TMI Tax Updates - e-Newsletter
November 17, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Cancellation of petitioner’s GST registration - non-filing of returns for a continuous period of six months - The decision to cancel the GST registration with retrospective date cannot be sustained. - it is considered apposite to direct that the cancellation of the petitioner’s GST shall take effect from 28.11.2019 and not from 01.07.2017. - HC
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GST:
Cancellation of petitioner’s GST registration - Once the petitioner’s GST registration was restored – which was cancelled on an allegation that it was obtained by fraud, misstatement or suppression of facts – it is not open for the respondent to again cancel the petitioner’s GST registration for the same reason unless it is premised on the ground that had occurred after the petitioner’s GST registration has been cancelled on 30.09.2021. - HC
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Income Tax:
Validity of the reassessment proceedings - Nature of receipt as arbitration award - The Tribunal interestingly holds that it is judicially settled that the amount should be considered as special income and it must be considered in its wider sense. The Tribunal failed to appreciate that a receipt on capital account cannot be assessed as income unless it was specifically brought within the scope of the definition of the term “income” in Section 2(24) - HC
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Income Tax:
Reassessment notices issued to a non-existing entity - Amalgamation - The fact that PAN was not deactivated would not help the Revenue because there could be cases relating to various years when the company was in existence and it is possible those PAN numbers are picked up for scrutiny or for issuance of refund. That in our view, will not be a sanction for Department to issue notices to a non-existing entity, particularly, when they were aware that the entity was not in existence. - HC
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Income Tax:
Assessment u/s 153A r.w.s. u/s 143(3) - Search and seizure proceedings - admissibility of primary and secondary evidence - Reliance on the statement of employees - In view of the violation of the principles of natural justice and also due to the non compliance of Section 65(B) of the Indian Evidence Act, this Court feels that it is a fit case for setting aside the assessment orders. - HC
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Income Tax:
Reassessment proceedings against dead person - Though the present case was initiated subsequent to the death of the assessee, it was initiated in the name of the dead person and the assessment order was also passed in the name of a dead person, though his legal representative had participated in the proceedings. - Department is supposed to have substituted the legal representative in the place of a dead person. - Order quashed - HC
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Income Tax:
Reopening of assessment u/s 147 - addition u/s 50C - assessee has sold two immovable properties in equal co-ownership with one person - nature of land sold - AO found that the village Morti/Morta is only 2.5-03 kilometers from the outer limit of the Ghaziabad Municipal Corporation. - Therefore, we do not give much importance to the contents of the certificate (issued by GNN) which is far from truth. - AT
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Income Tax:
TDS u/s 194C - payments made to Eco Development Committee (EDCs) and Van Suraksha and Prabandhan Samiti (VFPMC) - The work was executed through participation of people and government as per notification framed by the State Government as per National Forest Policy (1988) of the Central Government. - The payments made to these Van Samitis are not contract payments and provisions of section 194C thus do not apply. - AT
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Income Tax:
Deduction u/s 80IA - Fresh claim in the return of income filed pursuant to notice u/s 153A - Once the assessment proceedings have attained finality, then the additions can only be made in the hands of the assessee based on the incriminating material unearthed during the search. The Assessing Officer has no reason to entertain any fresh claim, which was not raised in the original return of income. - AT
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Income Tax:
Profits on sale of Flats - disallowance in respect of additional cost of construction of Tower - We see no infirmity in the cost of construction claimed by the assessee for the year under consideration at Rs. 3438/- per sq.ft. which is below the average rate communicated by GPL and the final rate agreed with GPL. - AT
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Customs:
Fixation of Tariff Value of Edible Oils, Brass Scrap, Areca Nut, Gold and Silver - Notification
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Customs:
Seeking provisional release of the goods - Ethanol Alcohol - The classification has to be seen at the time of import by the Petitioner and not the use to which it is put by the buyers of the goods from the Petitioner. There is no condition in the Customs Tariff under chapter 98 which imposes such an obligations on the Petitioner - the Respondents are not justified in refusing to release the goods provisionally. - HC
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Customs:
Rejection of the benefit of Preferential Trade Agreement - It is understood that the invoices were split into two for the convenience of the quantity of the goods exported and for issuing the Country of Origin Certificate respectively. These discrepancies do not have any bearing to the benefit under the Preferential Trade Agreement. - The order rejecting the benefit of concessional rate of duty as per the Preferential Trade Agreement is not justified. - AT
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DGFT:
One time exemption from ‘Prohibition’ is granted to Patanjali Ayurved Limited for export of 20 MT of Non-basmati white rice (Semi-milled or wholly milled rice, whether or not polished or glazed: Other) as donation to Nepal for earthquake victims.
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Corporate Law:
Refusal of registration of shares of the Respondents - ambit of Section 111A of Companies Act - sufficient cause for refusal to register shares or not - The Respondents have filed multiple complaints against the Appellant company to various statutory authorities - the allegation of the Appellant company is that the Respondents seek to cause hurdles in the way of bona-fide corporate decisions taken by the Appellant Company. The Respondents have chosen not to appear before this Court to rebut the allegation of the Appellant. - Refusal of registration of shares are bonafide - HC
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IBC:
Initiation of CIRP - NCLT rejected the Section 7 Application - There being no material brought on the record to indicate that the amount of Rs.2.6 Crore was advanced by the Appellant in pursuance of any offer of private placement invited by the company. - When the amount advanced cannot be related to Section 42, the applicability of Section 42(6) cannot be pressed - AT
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SEBI:
Most Important Terms and Conditions (MITC) - uniform documents for formalizing the broker-client relationship - Circular
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Service Tax:
Levy of service tax - Import of services - Palace of Provision Services (PPS) - Reverse Charge - For making available that data to the Appellant, it is being done from outside India and therefore the activities of licensing of the acquired data are carried out from outside India. Thus, applying Rule 3 (ii) of the Service Import Rules, service tax will not be applicable on these services. - AT
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Service Tax:
Classification of services - Merely by resorting to what they felt and what they were recovering as ‘Terminal storage charges’ would not make this Appellant also a warehouse keeper. The scope of the service has to be determined in terms of express wordings of that classification in Finance Act & Rules, and not in terms of nomenclature used for collecting the revenue for the services provided to the service recipients - AT
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Central Excise:
Activity amounting to manufacture or not - activity of packing of rechargeable batteries along with chargers and labelling the same - Neither under Section XVI nor under Chapter 85 there are any notes deeming activity of packing or repacking as amounting to manufacture. - They are the job workers who have undertaken the activity of packing and labelling. - Demand set aside - AT
Articles
Notifications
Central Excise-
39/2023 - dated
15-11-2023
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CE
Effective rates of Special Additional Excise Duty on petrol and diesel - Amendment in Notification No. 04/2022-Central Excise, dated the 30th June, 2022
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38/2023 - dated
15-11-2023
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CE
Special Additional Excise Duty on production of Petroleum Crude - Amendment in Notification No. 18/2022-Central Excise, dated the 19th July, 2022
Customs-
83/2023 - dated
15-11-2023
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Cus (NT)
Rate of exchange of one unit of foreign currency equivalent to Indian rupees - Swedish Kroner - Amendment in Notification No. 81/2023-CUSTOMS (N.T.), dated 2nd November, 2023
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82/2023 - dated
15-11-2023
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Cus (NT)
Fixation of Tariff Value of Edible Oils, Brass Scrap, Areca Nut, Gold and Silver
DGFT-
43/2023 - dated
11-11-2023
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FTP
Incorporation of Policy Condition for export of Non-basmati rice under HS Code 10063090
GST - States-
38/1/2017-Fin(R&C)(20/2023-Rate)/3750 - dated
19-10-2023
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Goa SGST
Amendment in Notification No. 38/1/2017-Fin(R&C)(5/2017- Rate), dated the 30th June, 2017
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38/1/2017-Fin(R&C)(19/2023-Rate)/3749 - dated
19-10-2023
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Goa SGST
Amendment in Notification No. 38/1/2017-Fin(R&C)(4/2017-Rate), dated the 30th June, 2017
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68/GST-2 - dated
15-11-2023
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Haryana SGST
Notification under section 164 for amendment in HGST Rules, 2017 (Fifth Amendment of 2023) under the HGST Act, 2017
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(24/2023) FD 20 CSL 2023 - dated
10-11-2023
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Karnataka SGST
Seeks to notify a special procedure for condonation of delay in filing of appeals against demand orders passed until 31st March, 2023.
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1345/XI-2–23-9 (47)-17-T.C.-236-U.P. Act-1-2017-Order (293)-2023 - dated
10-10-2023
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Uttar Pradesh SGST
The provisions of the Ordinance will be deemed to have come into force on October 1, 2023.
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2023 (11) TMI 552
Wrongful availment of the input tax credit (ITC) - mismatch in the returns - petitioner is aggrieved by the impugned SCN as the said explanation has apparently not been accepted and the respondents have initiated proceedings for recovery of the ITC which, according to the respondents, has been wrongly availed - HELD THAT:- Since the present petition is at the stage of the impugned SCN, it is not considered apposite to interfere in the proceedings, however, the concerned officer shall consider all contentions of the petitioner including the directions issued by the Allahabad High Court and the Gujarat High Court in the petitioner s case. The petition is disposed of.
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2023 (11) TMI 551
Cancellation of petitioner s GST registration - non-filing of returns for a continuous period of six months - SCN proposing to cancel the petitioner s GST registration did not set out the date for the personal hearing - HELD THAT:- The impugned order does not set out any reason for cancelling the petitioner s registration except stating that no reply was received to the SCN. It is the petitioner s case that it had stopped its business in the year 2019 and applied for the cancellation of GST registration with effect from 28.11.2019. In these circumstances there are no grounds in the impugned order setting out any reason for the cancellation of GST registration with retrospective date, that is, 01.07.2017. The respondent no. 2 s decision to cancel the GST registration with retrospective date cannot be sustained. It is also material to note that the petitioner s GST registration was proposed to be cancelled on the ground that it had not furnished any return for a period of six months - it is considered apposite to direct that the cancellation of the petitioner s GST shall take effect from 28.11.2019 and not from 01.07.2017.
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2023 (11) TMI 550
Cancellation of petitioner s GST registration - SCN did not specifically stated the reason for cancellation - Suppression of facts - HELD THAT:- Concededly, the SCN did not specifically stated the reason for proposing to cancel the petitioner s GST registration. Although it was alleged that the GST registration was obtained by means of fraud, wilful misstatement, or suppression of facts, but the SCN did not provide any clue as to the alleged fraud committed by the petitioner or the wilful misstatement made by it. There is no indication as to the facts which are alleged to have been suppressed by the petitioner. It is trite law that a show cause notice is to respond to the allegation which form the basis of proposing an adverse action. In the present case, the SCN was incapable of eliciting any meaningful response. The impugned order is also bereft of any reason. It merely states that it is in reference to the SCN. In view of the above, the impugned order is liable to be set aside as it is void and not informed by reason. There are merit in the petitioner s contention that once the petitioner s GST registration was restored which was cancelled on an allegation that it was obtained by fraud, misstatement or suppression of facts it is not open for the respondent to again cancel the petitioner s GST registration for the same reason unless it is premised on the ground that had occurred after the petitioner s GST registration has been cancelled on 30.09.2021. The present petition is allowed and the impugned order is set aside and the petitioner s GST registration is directed to be restored forthwith.
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2023 (11) TMI 549
Violation of principles of natural justice - non consideration of the reply so filed - HELD THAT:- Evident it is from the show cause notice dated 05.02.2022 that a response was to be filed by the petitioner latest by 20.02.2022, which the petitioner in fact had filed a day prior thereto on 19.02.2022. The impugned order does not reflect consideration of the reply so filed and only on this ground, as there is a violation of principles of natural justice and non consideration of the reply so filed, the order dated 06.06.2022 is hereby quashed and set aside. It is clarified that this Court has not gone into the merits of the issue and the authorities are free to pass a fresh order after consideration of the response filed by the petitioner on 19.02.2022 and after giving personal hearing to the petitioner from the stage of DRC-01. The petition is partly allowed.
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2023 (11) TMI 548
Maintainability of petition - contract for the execution of the electrical works regarding the augmentation of the power system in Government Medical College, Kozhikode - HELD THAT:- The question whether the appellant is entitled to be paid GST @12%/18% on the contract amount received or not is a disputed question of fact which cannot be decided in a writ petition filed under Article 226 of the Constitution of India. The determination of the said question includes the interpretation of the terms of the contract entered into between the appellant and the respondents. Such an exercise cannot be undertaken by the writ court. The remedy open to the appellant is to approach the civil court as rightly held by the learned Single Judge - there are no illegality or impropriety in the judgment impugned. The writ appeal is dismissed.
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Income Tax
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2023 (11) TMI 547
Penalty u/s 271(1)(c) - assessee had committed default by filing inaccurate particulars of total income in respect of certain disallowances - ITAT deleted the penalty levy - HELD THAT:- Disallowance was made by the AO due to difference in the opinion of assessee and the AO. As it is not a case of concealment of income or furnishing of inaccurate particulars of income. ITAT on the facts has agreed with the CIT(A) that assessee had made claim in transparent and befitting manner. In view of these conclusions arrived on facts, the ITAT agreed with the view of the CIT(A) that assessee has not committed any default or filed any inaccurate particulars of income warranting imposition of penalty. Apex Court in Commissioner of Income Tax Vs. Reliance Petroproducts Pvt Ltd. [ 2010 (3) TMI 80 - SUPREME COURT ] held that where assessee has furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as concealment of income on its part and where the AO has taken a particular view contrary to the view that assessee had, it would not attract any penalty under Section 271(1)(c) of the Act. The Apex Court held that if this contention of the Revenue is accepted then in case of every return where the claim made is not accepted by Assessing Officer for any reason, assessee will invite penalty u/s 271(1)(c). That is clearly not the intendment of the Legislature. Decided in favour of assessee.
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2023 (11) TMI 546
Reassessment notices issued to a non-existing entity - HELD THAT:- Any defence of Respondent will be of no assistance in-as-much as CIT(A) has passed orders on 28th March 2022, as stated in the affidavit in rejoinder dated 10th July 2022 setting aside re-assessment orders for AY 2012-13 and 2013-14 on the ground that the assessment order has been passed in the name of non-existing person, i.e., DIPL. In fact, we find it objectionable that this defence has been taken in the affidavit in reply because order of the CIT(A) was passed on 28th March 2022 whereas affidavit in reply is affirmed on 5th May 2022 and, therefore, the affiant should have been aware of the order passed. We would have expected affiant to be truthful and disclose this fact in his reply. The fact that PAN was not deactivated would not help the Revenue because there could be cases relating to various years when the company was in existence and it is possible those PAN numbers are picked up for scrutiny or for issuance of refund. That in our view, will not be a sanction for Department to issue notices to a non-existing entity, particularly, when they were aware that the entity was not in existence. Decided in favour of assessee.
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2023 (11) TMI 545
Validity of the reassessment proceedings - assessment of a sum receivable by appellant pursuant to an arbitration award as in the nature of income - receipt was towards appellant s retirement from the partnership Firm - HELD THAT:- A bare perusal of the reasons shows that there was no mention as to whether and how the amount as per the arbitration Award was in the nature of income. The information reveals that the said receipt was towards appellant s retirement from the said Firm. Therefore, justification given by respondent no. 1 in the order for taxability of the said receipt as not relating to appellant s retirement from the said Firm was contrary to the information/material available with him. The law is very settled in as much as the belief formed by the AO has to be based on the information/material available with him at the time of formation of the belief. There was no material whatsoever available with respondent no. 1 at that point of time to show that the said receipt of Rs. 7 Crores by appellant as referred to in the reasons did not relate to her retirement from the said Firm. In the absence of any statement in the reasons recorded for reopening the assessment regarding taxability of the said receipt and in view of non-sustainability of the justification provided by respondent no. 1 in the order dated 21st August 2014, the reassessment proceedings initiated u/s 148 of the Act, in our view, will be bad in law. It is also well settled that for the purposes of adjudicating the validity of assumption of jurisdiction under Section 148 of the Act, one has to only look at the reasons recorded by the Assessing Officer before reopening the assessment. Such reason cannot be supplemented or improved subsequently. For Assessment Year 2008-2009 also appellant had received similar amounts from the said Firm. After scrutinising the character of such receipt, it was held by the predecessor of respondent no. 1 that the receipt was not taxable in nature. Therefore, the formation of the belief that the amount received for the current year was taxable, in our view, tantamounts to a change of opinion which is not permissible in law. Having considered the consent terms with the arbitration award and the statement of claim, it is clear, the amount of Rs. 28 Crores was receivable by appellant in terms of the arbitration award dated 25th September 2009. As per the award, appellant has relinquished all her claims against the partnership firm . as well as the partners. Real dispute between the parties related to the termination of appellant s partnership interest in the said Firm. The consent terms were arrived at between the parties with a view to settle this dispute. It goes without saying that when appellant's rights and claims in the said Firm were settled by the consent terms and the arbitration award, there could not be her continuance as a partner with the said Firm. Therefore, the arbitration award was receivable by appellant in respect of her retirement from the said Firm. As held by the Apex Court in Mohanbhai Pamabhai [ 1987 (2) TMI 59 - SC ORDER] and this Court in Prashant S. Joshi [ 2010 (2) TMI 271 - BOMBAY HIGH COURT] amount receivable upon retirement from the said Firm could not be of an income nature. In our opinion, the Tribunal was not correct in holding that the amount of arbitration award receivable by appellant was not relatable to her retirement from the said Firm. The Tribunal has failed to appreciate that there was a dispute between appellant and her brothers with respect to her wrongful retirement from the said Firm. For invocation of arbitration proceedings the matter was carried right upto the Hon'ble Supreme Court. The settlement amount was receivable by appellant for relinquishment of her rights and claims as a partner of the said Firm. In these circumstances, though there may be no mention of her retirement from the said Firm in the consent terms or the arbitration award, the only inference possible would be that she no longer continued as a partner of the said Firm after such settlement. It is also not anybody s case that appellant has not played any role in the said Firm or received any share from the said Firm after the settlement. Even if we go alongwith the Tribunal that appellant had received the amount of Rs. 28 Crores under the arbitration award for transfer of a composite bundle of rights, it was not open to assess the entire amount of the award as income from other sources. The dominant component in the settlement was appellant s separation from the said Firm. The Tribunal ought to have considered each component of the rights and claims which were relinquished and withdrawn by appellant and bifurcated the amount of arbitration award between each of such rights and claims. Instead of doing this exercise and considering whether the amount was capital or revenue in nature, the ITAT has simplicitor accepted the conclusion reached by the CIT (A) to the effect that such receipt is of an income nature chargeable to tax as income from other sources. The Tribunal has failed to consider this issue in a proper perspective. The Tribunal interestingly holds that it is judicially settled that the amount should be considered as special income and it must be considered in its wider sense. The Tribunal failed to appreciate that a receipt on capital account cannot be assessed as income unless it was specifically brought within the scope of the definition of the term income in Section 2(24) of the Act as held by the Apex Court in CIT V/s. D. P. Sandhu Bros. [ 2005 (1) TMI 13 - SUPREME COURT] The Tribunal erred in evolving a concept of special income when no such concept exists either in the Act or in the jurisprudence and saying that the same is judicially settled. Thus we answer the substantial questions of law as framed in favour of appellant. The Tribunal ought to have held respondent no. 1 had assumed jurisdiction u/s 147 of the Act without fulfilling the jurisdictional pre-conditions and hence, the reassessment proceedings were without jurisdiction. Further, on the facts and in the circumstances of the case and in law, the Tribunal ought to have held that the amount Crores received by appellant as per the arbitration award was not chargeable to tax.
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2023 (11) TMI 544
Validity of reopening of assessment u/s 147 - Eligible income to be brought to tax - HELD THAT:- Even if there was no reply filed by petitioner the onus is on department to justify the reopening. If one considers the material relied upon by respondents to reopen, there are two buy and two sell. What has been brought has been sold or what has been sold only has been brought. It is well settled that only the net income from the buy and sell transactions can be brought to tax in petitioner s hand and not the entire sum as done in this case. There is no attempt to even apply their mind as to how, when there are contra entries of buy and sell, both amounts could be added to say escapement of income. Therefore, in this case, considering the figures as given in the reasons for reopening, net income from the buy and sell transactions which can be brought to tax in petitioner s hand and not the entire amount. In the petition, petitioner has stated that this net income also is less than the maximum amount which is not chargeable to income tax for the assessment year in question and accordingly no income chargeable to tax has escaped assessment in petitioner s hand. There is no denial in the affidavit in reply. Thus the issue of the impugned notice under section 148 of the Act, the passing of the impugned assessment order and the issue of the impugned demand notice and the impugned penalty notice and after going through the same and examining the question of legality thereof quash, cancel and set aside
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2023 (11) TMI 543
Assessment u/s 153A r.w.s. u/s 143(3) - Search and seizure proceedings - admissibility of primary and secondary evidence - Reliance on the statement of employees and electronic evidences - violation of principles of natural justice - accumulation of unaccounted money - certain loose excel sheets and pen-drive were seized and statements were also obtained from the MD and certain other employees for which some of them have given their retractions too - HELD THAT:- No justification need to be provided in the form of reasons by the petitioner while seeking for cross-examination of the witnesses. In the present case, the petitioner, in fact, provided the reasons which necessitated to cross-examine the witnesses whose statements were relied upon by the 1st respondent and a perusal of the reasons mentioned by the petitioner, appear to be just and reasonable and the 1st respondent ought to have provided the opportunity, but unfortunately, no opportunity was provided by which, right to lead rebuttal evidence is deprived of. It is clear that not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. In the present case, the statements of the employees of the petitioner company have been relied upon by the AO while passing the impugned order of assessment. When such being the situation, it is bounden duty of the AO to permit the petitioner to cross-examine the witnesses and not allowing the petitioner to cross-examine the said witnesses whose statements were made the basis of the impugned order, is no doubt, a serious flaw, by itself makes the order nullity inasmuch as it would amount to violation of principles of natural justice. Admissibility of electronic evidence - In the present case, it appears that the 1st respondent seized Pen-drive and other electronic equipments and based on the material available therein, the impugned order came to be passed. It is to be noted that when the 1st respondent had chosen to rely upon the electronic evidence which is available in the form of Pen-drive and other electronic equipments, the contents contained therein, have to be certified in terms of Section 65B of the Indian Evidence Act, which, admittedly, no such certification was done. Under the Indian Evidence Act, 1872, Section 65B prescribes a distinct framework that governs the admissibility of electronic evidence. As decided in Vetrivel Minerals vs ACIT [ 2021 (10) TMI 1020 - MADRAS HIGH COURT ] when the entire assessment has been framed only on the basis of the so~called electronic record which are said to be copies of Excel Sheet, Excel work note book etc., non compliance of Section 65(B) of the Indian Evidence Act renders the document inadmissible in the eye of law as held by the Supreme Court in the judgment reported in Anvar P.V vs. P.K. Basheer [ 2014 (9) TMI 1007 - SUPREME COURT ] Only if the electronic record is duly produced in terms of Section 65B of the Evidence Act, the question would arise as to the genuineness thereof and in that situation, resort can be made to Section 45A opinion of examiner of electronic evidence.The Evidence Act does not contemplate or permit the proof of an electronic record by oral evidence if requirements under Section 65B of the Evidence Act are not complied with, as the law now stands in India. In view of the violation of the principles of natural justice and also due to the non compliance of Section 65(B) of the Indian Evidence Act, this Court feels that it is a fit case for setting aside the assessment orders. Since the impugned order has been passed in violation of principles of natural justice and due to non-compliance of Section 65(B) of the Indian Evidence Act, this Court has no hesitation to hold that the impugned order is liable to be set aside.
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2023 (11) TMI 542
Late fee u/s 234E - filing the quarterly statement in wrong form 24Q instead of Form 26Q which was revised later - as quarterly TDS returns were filed on time, and only the Form was incorrectly filed, the Tribunal remanded the matter back to the Assessing Authority to pass fresh orders - HELD THAT:- It is not in dispute that the petitioner had filed the return on time. However, it was not in the correct Form, and it was revised. Therefore, when the petitioner had filed the return on time, there is no question of levying penalty and interest.
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2023 (11) TMI 541
Reassessment proceedings against dead person - Liability of legal representative - HELD THAT:- it is admitted that the impugned order was passed in the name of a dead person since the proceedings were initiated subsequent to the death of the original assessee. In terms of the provisions of Section 159(2)(b) of the Income Tax Act, any proceedings of the deceased person, subsequent to death, can be initiated against his legal representative. Though the present case was initiated subsequent to the death of the assessee, it was initiated in the name of the dead person and the assessment order was also passed in the name of a dead person, though his legal representative had participated in the proceedings. Department is supposed to have substituted the legal representative in the place of a dead person. However, they had not done the same and no order can be sustainable if it is passed in the name of a dead person - As decided in case of M.Hemanatha [ 2016 (4) TMI 258 - MADRAS HIGH COURT] held that no proceedings can be initiated against a dead person. Thus this Court is of the considered view that the impugned orders are not sustainable and the same are liable to be set aside.
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2023 (11) TMI 540
Revision u/s 263 - Deemed rent - ALV of the unsold stock (held as stock in trade) farming part of the inventory - PCIT has taken the view that since this project has been developed on ownership basis assessee company was owner of the property till it is sold and the annual letting value (ALV) of the unsold stock (held as stock in trade) farming part of the inventory should have been brought to tax as deemed rent under section 23(1)(a) whereas the assessee has neither offered deemed rent of unsold flats nor the AO brought the same to tax - HELD THAT:- AO has duly conducted the investigation by examining the detail facts regarding the unsold flats which was held as stock in trade by not determining ALV by following the guidelines given in the CBDT circular No.2/2018 dated 15.02.2018. Moreover Hon'ble Supreme Court in case of Chennai Properties Investments Ltd. vs CIT [ 2015 (5) TMI 46 - SUPREME COURT] held that unsold flats which are in stock in trade should be assessed under the head business income and there is no justification in estimating the rental value from those flats and notionally computing annual letting value under section 263 of the Act. Therefore invoking the jurisdiction u/s 263 by Ld. PCIT is not sustainable in the eyes of law, hence impugned order passed under section 263 is ordered to be set aside. Appeal filed by the assessee is allowed.
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2023 (11) TMI 539
Reopening of assessment u/s 147 - addition u/s 50C - assessee has sold two immovable properties in equal co-ownership with one person - nature of land sold - CIT(A) sustained the addition and directed the AO to re-compute the capital gain by reducing the costs of acquisition of the said properties from the total sale consideration in the hands of the assessee - HELD THAT:- We have gone through the order passed u/s 143(3) in the case of the co-owner Smt. Sudha Tyagi there is no mention/adjudication regarding the issue of grant of exemption to Assessee in the assessment order. The material available on record in the present case were also not been looked it into by the A.O. of the co-owner besides the same, even if the A.O. of the co-owner erroneously grants the exemption and refrained from making addition u/s 50C of the Act, the fact remains that the properties which were sold by the Assessee along with the co-owner is not beyond 8 kilometers of distance from the outer limit Ghaziabad Nagar Nigam (GMC). In so far as the certificate issued by the Ghaziabadad Nagar Nigam is concerned, considering the fact that during the Remand proceedings, A.O. after making extensive enquiry and also relying on the corroborative evidences, found that the village Morti/Morta is only 2.5-03 kilometers from the outer limit of the Ghaziabad Municipal Corporation. Therefore, we do not give much importance to the contents of the certificate which is far from truth. We find no error or infirmity in the order of the CIT(A) in upholding the disallowance made by the A.O - CIT(A) has rightly directed the A.O. to recomputed the capital gain by reducing the cost of acquisition of the said properties from the total sale consideration in the land of the Assessee. No merit in the Grounds of Appeal of the Assessee.
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2023 (11) TMI 538
TDS u/s 194C - payments made to Eco Development Committee (EDCs) and Van Suraksha and Prabandhan Samiti (VFPMC) - non deduction of TDS u/s 40(a)(ia) - whether payments made for preservation of forest/reforestation by employing self help groups as per implementation of panchayti raj/NREP/RLEGP can be constituted as contract payment within the meaning of section 194C or not? - HELD THAT:- The Van Samitis are instituted as per Rajasthan State Government Notification S.No. F/7(39)/VAN/90 dated 17.08.1999 for various conservation / forestation programme consisting people of local / village area for their upliftment through employment. As per notification these Van Samitis are not in the category of 'thekedar' i.e. contractor. Thus, work was executed through participation of people and government as per notification framed by the State Government as per National Forest Policy (1988) of the Central Government. Therefore, conditions for exemption u/s 194C are satisfied in this case in view of the CBDT circular no. 502 (F.No. 385/49/86-ITC dated 27.01.1988), as these payments were not contract payments. AO merely based on the fact that these payments were made for the work and relying the statement given by the AAO u/s 131 fasten the liability u/s 194C which is against the various facets argued by the ld. AR of the assessee. It Also noted here that in the statement recorded the AAO in answer to Question no 4 denied of involvement of contractor in his department. Considering these facts, and CBDT circular no 502 dated 27.01.1988, we are of the considered view that payments made to these Van Samitis are not contract payments and provisions of section 194C thus do not apply. As decided in M/s. Santur Infrastructure Pvt. Ltd [ 2019 (12) TMI 1106 - ITAT DELHI] assessee was not required to deduct TDS as the payment of EDC was not made out of any statutory and contractual liability to HUDA with whom the assessee has no privity of contract - Decided against revenue.
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2023 (11) TMI 537
Eligibility of Form 35-A filled before DRP - dismissing the objection filed in form number 35A verified by the authorized representative holding that as the directions are not verified by the assessee or its agent, the same is required to be dismissed as not maintainable - Whether Form 35-A has duly been filed in person ? HELD THAT:- According to us only assessee can verify form number 35A. However in the present case, the form number 35A is verified by the advocate, which was dismissed by the learned dispute resolution panel without giving any opportunity to the eligible assessee confronting the fact that form number 35A is not properly verified, violates the principles of the natural justice. Therefore, we put the assessee back to the stage of filing of objections before the learned dispute resolution panel. Accordingly we direct the Assessee to file objections before LD DRP within 30 days from the date of receipt of this order duly verified in accordance with law. Ld DRP may decide the objection in accordance with the law.
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2023 (11) TMI 536
Fresh claim in the return of income filed pursuant to notice u/s 153A - assessee has not claimed the benefit of deduction u/s 80IA in the original return of income, but was claimed while filing the return of income in pursuance to the notice issued u/s 153A - HELD THAT:- The assessee has not claimed deduction u/s 80IA in the original proceedings and also have not filed the audit report however, at the time of filing of return of income u/s 153A of the Act, the assessee had filed the audit reports and claimed deduction u/s 80IA of the Act. A perusal of the assessment order passed u/s 143(3) r.w.s. 153A shows that the AO has accepted the income determined as per the assessment order u/s 143(3). Thus, no addition was made by the Assessing Officer during the assessment proceedings u/s 143(3) r.w. section 153A - In our view, the AO was right in denying the claim of deduction u/s 80IA to the assessee as no addition was made in the hands of the assessee during the assessment proceedings on account of any incriminating material. Further, the issues which have attained finality, in an unabated assessment are required to be restricted having a live link with the incriminating material. We are of the opinion that re-assessment proceedings u/s 153A is not a denovo re-assessment as the re-assessment can only be made with respect to the incriminating material found during the course of search. We are of the opinion that the assessee cannot be permitted to make a fresh claim of deduction in the re-assessment proceedings u/s 153A of the Act. The above said finding is not only based on the interpretation of the provision of section 153A r.w.s. 139(1) of the Act, but also based on the mandatory provisions which require the assessee to file the audit report along with the original return of income for claiming the deduction under Chapter VI of the Act. Once the assessment proceedings have attained finality, then the additions can only be made in the hands of the assessee based on the incriminating material unearthed during the search. The Assessing Officer has no reason to entertain any fresh claim, which was not raised in the original return of income. Hence, we are of the considered opinion that the assessee is not entitled to file fresh return of income under Section 153A of the Act, with respect to claiming the deductions which had not been claimed by the assessee earlier in the original return of income. Hence, respectfully relying upon the above said decisions, we are of the opinion that the legal ground raised by the Revenue regarding the claim of fresh deduction u/s 80IA at the time of filing the return of income u/s 153A of the Act is sustainable. We are of the considered opinion that the findings of the CIT(A) is not in accordance with law and the assessee cannot be permitted to make a fresh claim of deduction for the first time in the return filed in response to notice u/s 153A of the Act. Thus, the legal ground is decided in favour of the Revenue and against the assessee.
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2023 (11) TMI 535
Profits on sale of Flats - disallowance in respect of additional cost of Tower I to V on the ground that the claim of additional cost was not settled among the parties - HELD THAT:- AO while making the addition has relied on the response received to the notice u/s 133(6) of the Act where GPL has informed that they have accounted an estimated cost of Rs. 3,166/- for the entire project. However, it is noticed that GPL vide letter dated 01/12/2008 has communicated a rate of Rs. 3,599/- per sq.ft. It is also noticed that the average cost per sq.ft. claimed by the assessee for the assessment year 2010-11 works out to Rs. 3,438/-. We, therefore, see merit in the submissions of the Ld.AR that the cost of construction as given by GPL keeps changing from time to time and that what the assessee for the year under consideration has taken as cost is less than the average rate communicated vide letter dated 01/12/2008 submitted by GPL. It is also noticed that the final cost of construction agreed between the assessee and GPL as per the supplementary agreement dated 31.03.2014 as per the agreement is Rs. 4,118/-. We see no infirmity in the cost of construction claimed by the assessee for the year under consideration at Rs. 3438/- per sq.ft. which is below the average rate communicated by GPL and the final rate agreed with GPL. Accordingly, we hold that the disallowance of Rs. 10,32,70,436/- be deleted. The appeal of the assessee is allowed. Disallowance of cost of land for the reason that the land was vacant and as per the ULC regulations certain area of the land in excess of the limits prescribed under ULC - HELD THAT:- CIT(A) in his order for AY 2009-10[ 2016 (10) TMI 1390 - ITAT MUMBAI] has given a clear finding that the land was not vacant as on the valuation date of 01.04.81 (since the factory building was there) and that the status as on the valuation date is what needs to be considered for the purpose of valuation by relying on the decision of the Bombay High Court in Lady Hirabai's Case [ 1988 (12) TMI 12 - BOMBAY HIGH COURT] It is also noticed from the perusal of records that the revenue in the appeal filed before the Tribunal for AY 2009-10 had not raised any specific ground in this regard and therefore we see merit in the submission of the ld AR that the issue has reached finality. Considering the facts of the present case, we see no reason to interfere with the decision of the CIT(A) in allowing the claim of cost of acquisition at Rs. 260 based on the valuation report. Accordingly this ground of the revenue is dismissed. Allowability of Interest on loans u/s 36(1)(iii) - CIT(A) allowed the claim of the assessee for the reason that the interest is paid wholly and exclusively for the purpose of business and, therefore, allowable u/s 36(1)(iii) - HELD THAT:- As noticed that the assessee has paid the interest on the loan taken from HDFC Bank which was borrowed for the purpose of settling employee dues so that the vacant land without any encumbrance can be handed over to the developer. Therefore we see merit in the submission that the interest is claimed as part of development cost since as per the terms of the agreement the assessee is required to given a clear and marketable title of the land to the developer. As settled position that interest cost incurred towards acquisition of the clear title of the property can be claimed as part of cost of acquisition. In the light of these discussions we uphold the decision of CIT(A) in allowing the claim of interest cost as part of development cost while computing the income. Appeal of the assessee is allowed and appeal of the revenue is partly allowed.
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2023 (11) TMI 534
Disallowance u/s. 14A r.w.r. 8D(2) - HELD THAT:- While deciding the issue, the Coordinate Bench of the Tribunal in [ 2023 (11) TMI 322 - ITAT MUMBAI] directed to Re-work disallowance u/s.14A under rule 8D(2)(iii) on investment which has yielded exempt income. Subsidy received by the Appellant from various States to be held as capital receipt, not chargeable to tax Sales tax incentives received by assessee are rightly considered as Capital Receipts by CIT(A) both for the purposes of normal tax as well for the purposes of computation u/s.115JB of the Act and be excluded while computing taxable income. Refund of royalty needs to be considered as Capital Receipts both for the purposes of normal tax as well for the purposes of computation u/s.115JB and be excluded while computing taxable income. Hence considering the above, the addition made by Assessing Officer is deleted. Additional depreciation u/s 32(1)(iia) - Whether additional depreciation is allowable only on new machinery i.e. the first year in which it is put to use? - HELD THAT:- It is observed that coordinate bench in its later decision in the case of Ambuja Cement Limited [ 2022 (11) TMI 1419 - ITAT MUMBAI] holding company of assessee has allowed similar claim of depreciation. When coordinate bench of ITAT in its latest decision has decided issue in favour of assessee by holding that assessee is entitled for additional depreciation u/s 32(1)(iia), such later decision would prevail over the decision of Everst Industries Limited [ 2018 (4) TMI 426 - ITAT MUMBAI] relied upon by Ld DR. As a result, since this aspect of the matter is no longer res integra, we see no reasons to take any other view of the matter than the view so taken by the coordinate bench in the group concern s case of the assessee. We uphold the plea of the assessee and direct the Assessing Officer to allow depreciation u/s.32(1)(iia) of the Act. Disallowance of proportionate Head Office expenditure and Research Development expenditure while computing deduction u/s 80IA/80IB/80IC - AO is directed to allocate Head office expenses (other than auditor fees and CMA expenses) on the basis of expenditure incurred by the units vis- -vis overall expenditure. Thus, ground of appeal in assessee s appeal is partly allowed. Disallowance of proportionate CENVAT credit availed for units eligible for deduction u/s 80IA - As relying on assessee own case [ 2023 (11) TMI 428 - ITAT MUMBAI] Assessing Officer to delete the impugned adjustment on account of CENVAT in the profits of the eligible units. Deduction u/s.80IA on Rail Infrastructure to be allowed. Disallowing claim of leave encashment - HELD THAT:- Hon'ble supreme court in the case of UOI v. Exide Industries Ltd. [ 2020 (4) TMI 792 - SUPREME COURT] has upheld constitutional validity of provision of section 43B(f) for provision for leave encashment liability and considering binding decision of Hon'ble Supreme Court claim cannot be allowed. However, if payment of such provision towards leave encashment is made in subsequent year, deduction may be allowed to assessee in such years if not allowed till date. Therefore, Assessing Officer is directed to verify and the same and allow the same as per our above directions. Addition of provision for Interest on Income tax while computing book profits u/s.115JB - HELD THAT:- As in assessee s case [ 2023 (2) TMI 1211 - ITAT MUMBAI] interest u/s.244A charged to Profit Loss account is not recovered by Assessing Officer by passing any order but same is provided based upon past experience based upon assessment orders / appellate orders in case of assessee hence such interest provided in the books of account in actual sense partakes the character of interest as provided in explanation 2 to section 115JB of the act. If assessee would have actually paid amount received u/s.244A to Assessing Officer on account of additions made in assessment order and such interest if would have been debited to P L account, such interest would have been disallowed while computing Book Profit hence on this analogy also provision of interest deserves to be added back while computing Book Profit u/s.115JB - as observed that if in later years such amount is actually required to be paid to Assessing Officer, assessee would adjust such interest payable directly to provision of interest appearing in balance sheet and in that scenario also such interest u/s.244A would not have been subject to Book Profit u/s.115JB of the Act which is contrary to the provision of the Act. On this ground also the claim of assessee fails and adjustment made by AO is also upheld. Addition in respect of tax on non-monetary perquisites while computing book profits u/s. 115JB - HELD THAT:- As in Rashtriya Chemicals Fertilizers Ltd [ 2018 (3) TMI 1564 - ITAT MUMBAI] , IDBI Bank v. DCIT [ 2021 (2) TMI 608 - ITAT MUMBAI] and M/s NHPC Ltd [ 2020 (3) TMI 1308 - ITAT DELHI] has deleted the adjustment made on account of tax paid on non-monetary perquisites provided to the employees to book profit u/s 115JB of the Act. Respectfully following the decisions as discussed herein above, this ground raised by assessee is allowed. Addition of unutilized CENVAT Credit - HELD THAT:- Irrespective of the method of accounting followed by the assessee, i.e. 'Inclusive method', wherein the taxes are included in the opening stock, purchases, etc. or the 'Exclusive method', the MODVAT credit does not have any impact on the profit of the assessee. Thus, following the ratio laid down by the Hon'ble Supreme Court in the case of Indo Nippon Chemicals Co. Ltd. [ 2003 (1) TMI 8 - SUPREME COURT] and followed by the Hon'ble Bombay High Court in the case of Diamond Dye Chem Ltd. [ 2017 (7) TMI 616 - BOMBAY HIGH COURT] we set-aside the order of the CIT (A) and direct the Assessing Officer to delete the addition made. Allowability of pre-operative expenses as revenue expenses when in its books of accounts the assessee itself had claimed the expenses as capital expenses and added them to its capital work in progress /fixed assets - HELD THAT:- As decided in own case[ 2023 (2) TMI 1212 - ITAT MUMBAI] AY 2009-10 the short grievance raised before us by the Assessing Officer is whether, even when the expenditure is shown in the books of accounts, it can be treated as revenue in nature in our considered view, stands concluded in favour of the assessee. The fact that in the books of account the assessee had capitalised the expenses does not prevent the assessee from claiming them as revenue expenses since the question of allowance of expenses has to be considered in the light of the legal position and the accounting treatment cannot be conclusive. Deduction u/s 80IA on profit derived from power-generating unit-TG3 located at Wadi allowed - As deduction was granted for an initial assessment year, same could not be rejected for subsequent assessment years unless relief for initial year was withdrawn. TP Adjustment - MAM for benchmarking transaction of sale of electricity - CIT(A) allowing the internal CUP adopted by the assessee for benchmarking of Specified Domestic Transactions of Inter-unit transfer of power and rejecting external CUP adopted by TPO - HELD THAT:- As identical issue is decided in favour of the assessee in the A.Y.2011-12 [ 2023 (11) TMI 428 - ITAT MUMBAI] held where consideration paid for purchase of electricity from State Power Corporation represents the market rate on which any industry undertaking or consumer would be getting electricity, then such market rate should be applied as CUP for benchmarking transaction of sale of electricity. TP adjustment for Technical services availed from Holcim Group Support Ltd - HELD THAT:- It is an undisputed fact that assessee has availed identical services from its AE in earlier assessment years. During the course of hearing, Ld AR has drawn attention to the fact that there has been no adjustment for the previous AYs 2007-08 to AY 2012-13 while passing the assessment order and this fact is not rebutted by Ld.DR during the course of hearing. The assessee has been consistently following TNMM method for determining the ALP of this transaction and same has not been disputed by TPO in earlier years. On perusal of TP order, it is observed that TPO did not apply any method or did not present any comparable agreements based on which man hours or costs was estimated. The TPO proceeded to arbitrarily decide, without any explanation or details whatsoever, and without reference to the actual transaction or services rendered, that 8,000 man hours would be considered reasonable for providing these services referred in the invoices furnished, and a cost of ₹.10,000/- per man hour was determined at arm s length man hour cost. The TPO has in fact not disputed that services were rendered by AEs. Thus as relying on CLSA India Private Limited [ 2019 (1) TMI 1351 - ITAT MUMBAI] we hold that since the TPO has not made the transfer pricing adjustment by following the mandatory provisions of the law and determined the same on estimation basis, action of the Ld. DRP in upholding the TP adjustment so made by the Ld. TPO is bad in law. TP adjustment being services availed from various AEs - TPO considered that ALP of above transactions as NIL on the ground that the assessee has merely described various services and that by itself does not justify the price charged and that the Assessee has not proved whether the services have actually been rendered and if it is based on the arm s length principle - HELD THAT:- During the course of hearing, AR has stated that invoices and documents furnished before TPO clearly demonstrate that these services were rendered / received and that there was no finding that no services were actually received nor there is any finding that such expenditure is not for the purpose of business. This fact is not contravened by DR during the course of hearing. The finding given by Ld CIT(A) clearly supports the argument of Assessee. Assessee has already submitted sufficient evidences to prove that actual services of AEs were taken by Assessee which mainly includes reimbursement of participation costs and license fees and actual support in a key business area (RMX or Concrete) of the Assessee and same is supported by terms of an agreement signed between the parties. This facts are not disputed by Ld DR. Once it is proved that Assessee has actually taken services of AE and no profit involvement is there, it is held that Ld CIT(A) has correctly deleted TP adjustment -Thus, this part of ground of appeal of the revenue is dismissed. TP adjustment for ITes and Technical services availed from HSSA - Assessee has adopted TNMM whereas TPO has adopted adhoc method for arriving value of services provided by AEs which is incorrect. In the case of Avery Dennison (India) P Ltd [ 2016 (1) TMI 933 - ITAT DELHI] held that TPO's conclusion that services had not resulted in any benefit and that no independent entity would have made such payment, as being in the realm of surmises conjectures, and not backed by any material. It is observed that TPO has estimated Man Hours as well as Man hour cost per hour which is not the proper method to determine value of services rendered by AEs. The identical issue is discussed herein above while adjudicating TPO adjustment for Technical Services availed from HGRS. Thus it is held that Ld CIT(A) has correctly deleted TP adjustment and this part of ground of appeal of the revenue is dismissed. Addition of provision for gratuity made while computing book profit u/s 115JB is deleted. Wealth tax provision is not required to be added back while computing Book Profits under Section 115JB. Addition of provision for leave encashment made while computing book profit u/s 115JB is deleted. Excise duty exemption received by assessee are capital receipts both for the purpose of computing income as per normal provision of the Act as well as book profit u/s 115JB of the Act and the addition made by Assessing Officer is deleted. Disallowance u/s 14A cannot be made while computing book profit u/s.115JB
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2023 (11) TMI 533
Disallowance u/s. 14A r.w.r. 8D(2) - HELD THAT:- Re-work disallowance u/s.14A under rule 8D(2)(iii) on investment which has yielded exempt income. Unutilized CENVAT Credit - HELD THAT:- Irrespective of the method of accounting followed by the assessee, i.e. 'Inclusive method', wherein the taxes are included in the opening stock, purchases, etc. or the 'Exclusive method', the MODVAT credit does not have any impact on the profit of the assessee. Thus, following the ratio laid down by the Hon'ble Supreme Court in the case of Indo Nippon Chemicals Co. Ltd. [ 2003 (1) TMI 8 - SUPREME COURT ] and in the case of Diamond Dye Chem Ltd. [ 2017 (7) TMI 616 - BOMBAY HIGH COURT ] we set-aside the order of the CIT (A) and direct the AO to delete the addition made on account of unutilised MODVAT credit. Sales tax incentives received by assessee are rightly considered as Capital Receipts by CIT(A) both for the purposes of normal tax as well for the purposes of computation u/s.115JB of the Act and be excluded while computing taxable income. Allowability of pre-operative expenses as revenue expenses when in its books of accounts the assessee itself had claimed the expenses as capital expenses and added them to its capital work in progress /fixed assets - HELD THAT:- As decided in own case in AY 2009-10 [ 2022 (11) TMI 1420 - ITAT MUMBAI ] the short grievance raised before us by the Assessing Officer is whether, even when the expenditure is shown in the books of accounts, it can be treated as revenue in nature in our considered view, stands concluded in favour of the assessee.The fact that in the books of account the assessee had capitalised the expenses does not prevent the assessee from claiming them as revenue expenses since the question of allowance of expenses has to be considered in the light of the legal position and the accounting treatment cannot be conclusive. Additional depreciation u/s 32(1)(iia) - whether additional depreciation is allowable only on new machinery be the first year in which it is put to use? - HELD THAT:- It is observed that coordinate bench in its later decision in the case of Ambuja Cement Limited [ 2022 (11) TMI 1419 - ITAT MUMBAI] holding company of assessee has allowed similar claim of depreciation. When coordinate bench of ITAT in its latest decision has decided issue in favour of assessee by holding that assessee is entitled for additional depreciation u/s 32(1)(iia), such later decision would prevail over the decision of Everst Industries Limited [ 2018 (4) TMI 426 - ITAT MUMBAI] relied upon by Ld DR. As a result, since this aspect of the matter is no longer res integra, we see no reasons to take any other view of the matter than the view so taken by the coordinate bench in the group concern s case of the assessee. We uphold the plea of the assessee and direct the Assessing Officer to allow depreciation u/s.32(1)(iia) of the Act. Deduction u/s 80IA on profit derived from power-generating unit-TG3 located at Wadi allowed - As deduction was granted for an initial assessment year, same could not be rejected for subsequent assessment years unless relief for initial year was withdrawn. Auditor s fee and director s remuneration (indirect expenses) should not be apportioned for computing deduction u/s 80IA - AO is directed to allocate Head office expenses (other than auditor fees and CMA expenses) on the basis of expenditure incurred by the units vis- -vis overall expenditure. Thus, related ground of appeal in departmental appeal is dismissed. Addition of provision for gratuity made while computing book profit u/s 115JB is deleted. Wealth tax provision is not required to be added back while computing Book Profits under Section 115JB. Disallowance u/s 14A cannot be made while computing book profit u/s.115JB of the Act. Expenditure incurred on club entrance fee and subscription fee is made to promote business interest is an allowable expenditure u/s 37(1). Deduction u/s 80-IA on captive power generating units by modifying the basis of determining the 'market value' of power captively consumed, adopted by the appellant - Where consideration paid for purchase of electricity from State Power Corporation represents the market rate on which any industry undertaking or consumer would be getting electricity, then such market rate should be applied as CUP for benchmarking transaction of sale of electricity. See Nectar Life science limited [ 2021 (9) TMI 1420 - ITAT DELHI ] As observed that while computing the output of the CPP, AO has excluded the transmission loss which was considered by assessee in their calculations but during the course of hearing before bench, assessee conceded the ground on the exclusion of the units lost in transmission for the purpose of computing the turnover of CPP. As observed that Ld AR has filed details regarding rate to be taken, such working was not available with the file of AO hence on this limited purpose of verification for the year under consideration, the AO is directed to verify the working as submitted by Ld AR and directed to consider the market value of power sold by CPP units at the Electricity rate at which CMM units at different location is purchasing electricity from SEBs as held/discussed by various courts. Deduction u/s.80IA on Rail Infrastructure to be allowed. Adjustment on account of CENVAT in the profits of the eligible units to be deleted. Disallowing claim of leave encashment - HELD THAT:- Hon'ble supreme court in the case of UOI v. Exide Industries Ltd. [ 2020 (4) TMI 792 - SUPREME COURT ] has upheld constitutional validity of provision of section 43B(f) for provision for leave encashment liability and considering binding decision of Hon'ble Supreme Court claim cannot be allowed. However, if payment of such provision towards leave encashment is made in subsequent year, deduction may be allowed to assessee in such years if not allowed till date. Therefore, Assessing Officer is directed to verify and the same and allow the same as per our above directions. Nature of expenditure - Write off of CWIP expenditure pertaining to referred projects which are part of existing business activity hence such expenditure is allowable expenditure. Addition of provision for leave encashment made while computing book profit u/s 115JB is deleted. Excise duty exemption received by assessee are capital receipts both for the purpose of computing income as per normal provision of the Act as well as book profit u/s 115JB of the Act and the addition made by Assessing Officer is deleted. Amount transferred to Debenture Redemption Reserve cannot be added back while computing Book Profits. Not excluding capital profits being profit on sale of investments and profit of sale of fixed assets in the computation of book profits u/s 115JB - HELD THAT:- As it is evident that the assessee will be entitled to indexed cost of acquisition while computing capital gains u/s 115JB of the Act. It is also to be noted that in the immediately preceding year Coordinate Bench has held that long term capital gains credited in the books of accounts is taxable to which even the Ld. AR fairly conceded subject to the decisions as relied supra. However, he claimed that the indexed cost of acquisition does not form part of income computed u/s 115JB of the Act. Respectfully following the ratio laid down in Best Trading and Agencies Limited [ 2020 (9) TMI 94 - KARNATAKA HIGH COURT ] is directed to recompute taxable long term capital gains arising on transfer of fixed assets after giving the benefit of indexed cost of acquisition while computing taxable profits u/s 115JB. Outstanding VAT disallowed u/s 43B on the basis of Tax Audit Report hence the same should be allowed on the payment basis - This issue needs verification and accordingly this issue is admitted and remitted back to the file of assessing officer verify the claim of the assessee as per law after giving opportunity of being heard to the assessee. Accordingly, the above additional ground is allowed for statistical purpose. Appeals filed by the revenue and assessee are partly allowed.
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2023 (11) TMI 532
Differential unutilized MODVAT credit referable to closing stock invoking the provisions of Section 145A - HELD THAT:- As decided in own case AY 2005-06 [ 2023 (2) TMI 1210 - ITAT MUMBAI] Tribunal has not committed any error. (underlined for emphasis by us) It is evident from the above that irrespective of the method of accounting followed by the assessee, i.e. 'Inclusive method', wherein the taxes are included in the opening stock, purchases, etc. or the 'Exclusive method', the MODVAT credit does not have any impact on the profit of the assessee. Thus, following the ratio laid down by the Hon'ble Supreme Court in the case of Indo Nippon Chemicals Co. Ltd. [ 2003 (1) TMI 8 - SUPREME COURT] and followed by Diamond Dye Chem Ltd [ 2017 (7) TMI 616 - BOMBAY HIGH COURT] we set-aside the order of the CIT (A) and direct the AO to delete the addition made on account of unutilised MODVAT credit. Club entrance/subscription fee is an expenditure was incurred on account of subscription to clubs for the purpose of promoting and fostering its business relationship and objective of the assessee was to enable its directors to meet various kinds of people in the clubs so that by such meeting they would develop business relationship. See Otis Elevator Co [ 1991 (4) TMI 53 - BOMBAY HIGH COURT] Addition on account sales tax subsidy under the normal provisions and u/s 115JB - We uphold the plea of the assessee and direct the AO to exclude the sales tax incentive subsidy for computing book profit u/s 115 JB of the Act Additional gratuity while computing income under normal provision of the Act. - A.O. was not justified in making this disallowance. Thus, this ground of appeal is allowed. TDS u/s 194A - interest payment made to SBI Bank- Bahrain Branch - disallowance u/s.40(a) - HELD THAT:- As decided in own case AY 2005-06 [ 2023 (2) TMI 1210 - ITAT MUMBAI] CIT(A) in his order has given finding that Bahrain Branch of State Bank of India (SBI) is part of SBI which is governed by the Banking Regulation Act and this fact is not disputed by LD DR. Further it is also a settled position that a branch office is part of the entire SBI and not a separate legal entity. Payment to foreign branch of Indian entity tantamount to payment made to Indian company only. Accordingly, provisions of Section 195 are not applicable in respect of payments made to foreign branch of Indian Bank. Deduction u/s 80IA on TG-2 and TG-3, Wadi unit allowed - As deduction u/s. 80-IB was granted for an initial assessment year, same could not be rejected for subsequent assessment years unless relief for initial year was withdrawn. Exclude the specific expense of cost audit fees and subscription to CMA in respect of Cement manufacturing units for the purpose of computing deduction u/s.80IA/ 80IB - We reject the grievance of the assessee against allocation of HO expenses, but we permit the assessee s plea to the limited extent that the allocation of HO expenses should be done on the basis of expenditure incurred by the units vis- vis overall expenditure - AO is directed to allocate Head office expenses (other than auditor fees and CMA expenses) on the basis of expenditure incurred by the units vis- -vis overall expenditure. Wealth tax provision is not required to be added back while computing Book Profits under Section 115JB. Provision for Normal/Additional Gratuity is in the nature of provision for an ascertained liability and is, therefore, not required to be added back while computing Book Profits in terms of Clause (c) of Explanation 1 to Section 115JB(2) . Addition of provision for leave encashment made while computing book profit u/s 115JB is deleted. Deduction u/s 80HHC computed on the basis of book profit u/s 115JB - above benefit to the assessee was denied by the Finance Act 2011 with retrospective effect 01-04-2005 - HELD THAT:- Any amendment denying the benefit to the assessee cannot be brought under the statute with retrospective effect. There will be certain classes of assessee who must have claimed the benefit of clause (iv) of explanation 1 to section 115 JB of the Act prior to the amendment by the Finance Act as discussed above. But, assuming their case have not been selected under scrutiny, then such benefit cannot be denied to them. On the contrary the assessees who were subject to scrutiny assessment, if they are denied the benefit, there will be discrimination to them. It is for the reason that there will not be allowed the benefit granted under the statute but withdrawn by way of retrospective amendment. Thus, the impugned amendment will create disharmony among different taxpayers. In view of the above and after considering the facts in totality, we are of the view that the assessee cannot be deprived for the benefit granted to it under the statute by way of retrospective amendment in the given facts and circumstances. Hence, the ground of appeal of the assessee is allowed. Amount withdrawn from share premium account while computing book profit u/s 115JB - We confirm the order of Ld. CIT(A) holding that amount transferred from Share Premium Account to the profit loss account was correctly reduced from Book Profits by the Assessee while computing book profit as per the provisions of Clause (i) of Explanation to Section 115JB(2) of the Act. This ground of appeal in Departmental Appeal is dismissed. Addition of VRS expenditure pertaining to earlier years, capital expenditure debited and write down of value of assets while computing the book profit u/s.115JB - HELD THAT:- CIT(A) has allowed the claim of the assessee on the basis of decision of the case titled as Apollo Tyres Ltd. [ 2002 (5) TMI 5 - SUPREME COURT] We also noticed that the issue has already been covered in favour of the assessee in the assessee s own case for the A.Y. 2002-03 we are of the view that the CIT(A) has allowed the claim of the assessee rightly. Capital expenditure debited to Profit Loss Account is not required to be added back while computing book profits under Section 115JB Amount transferred to Debenture Redemption Reserve cannot be added back while computing Book Profits. Excise duty exemption received by assessee are capital receipts both for the purpose of computing income as per normal provision of the Act as well as book profit u/s 115JB and the addition made by Assessing Officer is deleted. Disallowance u/s 14A in connection with proportionate interest disallowance is deleted. Sale of Refractory Business as slump sale by invoking the provision of sec. 50B instead of item-wise sale - HELD THAT:- AO has wrongly invoked provisions of Section 50B of the Act for computing Income from Capital gain on sale of undertaking in the year under consideration. The assessee has correctly treated transaction of sale as item wise sale in return of income and computed Income from capital gain as applicable to sale of Individual item of assets. Thus, addition made by Assessing Officer and sustained by Ld.CIT(A) cannot be upheld and related ground of appeal is allowed. Recompute taxable long term capital gains arising on transfer of fixed assets as well as investments after giving the benefit of indexed cost of acquisition (if applicable) while computing taxable profits u/s 115JB Addition of corporate tax paid at Saudi Arabia in computing Book Profit u/s 115JB - Assessee having earned profits/dividend on its operations in several countries, it will be allowed deductions in respect of taxes paid abroad, in respect of which no foreign tax credit was granted to assessee. Claim of assessee is found to be as per provisions of law and this ground of appeal is accordingly allowed. Payment to BIS Marking in the current assessment year and the same is eligible to claim as business expenditure - After considering the submissions, we are inclined to remit this issue back to the file of Assessing Officer to verify the claim of the assessee and allow the same on the payment basis as per law. Therefore, this additional ground raised by the assessee is allowed for statistical purpose.
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Customs
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2023 (11) TMI 531
Seeking provisional release of the goods - Ethanol Alcohol - classification of goods - to be classified under CTH 22.07 or under CTH 98.02 - HELD THAT:- The Petitioner would be justified in seeking provisional release of the goods. Admittedly, there is no dispute that the Petitioner has been importing these goods for last many decades and the classification under 98.02 has been accepted by the Respondents. Except the bill of entries which are the subject matter of show cause notice dated 28th July 2022 all the imports are cleared under CTH 98.02. The Petitioner has replied to the said show cause notice, but till today the Respondents have not adjudicated and pass any order. The Petitioner is a regular importer of the said goods and not a fly by night operator. The goods are in the bottles of 500 ml and confirm to the marking requirement as per the chapter 98 of the Customs Tariff Act. The Respondents would not be justified in not permitting provisional release of goods by contending that the goods under consideration are used in vaccine and sanitizer etc. The classification has to be seen at the time of import by the Petitioner and not the use to which it is put by the buyers of the goods from the Petitioner. There is no condition in the Customs Tariff under chapter 98 which imposes such an obligations on the Petitioner - the Respondents are not justified in refusing to release the goods provisionally. The Petitioner is entitled for provisional release goods under bill of entry no. 7594166 dated 30th August 2023 on execution of the bond - Petition disposed off.
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2023 (11) TMI 530
Rejection of the benefit of Preferential Trade Agreement - Steaming Non-Coking Coal imported by the appellant - rejection on the ground that invoice has been raised by the third party country - rejection also on the ground of difference in the invoice number as noted in the Country of Origin Certificate compared to the invoice issued by the Dubai supplier. Rejection on the ground that invoice has been raised by the third party country - HELD THAT:- On perusal of the Preferential Trade Agreement, it is found that it allows the invoice to be issued by a third party country - the rejection of the benefit of the Notification on this ground cannot sustain and requires to be set aside. The second ground for rejection is that there is a difference in the invoice number as noted in the Country of Origin Certificate compared to the invoice issued by the Dubai supplier - HELD THAT:- On perusal of the invoice, it is found that along with the number of the invoice there is an addition of the letters A and B in the invoices issued by the Dubai, UAE supplier. It is understood that the invoices were split into two for the convenience of the quantity of the goods exported and for issuing the Country of Origin Certificate respectively. These discrepancies do not have any bearing to the benefit under the Preferential Trade Agreement. The Ld. counsel has been able to give plausible explanation for the minor difference in the invoice numbers - the rejection of the benefit on the second ground also cannot sustain and requires to be set aside. The impugned order rejecting the benefit of concessional rate of duty as per the Preferential Trade Agreement is not justified. The impugned order is set aside - Appeal allowed.
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Corporate Laws
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2023 (11) TMI 529
Refusal of registration of shares of the Respondents - ambit of Section 111A of Companies Act - sufficient cause for refusal to register shares or not - NCLAT directed the appellant to register the shares of respondents - HELD THAT:- The interpretation of the expression sufficient cause in the context of refusal by a Company to register shares has to be pragmatic, reasonable and in consonance with the purpose of the legislation. Moreover, it has to be kept in mind that the legislature deliberately used the expression sufficient cause in proviso to Section 111A (2) as against the expression contravention of any of the provision of law used in proviso to Section 111A (3) of the Companies Act, 1956. In the opinion of the Court, the import of the expression sufficient cause cannot be reduced to mean only violation or contraventions of law. Any mala fide transfer done with the intention of obstructing the functioning of the company can also constitute sufficient cause for refusing the registration of transfer of shares. In the case at hand, Respondent No. 4 was associated with the Appellant company in the past. Respondent No. 1 is stated to be his wife while Respondent No. 5 is his daughter. On the other hand, Respondent Nos. 2 and 3 are alleged to be relatives of the Ex-statutory director of the Appellant company. The Respondents have filed multiple complaints against the Appellant company to various statutory authorities - the allegation of the Appellant company is that the Respondents seek to cause hurdles in the way of bona-fide corporate decisions taken by the Appellant Company. The Respondents have chosen not to appear before this Court to rebut the allegation of the Appellant. These facts constitute sufficient cause and the Appellant company has rightly refused to register the shares of the Respondents - Appeal allowed.
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Insolvency & Bankruptcy
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2023 (11) TMI 528
Admission of section 9 application - HELD THAT:- Learned Counsel for the Appellant submits that he has already filed an application bringing on record the proof of the payment to the Operational Creditor. Learned Counsel for the Operational Creditor submits that he has already received the entire payment. There are no reason in continuing the Corporate Insolvency Resolution Process any further - The Appeal is disposed of, impugned order is set aside and CIRP is closed.
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2023 (11) TMI 527
Initiation of CIRP - NCLT rejected the Section 7 Application - no concluded contract between the parties - no consideration for time value of money - no financial debt - HELD THAT:- There is nothing on the record to indicate that the company at any time has issued a private placement offer. Appellant has not brought any material on record to indicate that company at any time has issued private placement offer and in pursuance of which Appellant has made any application of allotment of shares. There being no material brought on the record to indicate that the amount of Rs.2.6 Crore was advanced by the Appellant in pursuance of any offer of private placement invited by the company. Amount of Rs.2.6 Crores which was advanced by the Appellant cannot be treated to be amount in response to the private placement. When the amount advanced cannot be related to Section 42, the applicability of Section 42(6) cannot be pressed as is being sought by the Appellant in the present case. Similarly, Rule 2(vii) of the Companies (Acceptance of Deposit) Rules 2014 and its explanation are not attracted. Rule 2(vii) contemplates any amount received and held pursuant to an offer made in accordance with the provisions of the Companies Act, 2013. Validity of findings of NCLT in PARA 27 of the order - HELD THAT:- Counsel for the Appellant is right in his submission that what was observed in the aforesaid e-mail and the attachment was that the amount can come out of the sale of summit units and then to be paid to the Appellant. The said e-mail cannot be read to mean that the amount has been paid and debt has been liquidated, even the Adjudicating Authority notices that the Financial Creditor has agreed that the said sum of Rs.2.6 Crores could have been adjusted by sale of summit units. The Corporate Debtor, thus, is not supporting the observations of the Adjudicating Authority that an amount of Rs.2.6 Crores has to be paid from sale of summit units and now the new theory is being propounded that the said amount is paid and adjusted - the finding of the Adjudicating Authority in paragraph 27 that no financial debt is due is unsustainable. Further, the finding of the Adjudicating Authority is it can easily be presumed that as on this day there is no financial debt within the meaning of Section 5(8) of the IBC, 2016 , which finding is based only surmises and conjecture. There being no material on the record to indicate that an amount of Rs.2.6 Crore was paid to the Appellant, the impugned order passed by the Adjudicating Authority deserves to be deleted. The order of the Adjudicating Authority rejecting Section 7 Application is upheld - Appeal disposed off.
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Service Tax
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2023 (11) TMI 526
Levy of service tax - Survey and Exploration of Mineral service - payment made to GX Technologies Corporation, USA (GXT) and GGS Spectrum Limited, UK (GGS) for use of the data collected by them under an agreement with DGH of Government of India - amount of income tax deposited under the TDS Scheme on payment made to Dynamic Global Advisors Ltd., which is located outside India, for the services received - reverse charge mechanism. Survey and Exploration of Mineral for payment made to GX Technologies Corporation, USA (GXT) and GGS Spectrum Limited, UK (GGS) for use of the data collected by them - HELD THAT:- Under the pre-negative regime, services were specifically defined with respect to scope and coverage, for the purpose of levy of service tax. The Show Cause Notice, as far as the first issue is concerned, proposes to levy service on the Appellant under the category of survey and exploration of mineral . The taxable service of survey and exploration of mineral and the expression survey and exploration is defined under Section 65(105)(zzv) and 65(104a) of the Finance Act, 1994 - Also, CBEC Circular dated 17.09.2004, clarifies the activities covered under the service category of survey and exploration of mineral . In the present case admittedly, the seismic data is owned by GXT and GGS which they have acquired under a contract entered into by them with DGH of India. Further, it is also admitted position that the said data is available off-the-shelf and is made available on license to use basis, to the Appellant. The Appellant has not engaged service of GXT and GGS for the purpose of carrying out any specific survey or exploration activity for them. This can be equated with the Appellant seeking license to use any copy right OR IPR protected knowledge, available in the form of a book or a web portal - it is observed that GXT and GGS are located outside India, and while they may acquire data from or within India, at the stage of acquisition of data, the same is done for their own self. For making available that data to the Appellant, it is being done from outside India and therefore the activities of licensing of the acquired data are carried out from outside India. Thus, applying Rule 3 (ii) of the Service Import Rules, service tax will not be applicable on these services. Applicability of service tax on TDS (income tax) - HELD THAT:- Tribunal in catena of judgments has held that service tax cannot be levied on the portion of TDS not deducted and remitted to the government - In the present case, TDS is paid by the Appellant on its own account (out of pocket) and hence, respectfully following the ratio in the judgment in M/S. HINDUSTAN OIL EXPLORATION CO. LTD. VERSUS COMMISSIONER OF GST CENTRAL EXCISE [ 2019 (2) TMI 1248 - CESTAT CHENNAI] , it is held that service tax will not be applicable on the TDS deposited by the Appellant on their own account and paid to the Government, in addition to the consideration paid to DGAL. With respect to the judgment of this Hon ble Tribunal in the case of SHELADIA RITES VERSUS CCCE ST, VISAKHAPATNAM - I [ 2018 (12) TMI 1244 - CESTAT HYDERABAD] relied upon by the Authorised Representative for the Revenue, it is seen that the facts in this case are different in as much as there the TDS was deducted from the gross amount payable to the service provider. In the present case, however, the gross amount charged by the service provider under Section 67 of the Finance Act, 1994, will only attract service tax and not on the TDS amount. Since both issues are decided on merits, no finding on limitation is given, and it is left stand open. Appeal allowed.
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2023 (11) TMI 525
Classification of services - business of operation and maintenance of Air cargo terminal, providing Cargo Handling services in respect of domestic as well as international cargo, transported by air through Rajiv Gandhi International Airport - Unloading/Acceptance of cargo from consignor - Checking label marks and number - Taking gross weight and volumetric weight - Facilitating Customs examination of cargo in case of international cargo which may involve packing and un-packing - After examination receiving Let Export Order from the Customs - Again checking marks and labels and other documents against AWB and acknowledging the same to agent - Loading cargo in trolleys for screening - Screening of cargo through X-Ray machines - Build-up of cargo in pallets for loading on Aircraft, by ground handling company - to be classified under Cargo Handling Services (CHS) or Airport Services (APS) and Storage and Warehousing Services (SWS)? Unloading/Acceptance of cargo from consignor - Checking label marks and number - Taking gross weight and volumetric weight - Facilitating Customs examination of cargo in case of international cargo which may involve packing and un-packing - After examination receiving Let Export Order from the Customs - Again checking marks and labels and other documents against AWB and acknowledging the same to agent - Loading cargo in trolleys for screening - collection of Terminal Processing Charges as SWS or not? - HELD THAT:- Keeping in view the nature of activities being performed and the charges being collected, it would be relevant to understand the flow of goods and the role of the Appellants in the cargo terminal. It is not disputed that the activities are being performed by the Appellants in the cargo terminal for which they are collecting certain charges either from the exporters/freight forwarders/agents or from the Airlines. It is also not in dispute that the goods in question are cargo and they are intended for loading into Aircraft for transportation. It is also not in dispute that cargo is meant for export. When the cargo is received at the cargo terminal, the Appellants are unloading and also storing the same in the terminal in the designated area, for completion of certain formalities, documentations, screening, etc. - the activities undertaken are in relation to the cargo within the cargo terminal , provided to the exporters/freight forwarders/agents in connection with the movement of export cargo. Generally, it is called prescreening. Sometimes for certain reasons the goods may not be cleared for export and the goods continue to lie in the designated area, for which they are charging demurrage charges. Whereas, sometimes the Airlines are unable to lift the load and thus the export-cleared cargo lies in the sterile area, for which they may charge demurrage from the Airlines. In all these cases, there is a free time and demurrage is charged only beyond free time. Merely by resorting to what they felt and what they were recovering as Terminal storage charges would not make this Appellant also a warehouse keeper. The scope of the service has to be determined in terms of express wordings of that classification in Finance Act Rules, and not in terms of nomenclature used for collecting the revenue for the services provided to the service recipients, in this case, exporter/freight forwarder/agent. In fact, the same notification also indicates that charges can be collected by the authority or any authorized cargo handling agency for various services (emphasis supplied). This precisely supports the contention that the activity being performed by the Appellant is that of Cargo Handling Agency for which they are collecting certain charges in the name of terminal storage processing charges. Therefore, Commissioner was not correct in holding the activities as covered from under SWS. Another aspect which is relevant is that in any cargo or freight terminal, where goods are received and processed for export, the area in which this is required to be done is called Customs area, notified by Revenue. Within the customs area all the activities of loading, unloading, storage, examination, etc., being done by authorized person only, known as customs cargo service provider (CCSP). These activities are regulated by Customs Area Regulations 2009. A plain reading will also suggest that cargo handling activities are performed before the cargo is exported. Thus such activities are in the nature of handling of cargo only. Screening of cargo through X-Ray machines - Build-up of cargo in pallets for loading on Aircraft, by ground handling company - to be classified under APS or not? - HELD THAT:- It is observed that these are required for safe passage of export cargo in the Aircraft. These are required to be done in terms of certain mandatory requirements and on specific request from Airlines for safe and easy movement of cargo and its loading and unloading in the Aircraft. These two activities are neither charged to the customers using the terminals, nor are these directly related to the activities concerning CHS. Here, the amount is being collected from the Airlines to whom specific services are being provided as per their requirement. The scope of APS as it existed even prior to its amendment in 2010, includes services provided to Airlines as well as for cargo and passenger baggage handling such as security, transit facilities, landing charges, parking charges etc. It is an admitted fact that services are provided to the Airlines on their specific request and not at the behest of the exporter/freight forwarder/agent. Therefore, these services appear to be classifiable under the category of APS. Prior to 01.07.2010, when proviso was added to Sec 65(105)(zzm), Airport service is read as service provided to any person, by Airport authority or by any other person, in any airport or civil enclave. Further, prior to 01.07.2010, we find that Cargo Handling service as defined under Sec 65(23) of the Finance Act includes also activities like loading, packing in special containers or for non-containerized freight, services provided by a container freight terminal or any other freight terminal, for all modes of transport, and cargo handling service incidental to freight, but does not include handling of Export cargo or passenger baggage or mere transportation of goods. The services being screening of cargo through X-ray machines and build-up of cargo in pallets for loading on Aircraft, by ground handling company also fall both under the Cargo Handling service as well as under Airport service. However, by virtue of provisions of Sec 65A, giving the guidance as to classification, as Sec 65(23) occurring earlier than sub-clause (zzm) of Sec 65(105), it is held that these services shall also be classifiable under Cargo Handling service. There are merits in the Appeal of Appellant/Assessee - appeal allowed.
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2023 (11) TMI 524
Classification of service - Business Auxiliary Service or not - receiving various incentives on quantity of purchases/sales of mobiles and shown such amounts under separate head of income in their Balance Sheets - HELD THAT:- The trade discount and cannot be classified under Business Auxiliary Service. Even this bench in the matter M/S AIA ENGINEERING LTD. VERSUS THE COMMISSIONER, ST. - AHMEDABAD [ 2014 (12) TMI 241 - CESTAT AHMEDABAD] has taken a view that if goods are purchased on outright basis then discounts cannot be treated as Business Auxiliary Service. Further, we also find that in the show cause notices issued subsequently for the period 2014-2015 and 2015-2016 for negative list period, Order In-Appeal Bearing No. RAJ-Excus-000-App-262-263 TO 2017-2018 dated 27.02.2018 was submitted to be in favour of the party on the same issue. The appellant must succeeded in this matter also - Appeal allowed.
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Central Excise
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2023 (11) TMI 523
Conversion to DTA from EOU - Alleged incorrect payment of duty on semi-finished goods and finished goods at the time of de-bonding into a DTA unit - failure to adopt Rule 14 of Customs Act, 1962 - it was held by CESTAT that The duty demand raised on the semi-finished goods and finished goods cannot be sustained for the reason that the goods have already been exported and that too on payment of duty under Section 3(1) of Central Excise Act, 1944. HELD THAT:- The appeals are dismissed on facts.
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2023 (11) TMI 522
CENVAT Credit - input services - Various services availed prior to commencement of commercial production in the factory - Emergency Medical Services - HELD THAT:- The very same issue as to whether credit on input services is eligible before commencement of production was considered by the Tribunal in the case of PEPSICO INDIA HOLDINGS (PVT.) LTD. VERSUS COMMISSIONER OF CENTRAL TAX, TIRUPATI [ 2021 (7) TMI 1094 - CESTAT HYDERABAD] . In the said case, the Department had denied the credit alleging that the services are used for setting up of factory and it was held that Although setting up the factory is not manufacture in itself, it is an activity directly in relation to manufacture. Without setting up the factory, there cannot be any manufacture. Services used in setting up the factory are, therefore, unambiguously covered as input services under Rule 2(l)(ii) of the Cenvat Credit Rules, 2004 as they stood during the relevant period (post 1-4-2011). The mere fact that it is again not mentioned in the inclusive part of the definition makes no difference. Once it is covered in the main part of the definition of input service, unless it is specifically excluded under the exclusion part of the definition, the appellant is entitled to Cenvat credit on the input services used. A similar issue was considered in the case of INDIAN COPPER CORPORATION LTD. VERSUS COMMISSIONER OF COMMERCIAL TAXES, BIHAR AND OTHERS [ 1964 (10) TMI 41 - SUPREME COURT] , which is also a decision passed analysing as to whether the impugned goods therein would get the benefit of Section 8(1) of the Central Sales Tax Act. These decisions do not have any connection with the facts or law considered in the present case - In the present case, there is no dispute that the appellant is a manufacturer of goods and so also, there is no dispute that the process undertaken by the appellant is manufacture. For these reasons, the decision relied by the Ld. Authorized Representative is of no assistance to the Department. Emergency Medical Services - HELD THAT:- The appellant has availed credit on Emergency Medical Services from M/s. Sri Vinayak Hospital to the tune of Rs.31,518/-. It is explained by the Ld. Counsel that being a factory, they have to provide on-site emergency medical services and the unit was set up at the factory in case of any accidents - the said service cannot fall under the ambit of eligible input services as it is not proved that such services are used for personal consumption. For the said reason, the amount of credit availed in respect of Emergency Medical Services is disallowed. Further, the Ld. Counsel also submitted that the appellant had reversed the credit for September 2013 availed for the services provided by the service provider viz. M/s. Lease Plan India Pvt. Ltd. to the tune of Rs.7664.99/- since there was lack of clarity in respect of the said service and that they are not contesting the same - the disallowance of credit in respect of the above service is upheld, as the same is not contested by the appellant. Disallowance of credit availed on Emergency Medical Services provided by M/s. Sri Vinayak Hospital to the tune of Rs.31,518/- is upheld - Disallowance of the credit availed, claimed to be reversed for September 2013, for the services rendered by M/s. Lease Plan India Pvt. Ltd. to the tune of Rs.7664.99/- is upheld - Disallowance and recovery of credit in respect of all the remaining services is set aside. The demand, interest and penalties imposed in respect of all other services are set aside. Appeal allowed in part.
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2023 (11) TMI 521
Refund of accumulated CENVAT Credit - denial of benefit of refund on the ground of limitation provided under Section 11B of the Central Excise Act, 1944 made applicable to the service tax matters under Section 83 of the Finance Act, 1994 - HELD THAT:- In appeal, the learned Commissioner (Appeals) had negated the original order, holding that the relevant date for reckoning the limitation for filing refund application under Section 11B ibid, would be the date of receipt of payment in convertible foreign exchange by the exporter-appellants and in case where payment for the service had been received in advance, then the same would be the date of issue of invoice. Accordingly, he has partly allowed the refund benefit, except for the period January, 2014 to March, 2014, where the entire amount of refund claim was rejected on the ground that no details of Foreign Inward Remittance Certificates (FIRCs) were submitted by the appellants. However, on perusal of the case records, more particularly the refund application filed by the appellants on 23.12.2014, we find that the appellants had specifically stated therein that the consideration for provision of the services exported have been received by them in convertible foreign currency and that proof of such payments were also annexed to such application. Since, verification of the FIRC etc., has to be done at the original stage, the matter should be remanded back to the original authority for the limited purpose of verification of such documents and for sanction of the refund claim in favour of the appellants, if due, as per law. Therefore, the impugned order rejecting the refund claims filed for the period January, 2014 to March, 2014, is set aside and the appeal is allowed by way of remand to the original authority for verification of the FIRC and other documents and for consideration of the refund benefit thereafter. The impugned order upholding rejection of refund applications on the ground of non-establishment of nexus cannot stand for judicial scrutiny - appeals allowed in favour of the appellants on the ground that grant of refund benefit is not subjected to compliance of the provisions of Rule 2(l) ibid and denial on the ground of non-establishment of nexus between the input services and the output services under Rule 5 ibid, is not sustainable. Appeal disposed off.
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2023 (11) TMI 520
Activity amounting to manufacture or not - activity of packing of rechargeable batteries along with chargers and labelling the same is a process incidental or ancillary to the completion of a manufactured product - whether the activity undertaken by the Appellants would amount to 'manufacture' or not as defined under Section 2(f) of the CEA, 1944? - HELD THAT:- In the present case, it is observed that after undertaking the activity of packing the chargers with the batteries and labelling them no different commercial commodity comes into existence. The goods viz. the charger and batteries remain exactly the same even after they are put together in a blister pack - In light of the decision of the Hon'ble supreme Court in M/S. SERVO-MED INDUSTRIES PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI [ 2015 (5) TMI 292 - SUPREME COURT] , it is held that the activity of mere packing of rechargeable batteries along with battery chargers and labelling the same as Eveready Rechargeable/Ultima and Uniross/Power Bank does not amounts to manufacture. Section 2(f)(ii) of the CEA, 1944 deems certain processes as amounting to manufacture, if there is a Section Note or a Chapter Note deeming the processes as amounting to manufacture. In the present case, neither under Section XVI nor under Chapter 85 there are any notes deeming activity of packing or repacking as amounting to manufacture. Further, in terms of Section 2(f)(iii) of the CEA, 1944 goods specified in 3rd schedule to the CEA, various processes like packing or repacking, labelling or relabelling is deemed to be the manufacturing process - the demand confirmed in the impugned order dated 02.12.2009 is not sustainable. Since the demand is not sustainable, the question of demanding interest and imposing penalty does not arise. The activity undertaken by the Appellant would not amount to manufacture as defined under Section 2(f) of Central Excise Act, 1944.The same discussion holds good for the Appellant also, since they are the job workers who have undertaken the activity of packing and labelling. Thus, the demand of central excise duty from the Appellant M/s New Engineering Company is not sustainable, as the activity undertaken by them does not amount to 'manufacture' as defined under Section 2(f) of CEA, 1944. Since, the demand itself is not sustainable, the question of demanding interest and imposing penalty on the Appellant does not arise. Appeal allowed.
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CST, VAT & Sales Tax
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2023 (11) TMI 519
Maintainability of appeal - appeal dismissed on the ground that appellant failed to pay the amount of pre-deposit ordered by the Tribunal - Section 73 of the GVAT Act - HELD THAT:- The Tribunal has not given any cogent reason as to how the prima facie case of the appellant is considered while determining the amount of pre-deposit. This Court in case of Kavya Marketing [ 2022 (4) TMI 1202 - GUJARAT HIGH COURT] has held We have noticed that while deciding the admission of appeals on merits, the first appellate authority summarily dismissed the appeal on the ground of non-payment of pre-deposit, and when such order is challenged in second appeal before the Tribunal, it is incumbent upon the Tribunal to examine the prima facie case and thereafter, to arrive at the decision with regard to insistence of payment of pre-deposit for entertainment of appeal. This Court has time and again in identical cases has held that Tribunal is obliged to consider a prima facie case, which the appellant may be in position to highlight. The interest of justice would be met if the appellant is directed to pay Rs. 15,00,000/- instead of Rs. 42,00,000/- in respect of all the three years in Six Appeals towards pre-deposits within a period of one month from today i.e. on or before 31.10.2023 - The appellant shall file a bond before the Assessing Officer to the satisfaction of the Assessing Officer with regard to the outstanding dues to be paid by the appellant to the effect that the appellant fails in the appeal filed by the Tribunal subject to further rights and contentions of the appellant in accordance with law, the appellant shall pay the amount of outstanding tax liability. All these appeals are partly allowed by remanding the matters back to the First Appellate Authority - The impugned orders are quashed and set aside.
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Indian Laws
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2023 (11) TMI 518
Dishonour of Cheque - discharge of legally enforceable debt or not - acquittal of the accused - rebuttal of presumption - HELD THAT:- It is a settled position in law that for the purpose of the prosecution under section 138 of the NI Act, an instrument must be entered into by the person who owes a legally enforceable debt to another and such person who takes over the liability of the former to discharge such debt in favour of the latter. The party to whom such debt is owed must either be made a party to such instrument or must be informed of such assignment/transfer of liability. A mere statement that the cheque was issued by a person to discharge the liability of another is not sufficient to set the wheels of criminal prosecution under section 138 of the NI Act in motion. The presumption under section 139 of the NI Act is rebuttable. The benefit under this section cannot be availed if the accused raises a plausible defence, which creates doubts about the existence of a legally enforceable debt or liability. To create such doubt, the accused can rely on the materials submitted by the complainant in order to raise such a defence, and it is conceivable that in some cases, the accused may not need to adduce evidence of his/her own. In the present case, the cheque was not issued by the accused towards the discharge of liability of the debt of Mr Dhaval Bhatt owed by him to the complainant. If the cheque had been issued by Mr Dhaval Bhatt for the outstanding amount of Rs. 10,02,980/-, the accused could have availed the benefit of section 139 of the NI Act. However, in the absence of the assignment of liability of Mr Dhaval Bhatt unto the accused and there being no nexus between the issuance of the said cheque and the liability of the accused to repay the outstanding amount to the complainant, the trial Court rightly concluded that the complainant failed to prove that the dishonoured cheque was issued by the accused for discharge of liability. The trial Court has rightly acquitted the accused for the offence punishable under section 138 of the NI Act - Appeal dismissed.
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