
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2020 (11) TMI 466
Income accrued in India - royalty taxable under section 9 (l)(vi) of the Income Tax Act, 1961 read with article 12(3) of India Switzerland Double Taxation Avoidance Agreement - Indo Swiss tax treaty - HELD THAT:- As decided in DUN BRADSTREET ESPANA, IN RE [ 2004 (10) TMI 88 - AUTHORITY FOR ADVANCE RULINGS] Article 12(3) of Indo Swiss DTAA, that we are currently dealing with, is verbatim the same as Article 13(3) of India Spain DTAA that Hon'ble Authority of Advance Ruling was dealing with. The conclusions so arrived at by the Authority for Advance Ruling, which now stand approved by Hon'ble jurisdictional High Court [ 2011 (7) TMI 957 - BOMBAY HIGH COURT] are equally applicable in the context of Indo Swiss DTAA as well. It is only elementary that when the assessee is not taxable under the provisions of the respective DTAA, there is no occasion to examine the taxability under the Income Tax Act 1961, since the provisions of the Income Tax Act 1961 apply only when these provisions are more favourable to the assessee vis-a-vis the provisions of the applicable DTAA. When the above position was brought to the notice of the learned Departmental Representative, he simply placed his reliance on the stand of the authorities below. He could not, however, neither point out any legally distinguishable features between the case before Hon'ble jurisdictional High Court vis-a-vis this case, nor any other reasons for not following the binding precedent from Hon'ble jurisdictional High Court. Once our Hon'ble jurisdictional High Court has expressed a view, it cannot be open for us to be swayed by a contrary view expressed by any other Hon'ble High Court. No decision from Hon'ble jurisdictional High Court, contrary to the above decision of Hon'ble jurisdictional High Court, was brought to our notice. - we delete the impugned addition as royalty in the hands of the assessee. - Decided in favour of assessee.
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2020 (11) TMI 465
Suppression of commission income - net addition made granting deduction for license fees paid and shortages - According to the assessee the data with respect to the computation of suppress commission does not belong to the assessee even though they had made elaborate submissions and interacted before the Ld.AO as well as before the Ld.CIT(A) to defend the case - HELD THAT:- We wonder as to why this discrepancy was not pointed out before the Ld. AO or even before the Ld. CIT (A) by the assessee or by her Ld.AR. It is quite possible that there may have been a hotch potch in adopting the correct data by the Ld.AO when information is obtained with respect to various dealers from different source. Though the assessee had shown negligence during the course of the respective proceedings before the Ld. Revenue Authorities and even when I find the elaborate exercise undertaken by the Ld. AO to be quite appealing, it is not appropriate to adopt the data belonging to some other assessee while computing the addition in the hands of the assessee. Therefore hereby remit back the matter to the file of the Ld. AO for de novo consideration - advise the assessee to be vigil during the course of the proceedings before the Ld. Revenue Authorities in order to avoid such hotch potch.
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2020 (11) TMI 464
TP Adjustment - comparable selection - HELD THAT:- Comparable Persistent Systems Limited was excluded based on the RPT filter and the L T InfoTech Limited was considered for exclusion because of trading in software and owned significant intangible assets, and further the Infosys Limited was excluded considering the brand presence and turnover criteria. We follow the judicial precedence A.Y. 2015-16 and direct the TPO to exclude L T InfoTech Limited, Persistent Systems Limited and Infosys Limited from the final list of comparables for determination of ALP. Persistently loss making unit cannot be said as comparable - Disputed issue in respect of losses of continuous three years has to be verified/ tested by the Assessing Officer. Accordingly we remit this matter to the file of TPO/A.O for examination. Working capital adjustment - The opposite applies to higher levels of accounts payable. By carrying high accounts payable, a company is benefitting from a relatively long period to pay its suppliers. It would need to borrow less money to fund its purchases and/or benefit from an increase in the amount of cash surplus available to invest. In a competitive environment, the cost of goods sold should include an element to reflect these payment terms and compensate for the timing effect. A company with high levels of inventory would similarly need to either borrow to fund the purchase, or reduce the amount of cash surplus which it is able to invest. Note that the interest rate July 2010 Page 6 might be affected by the funding structure (e.g. where the purchase of inventory is partly funded by equity) or by the risk associated with holding specific types of inventory) Making a working capital adjustment is an attempt to adjust for the differences in time value of money between the tested party and potential comparables, with an assumption that the difference should be reflected in profits - we direct the TPO/A.O with similar directions to grant Working Capital Adjustment. Disallowance u/s 14A r.w.r. 8D - HELD THAT:- Admittedly, there is no exempt income earned by assessee during the year, as has been noted by Ld.AO in impugned order. Under such circumstances, we direct Ld.AO to delete addition made under section 14 a read with rule 8D for year under consideration. Accordingly this ground raised by assessee stands allowed. Disallowance of deduction under Section 80G - HELD THAT:- Where these two exceptions are provided in Section 80G of the Act, it can be inferred that the other contributions made u/s. 135(5) of the Companies Act are also eligible for deduction u/s. 80G of Income Tax Act subject to assessee satisfying the requisite conditions prescribed for deduction u/s.80G of the Act. In the present case the A.O. has not dealt on these aspects, prima facie, considered the contributions as not voluntary but a legal obligation and has accepted the genuineness of the contributions. We are of the opinion, that the matter has to be considered for examination and verification of facts subject to the assessee satisfying the requirements of claim u/s.80G of the Act. Accordingly, we restore the entire disputed issues to the file of A.O. for fresh examination and verification as discussed above and the assessee should be provided adequate opportunity of hearing.
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Customs
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2020 (11) TMI 463
Imposition of Penalty u/s 112A of the Customs Act, 1962 - providing of two different invoices for the imported goods - allegation of abetting the importer in evasion of customs duty by causing misdeclaration - Difference of Opinion - HELD THAT:- There are contrary decision on this issue. Therefore, it would be in the interest of justice to refer the matter to Larger Bench of this Tribunal to decide the issue, which is as follows :- (i) Whether penalty under Section 112(a) of the Customs Act, 1962 can be imposed during the period 2012-13 to an exporter who has mis-declared the goods located in Dubai, UAE or not? The Registry is directed to place the matter before the Hon ble President with a request to constitute a Larger Bench to decide the above issue.
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Service Tax
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2020 (11) TMI 461
Classification of services - Maintenance and Repair service or otherwise - Charter hire of workover rigs - Extended period of limitation - HELD THAT:- The scope of work has been stated in Annexure III appearing on page No. 85 of the appeal book, which inter alia states that, contractor shall be required to start work over, and if required, complete the development / exploratory wells for ONGC by deploying its mobile work over unit at such locations within the operating area as may be identified by ONGC, and to such depth as are designated by ONGC to exploit natural hydrocarbon in the form of oil gas . Thereafter, in subsequent paragraph, it has been stated that other specified jobs shall also be carried out during the said work over operations, which are not limited to what has been expressly stated therein. The learned Commissioner, in page No. 7 8 of the impugned order, after having noted that aforesaid scope of work, has hurriedly concluded that the work is nothing but maintenance and repair of workover oil wells. No basis whatsoever has been assigned. He completely lost sight that the workover job has been desired by ONGC to complete the development and exploratory wells by deploying the mobile workover units at locations identified by ONGC to exploit natural hydrocarbons. On perusal of the above scope of work, we are not inclined to accept the conclusion reached by the learned Commissioner to hold that the service rendered by the assessee is for repair or maintenance. We agree with the submissions made by the learned Advocate that no repair or maintenance service has been rendered by the assessee and whatever repair service has been undertaken is clearly incidental to the main service of hiring of workover rigs. The said service could not be taxed under the category of Maintenance, Management and Repair service'. Extended Period of Limitation - HELD THAT:- The learned Commissioner has not assigned any positive evidence to show that Service Tax has been deliberately not paid by the assessee. The only finding that has been made by the learned Commissioner is that the assessee has not intimated the fact of rendering the said service, which in view of the department is taxable under Maintenance, Management and Repair service . On the basis of said findings, the extended period of limitation has been invoked, which in our view is also not proper and would not meet the test of law, more so in view of the fact that issue pertained to interpretation of taxability - the demand confirmed by invoking the extended period of limitation fails. The impugned demand of Service Tax and interest are set aside and the appeal filed by assessee is allowed.
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Indian Laws
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2020 (11) TMI 462
Dishonor of Cheque - vicarious liability - Complaint against the CEO / erstwhile Director (Petitioner), even though they were not signatory of the cheque - Personal assurance and knowledge - legal notice of demand was sent by the complainant but despite the receipt of the notice the Accused persons failed to remit the alleged outstanding amount - summon of Accused including the Petitioner - Sections 138/141/142 of the NIA - Whether the complaint and the summons can be quashed qua the Petitioner in the absence of the complainant? - HELD THAT:- The said issue is settled and the law on this is no longer res integra. A similar situation had arisen in the case of Lafarge Aggregates Concrete India P. Ltd. vs. Sukarsh Azad Ors. [ 2013 (9) TMI 1188 - SUPREME COURT ] decided by the Supreme Court on 10.09.2013. In the said case the Respondents were the Directors in the Company at whose instance the High Court had quashed the complaint lodged by the Appellant under Section 138 of NIA. The High Court allowed the petition filed under Section 482 Cr.P.C. and quashed the proceedings, but the order was ex-parte. In case the complainant chooses not to appear and contest the petition, despite being served, Court can proceed ex-parte and hear the Accused in a petition filed under Section 482 Cr.P.C. for quashing - Record indicates that Respondent has been duly served, and has due intimation of the listing of the petition, but has chosen not to contest the petition, despite ample opportunities to defend. In the circumstances the Respondent is proceeded ex-parte and the petition is heard on merits. There is force in the contention of counsel for the Petitioner that since the Petitioner had resigned on 15.06.2016 and was no longer responsible for the conduct of business of Accused No. 1 Company, on the date of the commission of the alleged offence, she cannot be arrayed as an Accused in the proceedings emanating out of the complaint referred to above. Form No. DIR-11 clearly evidences the resignation of the Petitioner on 15.06.2016 and the cheque in question is admittedly issued on 28.10.2016, which is post her resignation. It cannot therefore be said that the Petitioner was in-charge of and responsible for the conduct of day to day business/affairs of the Company, as contemplated in Section 141 of the NIA for being proceeded against - There is also merit in the contention of the Petitioner that the provisions of Section 141 require that there must be specific and necessary averments in the complaint regarding the nature of transactions between the parties and a complaint cannot be maintained on mere sketchy averments/allegations. Sections 138 141 of the NIA were introduced in the Act to encourage the wider use of a cheque and to enhance the credibility of the instrument. The intent of the Legislature in carrying out the Amendment was to encourage people to have faith in the efficacy of banking transactions and use of cheques as negotiable instruments. To balance, a penal provision was enacted to ensure that the drawer of a cheque does not misuse the provisions and honours his commitment. The issue herein concerns the criminal liability arising out of dishonour of a cheque. Normally the criminal liability is not vicarious i.e. one cannot be held criminally liable for the act of another. Section 141 of NIA is however an exception where the offence under Section 138 is committed by a Company but the liability extends to the officers of the Company, subject to fulfillment of the conditions under Section 141, as a caveat - Through several judicial pronouncements it has been enunciated that it must be clearly averred in the complaint made against any person that he/she, at the time the offence was committed, was in-charge of and responsible for the conduct of the business of the Company and thus liable. Perusal of the complaint shows that the allegation of issuing the cheque is against accused No.1 from the account maintained by accused No. 1 and allegations of signing are against accused No. 2, as authorized signatory of accused No.1. The allegation against accused No. 5, who is the Petitioner herein, is that an assurance was given to the complainant that the cheque shall be honoured on presentation. Petitioner is stated to be the CEO of accused No.1 Company and the wife of accused No.2. It is averred that the cheque was issued with her consent and knowledge and she attended meetings with the official of the complainant and responsible for the business of the Company. What is significant is that in the entire complaint there is not even a whisper of the alleged transaction, pursuant to which the cheque was allegedly issued in favour of the complainant. All that is mentioned is towards the discharge of part of legal debts/liability cheque was issued. There are no specific allegations or averments against the Petitioner regarding her alleged role either in the transaction or in the conduct of business of the Company. It is settled that mere designation of an officer in a Company is not enough to make the officer vicariously liable. The absence of an averment as to the transaction / specific role of the Petitioner, in my opinion, is fatal to the case of the complainant. It is relevant to note at this stage that it is not the case of the complainant that even after resigning as a CEO of accused No. 1 the Petitioner continued to be associated with the Company or was occupying any such position which made her in-charge and responsible for the conduct of its business. Vicarious liability has been imputed to the Petitioner solely on account of her being the CEO of accused No. 1. It is also not the case of the complainant that the cheque in question was dishonoured or the notice of demand was not complied with due to connivance of or with the consent of the Petitioner. The complainant has also not averred that even after resigning as CEO the Petitioner was in a position to have given instructions to the officers of the Company who were in-charge of the affairs of the Company, to ensure that the cheque when presented for encashment should be honoured. Therefore, the Petitioner is not even covered under Sub-Section (2) of Section 141 of the NIA. The summon order along with the complaint filed under Sections 138/141/142 of the NIA by the Respondent against the Petitioner pending before the Trial Court are quashed - Petition allowed.
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