TMI Tax Updates - e-Newsletter
December 16, 2021
Case Laws in this Newsletter:
GST
Income Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Input tax credit - land filling pit can be considered as ‘Plant and machinery’ or as ‘civil structure’ - In the second explanation given in Section 17, while providing the meaning of the term plant and machinery, it has been clearly stated that Buildings and Civil Structures shall not be covered under the term Plant. However, while so clarifying, it has been accepted and understood that plant and machinery many a times requires support structure and/or foundation for installation and cannot work otherwise. Thus, civil structures such as foundation and supporting structure for fastening of plant and machinery to earth has been included as part of plant and machinery. However, any other civil structure has clearly been excluded from the definition of ‘plant and machinery’. The land filling pit comes within the ambit of the exclusion and hence is not eligible for input tax credit. - AAAR
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GST:
Reverse Charge Mechanism - procurement of renting of immovable property services from Seepz Special Economic Zone Authority (Local Authority) - zero rated supply or not - Overall, a harmonious construction of section 5 (3) of IGST Act, 2017 read with relevant notifications and section 16 of IGST Act, 2017 clearly stipulates that applicant is liable to pay tax under Reverse Charge mechanism. - AAR
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GST:
Classification of services - Work Contract Services on Construction of Roads - Tax Rate to be charged by the sub-contractor to main contractor - In respect of Sub-Contract awarded to the applicant by the main contractor, to whom Aurangabad Municipal Corporation awarded the contract for Executing Work of construction of Concrete Roads in Aurangabad City, the rate to be charged is 6% SGST plus 6% CGST, total 2%, as discussed above. - AAR
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GST:
Nature of activity - business or not - activity of the applicant i.e. collecting contributions and spending towards meeting and administrative expenditures only - contributions from the members - The amendment to Section 7 (mentioned above) clearly treats the applicant and its member as two different persons where there is a supply of services from the applicant to its members and thus as per the applicant’s own submission that two different persons have been envisaged in the law to tax a transaction as a supply made for a consideration, in the instant case there is a supply by the applicant to its members and consideration is received in the form of “fees”. - AAR
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GST:
Classification of services - activity of surface coating undertaken by the Applicant in the State of Maharashtra on original/new goods received from Customer - The subject activity undertaken on old and worn out goods received from the end users is an activity of repair and squarely falls under SAC 9987 and will attract 18% GST - AAR
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Income Tax:
Interest u/s 244A of the Act on the advance tax payment - The benefit of advance tax has already been allowed to the assessee, i.e., petitioner. In any event, there is no finding either by the Assessing Officer or respondent no.1 that there was delay and how petitioner was responsible for that delay. - Revenue directed to compute the interest and made the payment - HC
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Income Tax:
Exemption u/s 11 - Charitable activity u/s 2(15) - The general public utility from such construction is derived as fact with the facilities constructed by the assessee are put to utility. The activity undertaken by the assessee on one hand and on another hand with the ultimate purpose or user of buildings constructed by the Government shall not be mistaken with one another. The assessee is interpreting proviso by excluding one of the important limbs, viz. involves the carrying on of any activity in the nature of trade, commerce or business. The decision of the authorities are independently considered and by taking note of CBDT Circular and above reasoning, we are of the view that the substantial question raised could be answered in favour of the revenue and against the assessee. - HC
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Income Tax:
Disallowance of depreciation claimed by the assessee u/s 32 on the fixed assets acquired/purchased during the year - asset put to use or not? - Once a new factory has been set up with new plant & machinery which was used for production during the year and depreciation has been claimed on such plant & machinery, then same cannot be denied on the ground that the plant & machinery of the new assets purchased during the year were not put to use. - AT
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Income Tax:
Reopening of assessment u/s 147 - Addition u/s 68 - No such evidence to prove the fact that the remittance made by the assessee in his NRE Account or the credit allegedly appearing in HSBC has any source from income in India or routed from any business connection in India. - None of the findings recorded by the CIT(A) have been assailed on the basis of any material or evidence rather based on assumption. Therefore, we do not find any merit in the grounds of appeal raised by the revenue. - AT
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Income Tax:
Levying MAT u/s 115JB - 100% reduction of the profit u/s. 80IB(10) - while computing the book profit u/s. 115JB appellant had reduced it from book profit and claimed that it was not liable for tax under, this Section - explanation (1) to section 115JB clearly provides what can be adjusted from book profit. Hence, sub-section (5) duly saves the prescription of Explanation (1). Hence, this explanation (5) does not help the assessee to claim that section 80IB deduction permissible under the I.T. Act should be adjusted from book profit - AT
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Income Tax:
Unexplained cash credit - addition of cash deposit in bank account - It is important to mention here that the bank statements cannot be termed as books of accounts for the purposes of Sec. 68 - Also as found from perusal of the record that in the subsequent assessment years such cash deposits in the same bank account has been treated as sales executed through the assessee on which the assessee has earned commission income @ 7.5% on sale - A.O. as well as ld. CIT(A) have not specifically mentioned as to under which Section of the Act the additions have been made and also keeping in view the fact that Bank statement is constantly held to be not books of account for the purpose of Section 68 - Additions deleted - AT
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Income Tax:
TP Adjustment - The product licenses were held by the AE who was also responsible for maintenance of the product licenses. The manufacturing was done in strict adherence to Product License and the labeling on products was of assessee’s AE. The same is evident from Technical agreement (page no. 342-356 of the Paper Book) between the assessee and FDC-UK (AE). In case of non-AE sales, these expenses are to be borne by the assessee, which fact remains undisputed before us. Therefore, the adjustment of this component has rightly been allowed by Ld. CIT(A). - AT
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Income Tax:
Exemption u/s 11 - registration u/s 12AA Cancelled - Application test under section 11, 12 and 13 of the Act, could have been applied only after the outcome of the examination by the A.O. from the record. In our opinion, the A.O only after proper examination of the assessee’s record may be in a position to come to the conclusion as to whether the benefit directly or indirectly from the property or the income has been derived by the person mentioned under section 13(3) of the Act or as to whether the assessee Trust record entire receipt or expenses in the books of accounts. In the present case nothing is brought on record to substantiate that the A.O. had undertaken aforesaid exercise as regards to the provisions contained in Section 11, 12 and 13 of the Act. - AT
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Indian Laws:
Dishonor of cheque - compoundable offence - It can safely be said that when the offence under Section 138 N.I. Act is compounded in accordance with Section 147 N.I. Act, the question of imposition of a sentence on Respondent No.2 does not arise. Section 357(3) Cr.P.C. states that when a Court imposes a sentence, of which fine does not form a part, the Court may order the accused person to pay, by way of compensation any amount that the Court deems fit to the person who has suffered any loss or injury. - HC
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Central Excise:
CENVAT Credit - input - Coal - denial on the ground that since the appellant has not paid duty at the Central Excise tariff rates and have paid duty less than that, as per Customs Notification No. 12/2012-Cus, appellant are not eligible for Cenvat credit - For this reason itself, the Cenvat credit availed by the appellant in respect of CVD cannot be denied - AT
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Central Excise:
Levy of Special Excise duty - Air Conditioners and parts - case of the department is that the goods which have been cleared by the appellant are having essential characteristic of complete air conditioner therefore, is liable to special excise duty - it is clear that the assembly which were cleared by the appellant were not contained either one or more items specified in the board circular. Therefore, if this is correct then the goods cleared by the appellant do not have essential characteristic of complete air conditioner therefore, the same shall not be liable for levy of special excise duty. - AT
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VAT:
Reassessment under Section 43 of the OVAT Act - absence of completion of assessment under Sections 39, 40, 42 or 44 of the OVAT Act - The picture that emerges is that if the self-assessment under Section 39 of the OVAT Act for tax periods prior to 1st October, 2015 are not “accepted’ either by a formal communication or an acknowledgment by the Department, then such assessment cannot be sought to be re-opened under Section 43 (1) of the OVAT Act and further subject to the fulfillment of other requirements of that provision as it stood prior to 1st October, 2015. - HC
Articles
Notifications
News
Case Laws:
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GST
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2021 (12) TMI 612
Constitutional Validity of clause (iv) of the Notification No. 16 / 2021 Central Tax (Rate) dated 18th November, 2021 and clause 1(i) and clause 2(i) of Notification No. 17 / 2021 Central Tax (Rate) dated 18th November, 2021 - HELD THAT:- Issue notice. Ms.Supriya Juneja, Advocate accepts notice on behalf of respondent no.2. She states that Mr.Aditya Singhla, Advocate, who is to argue the matter, is in personal difficulty. She also prays for some time to obtain instructions. In the interest of justice, re-notify on 21st December, 2021.
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2021 (12) TMI 611
Input tax credit - land filling pit can be considered as Plant and machinery or as civil structure - whether the Appellant is entitled to avail input tax credit on the construction of land filling pit or is it hit by the restriction laid down in clause (d) of Section 17(5) of the CGST Act? - HELD THAT:- It is an engineered pit in which layers of solid waste are filled, compacted and covered for final disposal. Land filling is the term used to describe the process by which solid waste is placed in the landfill. The purpose of land filling is to bury/alter the chemical composition of the waste so that they do not pose any threat to environment / public health. Landfills are built to concentrate the waste in compacted layers to reduce the volume and monitored for the control of liquid and gaseous effluent in order to protect the environment and human health. It is lined at the bottom to prevent groundwater pollution. Each layer of solid waste is covered with a layer of compacted soil until the capacity of the landfill is reached. It is then covered and sealed. The life span of a landfill ranges from 12 to 40 years. The definition of the expression plant and machinery as given in the Second Explanation to Section 17(5) uses the term means . As per the principles of interpretation of law laid down by higher judicial forums, a definition which uses the term means has to be strictly construed to mean only what is stated therein and nothing more, nothing less. For the land filling pit to be considered a plant , it has to be either an apparatus , equipment or machinery which is fixed to the earth. Foundations and structural supports used to fix such apparatus, equipment and machinery to the earth are also covered within the ambit of the definition of plant and machinery . The definition also has certain exclusions to make it clear that even if they are fixed to the earth, they will not be considered as plant and machinery . The use of the word means indicates that the definition is hard and fast and no other meaning can be assigned to the expression than what is put down in the definition. In the second explanation given in Section 17, while providing the meaning of the term plant and machinery, it has been clearly stated that Buildings and Civil Structures shall not be covered under the term Plant. However, while so clarifying, it has been accepted and understood that plant and machinery many a times requires support structure and/or foundation for installation and cannot work otherwise. Thus, civil structures such as foundation and supporting structure for fastening of plant and machinery to earth has been included as part of plant and machinery. However, any other civil structure has clearly been excluded from the definition of plant and machinery . The land filling pit comes within the ambit of the exclusion and hence is not eligible for input tax credit. Appeal dismissed.
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2021 (12) TMI 610
Reverse Charge Mechanism - procurement of renting of immovable property services from Seepz Special Economic Zone Authority (Local Authority) - zero rated supply or not - Notification No. 13/2017 dated 28th June, 2017 read with Notification No. 03/2018 - Central Tax (Rate) dated 25th January 2018? - levy of IGST or CGST and SGST - HELD THAT:- In the instant case, as submitted by the applicant, they are receiving renting of immovable property services from a local authority i.e. SEEPZ SEZ and the applicant is registered under the CGST Act, 2017. Hence the applicant must discharge service tax liability under reverse charge mechanism as per the provisions of the amended Notification No. 10/2017- I.T. (Rate) dated 28.06.2017. The RCM provisions provide that all provisions of the IGST Act shall apply as if the recipient person is liable to pay tax. The subject case satisfies all the conditions of Notification No. 10/2017-I.T. (Rate) dated 28.06.2017 as amended, and therefore as per section 5(3) of IGST Act, 2017, we are of the opinion that, the applicant is liable to pay tax under Reverse Charge Mechanism. Applicant has cited Notification No. 18/2017- I.T.(Rate) to state that the renting of immovable property services are imported by them and are therefore exempted from IGST. Applicant has cited Section 2 (o) of SEZ Act 2005, which defines the term Import and have come to a conclusion that, receiving goods or services by a SEZ Unit from a SEZ Developer of same SEZ or different SEZ tantamounts to import of goods under the SEZ Act, 2005 and since, based on the Lohani Committee report, GST laws were aligned with the SEZ laws in 2018 the benefit of tax free procurement in terms of Notification No 18/ 2017- I.T. (Rate) dated 05.07.2017 is available to them. The applicant, a SEZ Unit, is situated in an Exclusive Economic Zone and as per the aforesaid definition mentioned above; the term India includes an exclusive economic zone. Therefore in the subject case both, the recipient and supplier of services are situated in India. Hence, Notification No. 18/2017 is not applicable in this case. We agree with the submissions of the jurisdictional officer on this issue. Zero Rated supplies - HELD THAT:- The sub-section 16(2) of IGST Act, 2017 itself says that credit of input tax may be availed for making zero-rated supplies, notwithstanding that such supply may be an exempt supply. Further sub-section 16 (3) is only applicable to registered person making zero rated supply i.e. suppliers of Zero Rated Supplies, but here, the applicant is recipient and thus it is not covered under section 16(3). Overall, a harmonious construction of section 5 (3) of IGST Act, 2017 read with relevant notifications and section 16 of IGST Act, 2017 clearly stipulates that applicant is liable to pay tax under Reverse Charge mechanism. Whether they are required to discharge liability under Reverse Charge Mechanism for procurement of other services? - HELD THAT:- Notification No. 10/2017-I.T. (Rate) dated 28.06.2017- amended by Notification No. 3/2018- IT. (Rate)-dated 25.01.2018, notifies only specific category of services on which tax is payable under reverse charge mechanism. Hence, applicability of the said notification cannot be decided in a general/blanket manner for other services mentioned by the applicant because the other services are not enumerated by the applicant - this issue cannot be answered in absence of proper information provided by the applicant. Under which head tax Applicant will be required to discharge tax, if any, under reverse charge mechanism? - HELD THAT:- The tax will have to be discharged under IGST.
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2021 (12) TMI 609
Classification of services - Work Contract Services on Construction of Roads - Tax Rate to be charged by the sub-contractor to main contractor - rate of tax of 12% or 18%? - HELD THAT:- In the present case, the works contract i.e. composite contract of construction of roads has been awarded by the Aurangabad Municipal Corporation to M/s J.P. Enterprises (Main contractor) and the said main contractor has awarded part of said contract to the applicant. The applicant is thus a sub-contractor and for the supply undertaken, has issued invoices by charging GST @ 12% - the supply of service under the impugned contract is not yet completed. It is still a work being undertaken by the applicant at the time of filing of the application and therefore satisfies the provisions of Section 95 of the CGST Act. Hence, the subject application cannot be rejected outright on the ground contended by the jurisdictional officer. Hence, the application of the applicant is being considered. As per Sr. No. 3 (ix) of the notification amended by Not cation 1/2018-Central Tax (Rate) dated 25 January 2018, Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017 provided by a sub-contractor to the main contractor providing services specified in item (iii) or item (vi) above to the Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity. attracts levy of GST at 12%. The jurisdictional officer has stated that, since the activity undertaken by applicant, construction of roads is related to item (iv) of the original notification 11/2017 and hence its does not qualify for tax rate of 12% GST due to the fact that the said Entry No. (iv) is not mentioned in the amended Sr. No. 3(ix). Hence, according to the jurisdictional officer, as the activity undertaken by applicant does not qualify for 12% tax rate, it should attract 18% tax rate i.e. 9% CGST and 9% MGST. Similarly, in the case of IN RE: M/S. BUILDING ROADS INFRASTRUCTURE CONSTRUCTION PRIVATE LIMITED, [ 2021 (8) TMI 526 - AUTHORITY FOR ADVANCE RULING, ANDHRA PRADESH] held that the works contract services pertaining to construction, erection, commissioning and completion of Bridges and Roads provided by the applicant as a subcontractor to the Contractors who have been awarded the construction contract pertaining to construction/widening of roads by the Government Entities such as National Highway Authority of India, falls under Serial No 3 (iv) of the Notification No.11/2017 as amended from time to time and chargeable to GST @ 12%.
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2021 (12) TMI 608
Nature of activity - business or not - activity of the applicant i.e. collecting contributions and spending towards meeting and administrative expenditures only - contributions from the members, recovered for expending the same for the weekly and other meetings and other petty administrative expenses incurred including the expenses for the location and light refreshments - supply or not - doctrine of mutuality - HELD THAT:- In view of the amended Section 7 of the CGST Act, 2017, we find that the applicant society and its members are distinct persons and the contribution received by the applicant, from its members is nothing but consideration received for supply of goods/services as a separate entity. The principles of mutuality, which has been cited by the applicant to support its contention that GST is not leviable on the contribution collected from its members, is not applicable in view of the amended Section 7 of the CGST Act, 2017 and therefore, the applicant has to pay GST on the said amounts received from its members. According to applicant, there is no commercial consideration involved in the process, just that the funds are collected in a common pool for meeting the expenses for the weekly meetings and other petty expenses incurred in meeting the common objective of betterment of society. According to applicant, the amount being collected from the members is reimbursement of expenses or share of contribution - The common pool is being spent back on the members only. According to applicant, in the absence of two distinct persons and also in absence of consideration, as defined under the Act, contributions received from the members in the Administration Account does not qualify as a Supply within the meaning of the term, as defined under the Act. The amendment to Section 7 (mentioned above) clearly treats the applicant and its member as two different persons where there is a supply of services from the applicant to its members and thus as per the applicant s own submission that two different persons have been envisaged in the law to tax a transaction as a supply made for a consideration, in the instant case there is a supply by the applicant to its members and consideration is received in the form of fees .
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2021 (12) TMI 607
Classification of services - activity of surface coating undertaken by the Applicant in the State of Maharashtra on original/new goods received from Customer - classifiable under service accounting code 9988 more specifically under code 998898 as job work activity chargeable to tax at 12% in terms of entry no. 26(id) of Notification 11/2017 Central Tax (Rate) as amended or at 18% in terms of entry no. 26(1v) of Notification no. 11/2017 - HELD THAT:- Since no new product comes into existence after the process conducted by the applicant on the goods supplied by its principals, therefore the process undertaken will come under the purview of job work as defined under Section 2 (68) of the CGST Act, 2017. Thus, the applicant is only a job worker to the OEMs and as a job worker, carries out processes on goods supplied by its principals - the impugned services supplied by the applicant are in the nature of job work. The said services do not fall under entries at items (i), (ia), (ib) and (ic) above. Therefore the subject supply of services will be covered by the residuary entry at item (id) of the said notification, namely, Services by way of job work other than (i), (ia), (ib) and (ic) above. Hon ble Supreme court in the case of M/S. MARUTI SUZUKI INDIA LTD. VERSUS COMMNR. OF CENTRAL EXCISE [ 2015 (3) TMI 784 - SUPREME COURT] has also held that there is a distinction between processing and manufacture and that Electro Deposition (ED) Coating of anti-rust treatment to increase shell life of various component is merely a processing activity and not a complete manufacturing activity. The impugned services supplied by the applicant are in the nature of job work services, classifiable under Entry at item (id) under heading 9988 of Notification No.11/2017-Central Tax Rate dated 28.06.2017 as amended. Coating services on old, worn out or used goods received from end users - HELD THAT:- Applicant receives old and worn out goods from its customers who have actually used the said goods and such use has resulted in wear and tear. The applicant has restored the old or damaged goods into good condition and also improved the functionality of the said goods, by the impugned activities. As per section 2 (68) of the CGST Act, 2017 job work means, any treatment or process undertaken by a person on goods belonging to another registered person and the expression job worker shall be construed accordingly . Thus Job work is a processing or working upon raw materials or semi-finished goods supplied to the job worker, so as to complete a part or whole of the process resulting in the manufacture or finishing of an article or any operation which is essential for the afore-mentioned process. In the subject case, old, worn out cutting tools and components/goods are converted into reusable cutting tools and components /goods. The old worn out cutting tools and components/goods are not a distinct commodity from serviceable cutting tools components/goods, only that they were rendered unusable only because of wear and tear over a period of prolonged use. When the old and worn out goods are repaired, no new commercial commodity comes into being, rather it remains a cutting tool/component but now it can be reused. An example would be of a Television Set which has stopped working due to certain reasons like, failure of a circuit, etc. When such a Television set is taken up for correcting the deficiency in order to make it workable, it cannot be said that the concerned mechanic has manufactured a new Television or has conducted job work which has resulted in the production of a new Television. The subject activity undertaken on old and worn out goods received from the end users is an activity of repair and squarely falls under SAC 9987 and will attract 18% GST under Entry No. 25(ii) of Notification No. 11/2017 dated 28.06.2017, as amended - the coating services on the old and worn out goods like cutting tools and components is an activity of repair and squarely falls under SAC 9987. The coating services on old and worn out goods supplied by end users are not an activity as outsourced portions of a manufacturing process or a complete outsourced manufacturing process and therefore, the impugned activity does not fall under SAC 998873. Coating services on new tools received from end users - HELD THAT:- With respect to old, used or worn out goods, the applicant has submitted that the said goods are not sent by the Customers for carrying out any part of the process of manufacturing but instead to restore the functionality of the old and worn out tools and make them reusable for such Customers. Thus it appears that such goods are sent by the end users. The applicant has not submitted details of new goods received from end users, if any, for coating services to be carried out - the semi finished/new/original goods are received only from tool manufacturers and not from end users and therefore we do not take up the issue of coating services on new tools received from end users for further discussion.
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2021 (12) TMI 606
Seeking grant of Regular Bail - fraudulent availment and utilization of input tax credit - section 69 of the CGST Act, 2017 - HELD THAT:- This Court observed that the offences is punishable up to 5 years, compoundable and triable by Court of Magistrate. Admittedly, the complaint against the applicant-accused is yet to be filed. Further, the allegations against the applicant-accused are yet to be established during the trial and trial will take long time. Thus, seeing the quantum of sentence accused is likely to face, gravity of the offence, severity of punishment, the liberty of an individual being involved, the period of custody of the accused, this court is of the considered opinion that the applicant / accused is entitled for concession of regular bail in this case. The applicant namely, SHRI RAMESHCHANDRA TULSIDAS AGARWAL is ordered to be released on bail in connection with the offence punishable U/s. 132(1)(B) C of the CGST Act, 2017 on furnishing personal bond of ₹ 15,000/- with one surety like amount to the satisfaction of Ld. Trial Court/ Illaqua Magistrate/concern court - Application allowed.
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Income Tax
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2021 (12) TMI 605
Interest u/s 244A of the Act on the advance tax payment - HELD THAT:- Under Section 237 of the Act, if any person satisfies the Assessing Officer that the amount of tax paid by him or on his behalf or treated as paid by him or on his behalf for any assessment year exceeds the amount with which he is properly chargeable under this Act for that year, he shall be entitled to a refund of the excess. Section 244A provides that where the refund of any amount becomes due to the assessee under this Act, he shall, subject to the provisions of this Section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the manner provided in the Sub Section (1) of Section 244 of the Act. Section 244A(2) provides that in the event the proceeding resulting in refund has been delayed for reasons attributable to the assessee, the period of delay was attributable shall be excluded from the period for which the interest is payable. In this case, the proceeding resulting in the refund cannot be stated to be delayed for reasons attributable to petitioner. In any event, there is no finding that there was delay in the proceeding resulting in the refund and that delay was attributable to petitioner. It is true that petitioner submitted original advance tax challan for ₹ 40,00,000/- on 15th February 2002 after filing the return of income and not with the return of income filed on 31st October 2001, but petitioner has received intimation accepting the returned loss and granting refund on 26th January 2003 and the assessment order itself came to be passed on 30th March 2004. Therefore, the benefit of advance tax has already been allowed to the assessee, i.e., petitioner. In any event, there is no finding either by the Assessing Officer or respondent no.1 that there was delay and how petitioner was responsible for that delay. We have to also note that no reply has been filed to this petition.
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2021 (12) TMI 604
Validity of reopening of assessment u/s 148 - Mandation of recording speaking order - HELD THAT:- All the stages in GKN Driveshafts [ 2002 (11) TMI 7 - SUPREME COURT] principle except the last stage of the assessing officer passing a speaking order have been completed. In the instant case there is no disputation or disagreement that the assessing officer has not passed a speaking order on the objections of the writ petitioner / assessee ie., objections to the reasons for reopening. It is therefore now imperative that the GKN Driveshafts principle is complied with. On this short point, the matter is now sent back to the assessing officer viz., the first respondent to make a speaking order qua the writ petitioner's objections to the reasons for reopening. This shall be done by the first respondent assessing officer within three [3] weeks from today ie., on or before 30.12.2021.
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2021 (12) TMI 603
Reopening of assessment u/s 147 - Period of limitation - scope of procedure prescribed under Section 148A - according to the petitioners notice is barred by limitation and that the respondent before issuing the notice under Section 148 of the Act has not followed the mandatory procedure prescribed under Section 148A of the Act as prescribed by the Finance Act, 2021 and applicable w.e.f. 01.04.2021 before issuance of notice under Section 148 - HELD THAT:- The issue involved in the present writ petitions is squarely covered by the decision of the Allahabad High Court in the matter of Ashok Kumar [ 2021 (10) TMI 517 - ALLAHABAD HIGH COURT] which in my view is a correct view and has been taken after considering the judgment passed by the Single Bench of Chhatisgarh High Court in the matter of Palak Khatuja [ 2021 (9) TMI 199 - CHHATTISGARH HIGH COURT] which has been relied upon by respondents counsel and therefore the present petitions deserve to succeed. Accordingly, the writ petitions are allowed. The reassessment notice issued to the petitioners under Section 148 of the Income Tax Act is quashed.
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2021 (12) TMI 602
Exemption u/s 11 - Charitable activity u/s 2(15) - assessee receives fee by way of commission from the Government for purpose of construction of building for Government - HELD THAT:- The assessee must satisfy the conditions stipulated in the definition. The assessee tries to bring its case within the ambit of 4th limb of section 2(15) of the Act and attempts to wriggle out from the effect of proviso which deals with services in relation to trade, commerce or business. The contention, in our considered view, is completely untenable. The assessee receives amount from the Government, executes construction work for the benefit of the Government through contractors. The assessee receives fee by way of commission from the Government. The purpose of construction of building for Government cannot be accepted as an activity coming within the meaning of advancement of any other object of general public utility. In our view the reason being the construction activity by itself does not advance any other object of general public utility. The general public utility from such construction is derived as fact with the facilities constructed by the assessee are put to utility. The activity undertaken by the assessee on one hand and on another hand with the ultimate purpose or user of buildings constructed by the Government shall not be mistaken with one another. The assessee is interpreting proviso by excluding one of the important limbs, viz. involves the carrying on of any activity in the nature of trade, commerce or business. The decision of the authorities are independently considered and by taking note of CBDT Circular and above reasoning, we are of the view that the substantial question raised could be answered in favour of the revenue and against the assessee.
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2021 (12) TMI 601
Minimum Alternate Tax (MAT) - Applicability of section 115JB on electricity company - Applicability of section 43B in respect of the electricity duty collected - HELD THAT:- Questions of law raised in the appeals are covered by the judgment of this Court reported in Kerala State Electricity Board V. Deputy Commissioner of Income Tax [ 2010 (11) TMI 127 - KERALA HIGH COURT] . - Decided in favour of assessee.
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2021 (12) TMI 600
Delayed employees contribution to PF and Employee State Insurance u/s 36(1)(va) r.w.s. 2(24)(x) - Contribution deposited beyond the due date prescribed under relevant Act and deposited within due date by filing the return on u/s 139(1) - HELD THAT:- We find no merit in the argument of the ld.DR since the explanation as provided in Finance Act 2021 prescribes that the amendment in both sec.36(va) as well as 43B by inserting corresponding explanation that although impugned PF comes in the form of provision and the same is applicable from 1/4/2021 onwards only. In the present case we are concerned with the asst. year 2017-18 and the amended provision could not be applied retrospectively as it is only applicable w.e.f 1/4/2021. Being so no disallowance could be made by the AO in respect of PF/ESI paid within the due date of filing return of income. Though, it was beyond the date mentioned in the respective Act. This view of ours is supported by various judgment relied on by the ld.AR. Accordingly the appeal of the assessee is allowed.
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2021 (12) TMI 599
Unexplained cash deposits in two bank accounts - Legal tender money in demonetization of currency - AO culled out, the deposits that was made of bank notes that were declared as not legal tender owing to demonetization of currency - HELD THAT:- Both AO and CIT(A) accepted the fact that the cash receipts are nothing but sale proceeds in the business of the assessee. Addition has been made only on the basis that after demonetization, the demonetized notes could not have been accepted as valid tender. Since the sale proceeds for which cash was received from the customers was already admitted as income and if the cash deposits are added under section 68 of the Act that will amount to double taxation once as sales and again as unexplained cash credit which is against the principles of taxation. Assessee was having only one source of income from trading in beedi, tea power and pan masala and therefore provisions of section 115BBE of the Act will have no application so as to treat the income of the assessee as income from other sources. As in the case of CIT Vs. Associated Transport Pvt. Ltd. [ 1994 (1) TMI 18 - CALCUTTA HIGH COURT] on identical facts took the view that when cash sales are admitted and income from sales are declared as income, wherein the Hon'ble Tribunal found that the assessee had sufficient cash in hand in the books of account of the assessee, that there was no reason to treat the cash deposits as income from undisclosed sources. When cash receipts represent the sales which the assessee has offered for taxation and when trading account shows sufficient stock to effect the sales and when no defects are pointed out in the books of account, it was held that when Assessee already admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE - See M/S HIRAPANNA JEWELLERS AND (VICE-VERSA) [ 2021 (5) TMI 447 - ITAT VISAKHAPATNAM] - thus the addition made is not sustainable and the same is directed to be deleted. Appeal of the assessee is allowed.
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2021 (12) TMI 598
Disallowance of Employees contribution of PF ESI u/s 36(1)(va) remitting the dues beyond the due date prescribed under the respective Statutes - HELD THAT:- We notice that an identical issue has been examined by the co-ordinate bench in the case of Shri Gopalakrishna Aswini Kumar [ 2021 (10) TMI 952 - ITAT BANGALORE] wherein the co-ordinate bench has expressed the view that the amendment made to sec.36(1)(va) of the Act will have prospective application and hence the decision rendered in the case of M/s Essae Teraoka (P.) Ltd [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT] . Thus we hold that the additions made in both the years are liable to be deleted. Accordingly, we set aside the orders passed by Ld CIT(A) in both the years under consideration and direct the AO to delete the impugned additions in both the years - Decided in favour of assessee.
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2021 (12) TMI 597
Disallowance of depreciation claimed by the assessee u/s 32 on the fixed assets acquired/purchased during the year - asset put to use or not? - one of the main contention raised by the assessee was that nowhere in show-cause notice or queries, AO has asked, whether the assessee has started its business or not - HELD THAT:- From bare perusal of the assessment order, it is seen that ld. AO put a query to the assessee on 18.03.2016 to file the details of fixed assets and why the depreciation should not be denied. In response, the assessee has submitted the details as well as purchased bills as noted by the AO - in the show-cause notice dated 18.03.2016 which has been noted by the ld. CIT (A) that, in the entire show-cause notice, nowhere there was any specific query whether the assets were put to use during the year. Production was carried out by utilizing raw material and finished semi-finished stocks at the year end. Not only that, the goods produced had also been sold and revenue from the operation has also been shown at ₹ 6,80,056/-. This is not only mentioned in the audited financial accounts, which were there before the AO, but also from the statutory record of RG-1 register, copy of excise return and copy of VAT Return. Once a new factory has been set up with new plant machinery which was used for production during the year and depreciation has been claimed on such plant machinery, then same cannot be denied on the ground that the plant machinery of the new assets purchased during the year were not put to use. The aforesaid finding of the ld. CIT (A) is not only based on appreciation of facts but also in accordance with law and hence said finding is affirmed. - now it is a well trite law even if assets are ready to use, which here in this case was actually put to use, then also depreciation cannot be denied.- Decided in favour of assessee.
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2021 (12) TMI 596
Additions in respect of employees contribution towards ESI/PF - Addition not made within the prescribed due date U/s 36(1)(va) of the Act and since these amount were not disallowed in the return of income filed by the assessee, the variance between the tax audit report and ITR has been duly flagged by the CPC in the computerized processing and disallowance u/s 143(1)(a)(iv) on the basis of fact furnished by the assessee was made which clearly fails within ambit of prima facie adjustment to be carried out u/s 143(1)(a)(iv) - HELD THAT:-Employees contribution to ESI and PF collected by the assessee from its employees have been deposited well before the due date of filing of return of income u/s 139(1) . In the instant case, the impugned assessment year is assessment year 2018-19 and therefore, the said amended provisions cannot be applied in the instant case. The addition by way of adjustment while processing the return of income u/s 143(1) so made by the CPC towards the deposit of the employees s contribution towards ESI and PF paid before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted. - Decided in favour of assessee.
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2021 (12) TMI 595
Reopening of assessment u/s 147 - Addition u/s 68 - assessee not explaining the source of the credits appearing in his bank account of HSBC Switzerland - status of assessee being non-resident Indian - limited application in the case of a non-resident - receipts taxable in India - whether the provisions u/s 68 and 69 of the Act do not distinguish between the residential status of an assessee? - CIT-A deleted additions by holding that once the assessee took his stand that he a non-resident, he can have foreign asset and foreign accounts which is not required declared before the Income Tax Authority - whether it can be said that the credits appearing the HSBC bank accounts in question lead to the situation where the amount is includible in the income of the assessee, a non resident Indian, within the provisions of section 5(2) of the Act? - HELD THAT:- A bare reading of provisions of section 5(2) of the Act makes it clear that that in case of a non-resident assessee, the total income that is liable to be taxed shall comprise of income, which is received or deemed to be received by or on behalf of such person or the same accrues or arises or is deemed to accrue or arise in India to such person. No such evidence to prove the fact that the remittance made by the assessee in his NRE Account or the credit allegedly appearing in HSBC has any source from income in India or routed from any business connection in India. We find that the CIT(A) clearly held that there is no material or evidence to say that the assessee was having any business connection in India so as to justify an inference that any income thereof was received or deemed to have been received or accrued or deemed to have accrued in India. Further on perusal of the Grounds of appeal raised by the revenue before us, we find that none of the findings recorded by the CIT(A) have been assailed on the basis of any material or evidence rather based on assumption. Therefore, we do not find any merit in the grounds of appeal raised by the revenue. Hence, we do not find any infirmity, illegality or perversity in the order passed by ld CIT(A), which we affirm. No merit in all the grounds of appeal raised by the revenue, resultantly all the grounds of appeal raised by the revenue are dismissed.
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2021 (12) TMI 594
Revision u/s 263 by CIT - assessee claimed deduction under section 54B against the Long Term Capital Gains (LTCG) earned thereon, on purchase of another agriculture land at Ved Karada, Surat - HELD THAT:- We have seen the copy of photographs which shows that vacant portion of the land is in cultivation form. The copies of same photographs are available in the assessment record, which were taken at the instance of inspector. No unusual things are seen in these photographs, which may suggest that the said land is used for other than agriculture purpose. We have also seen the copy of the sale deed dated 30.03.2015, executed by assessee in favour of the purchaser, wherein the nature of land is clearly mentioned as agriculture land . Further in the land record in Form-7/12, the nature of land is also mentioned as agriculture. The Sub-Registrar at the time of registration of sale deed has accepted the nature of land as agriculture. And form the other evidence placed before us, the assessee has shown that the land in question was used for agriculture purpose. Considering the aforesaid evidence, wherein the assessee has clearly demonstrated that the land under question was being used for agriculture purpose, therefore, we are of the view that the assessing officer has taken a reasonable and plausible view, which cannot be branded as erroneous. Since, the assessing officer has accepted the explanation of assessee, which was coupled with evidence; the assessing officer may not have thought to pass detailed order on the issue examined by her. In our view, once the contention of the assessee on a particular issue is accepted by assessing officer, the order is not appealable order and no appeal would be filed, against such accepted position as an assessee will not feel aggrieved with it, it is not necessary to give reasons of acceptance of such pleas. So far as the observation of ld PCIT that the assessing officer did nothing to sort out the enquiry to verify the assertion of the assessee and there was failure on the part of Assessing Officer to bring on record the even correct facts or non-conduct of enquiry verification of facts, is concerned, we find that the assessing officer made requisite investigation before allowing relief to the assessee. The investigation conducted and the view adopted by the assessing officer in the present case, if not accepted by the Ld. PCIT, in nothing but change of opinion. It is settled position in law that no revision of assessment order is permissible on mere change of opinion. On the basis of material before the assessing officer, she took reasonable, plausible and legally sustainable view, which cannot be branded as erroneous. There is no doubt that while accepting the claim in the assessment, there may be some loss of revenue, tax can be levied only with the authority of law, and every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the revenue unless the view adopted by assessing permissible in law. Once the assessing officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the assessing officer is unsustainable in law. Hence, the grounds of appeal raised by the assessee are allowed.
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2021 (12) TMI 593
Disallowance of credit for TDS - addition confirmed by CIT while processing the return of income by CPC under section 143(1) of the Act and thereafter passing the order under section 154 - HELD THAT:- While passing the order under section 154 of the Act, the CPC has denied the TDS credit for an amount of ₹ 1,54,213/- but no reason is assigned for non granting the credit of the said amount. CIT(A) though accepted this fact that the CPC has not given any reason for not allowing the credit of the said amount and accordingly directed the CPC to allow the total TDS credit ₹ 11,06,643/- instead of ₹ 9,52,430/- allowed in the rectification order passed under section 154 CIT(A) has directed the assessee to provide the information for the purpose of implementing the directions issued to the CPC. Thus, it is manifest from the impugned order that the CIT(A), instead of getting relevant details and facts verified by calling a remand report from the Assessing Officer, has directed the CPC to consider the issue and allow the claim. Since the assessee has claimed that the relevant details were filed in the proceedings under section 154 of the Act as well as before the CIT(A) therefore, in the interest of justice, we set aside this issue to the record of the Assessing Officer to verify the relevant details and correctness of the claim of the assessee regarding the TDS credit. The Assessing Officer has to properly verify the details of TDS as reflected in Form 26AS and then allow the TDS credit to the assessee after giving an opportunity of hearing to the assessee - Appeal is allowed for statistical purposes.
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2021 (12) TMI 592
Revision by PCIT u/s 263 - As per CIT assessment framed u/s 143(3) is erroneous and prejudicial to the interest of the revenue as the AO has not examined the issue of sale of flat at a price lower than stamp value - HELD THAT:- The date of purchase is the date when the allotment letter was issued to the assessee and not the date of registered agreement. The case of the assessee is squarely covered by the decision of the coordinate bench in the case of Naina Saraf [ 2021 (9) TMI 766 - ITAT JAIPUR] wherein held we are not in agreement with the view taken by the ld. Pr.CIT holding the applicability of S. 56(2)(vii)(b)(ii) in the facts and circumstances of the case and therefore we hold that the assessment order, subjected to revision u/s 263, is not erroneous and prejudicial to the interest of the revenue. Therefore, considering the totality of facts and circumstances of the case, the impugned order passed u/s 263 of the Act by the ld. Pr.CIT, is therefore, quashed. Hence revisionary jurisdiction has not been validly exercised. Hence we quash the order passed u/s 263 of the Act by ld. PCIT and restore the order of AO. The appeal of the assessee is allowed.
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2021 (12) TMI 591
Addition on account of short term capital gain - Incomplete sale - flat was leased property of Mumbai Port Trust - whether there was no transfer of flat during the year? - HELD THAT:- The flat was leased property of Mumbai Port Trust and approval of the Mumbai Port Trust was required to be obtained for handing over the possession .We also note that the assessee has received only ₹ 25,00,000/- and the balance consideration was still outstanding - assessee was to hand over the possession to the buyer only upon full and final payment of sales consideration and after obtaining NOC from Mumbai Port Trust. Possession has not been handed over as certain conditionalities are to be fulfilled like payment of balance consideration and obtaining of NOC - Mumbai Port Trust has been applied for issuing the NOC but still the same is awaited - sale is certainly not complete and it is absolute sale but a conditional sale which would be complete after satisfaction of the above two conditions. Neither AO nor ld CIT(A) have brought on record any substantive evidence to the contrary. So we are not in agreement with the conclusion of the ld CIT(A) that sale is complete. Sale of flat would only be completed after fulfilment of remaining conditions - we are inclined to set aside the order of ld CIT(A) on this issue and direct the AO delete the addition of short term capital gain. - Decided in favour of assessee.
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2021 (12) TMI 590
Revision u/s 263 by CIT - Allowability of provision for pension and provision for leave encashment - HELD THAT:- Pr. CIT came through the audit objections raised by the statutory auditors of the company in which statutory auditors have flagged the expenditure claimed by the assessee on provisions of contribution to pension and provision of leave encashment. It is fact on record that the Assessing Officer has asked for several information through notice u/s 142(1) specifically on provision for pensions, the assessee has filed relevant information which was available on the published financial statement and assessee has specifically submitted a note on provision for pension explaining the necessity of creating the provisions based on the actuarial report. This has necessitated due to the fact that the assessee has moved from the existing LIC 94-96 mortality table to adopt IALM 2006-08 mortality table because of which the contribution to approved superannuation was short to the extent of ₹ 1391.25 crores. As per case of GLAXO SMITHKLINE PHARMACEUTICALS, MUMBAI [ 2011 (1) TMI 1530 - ITAT MUMBAI] we noticed that even in the given case there was a shortage of contribution to the fund based on the actuarial valuation report and even assessee has contributed to the above fund based on the above said report. Therefore, the expenditure claimed by the assessee is allowable under Income Tax Act u/s 37 of the Act. Hence, we are in agreement with the submissions of the Ld. AR on this aspect. Provision for leave encashment - Assessee has claimed an amount on account of provision for leave encashment. Based on the fact on record, we noticed that the assessee has not made the payment during this year and rightly statutory auditor has flagged this expenditure which is not allowable u/s 43B. AR heavily relied on the case of Glaxo Smithkline Pharmaceuticals (supra) and we observed that the Hon ble Supreme Court upheld the constitutional validity of section 43B(1) of the Act and wherein it has accepted the decision of Hon ble Calcutta High Court. Therefore, as far as this issue is concerned which is against the assessee and the Assessing Officer should have verified the issue in detail. We do not see any submission or any inquiry made by the Assessing Officer on this aspect. Therefore, in our considered view, to the extent of this issue which is against the assessee, we uphold the observations of the Ld. Pr. CIT in this regard and the order passed by the Pr. CIT u/s 263 is stayed to this expenditure. Appeal filed by the assessee is partly allowed.
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2021 (12) TMI 589
Validity of reopening of assessment u/s 147 - Assessment of capital gain upon entering joint development agreement - HELD THAT:- It is an admitted fact that the Joint Development Agreement was not furnished by the assessee along with return of income and the details of JDA came to the notice of the AO only subsequently - JDA would constitute fresh material. It is a settled proposition of law that the entries made in the books of account will not be deciding factor in so far as Income tax Act is concerned. Hence we are of the view that there was sufficient reason for the AO to entertain the belief that there was escapement of income. Accordingly, we uphold the validity of reopening of assessment. Transfer of capital asset u/s 2(47) - We notice that the assessee has entered into a joint development agreement on 29.12.2005 and on the very same day a supplementary joint development agreement was also entered. Both the agreements have been registered with the registration authorities - the developer is granted irrevocable permission and license to enter the scheduled property for the purpose of construction of residential apartments as per the plan to be obtained. It is specifically been mentioned that the license so granted shall not be considered as possession delivered in part performance of the contract u/s 53(sic. 53A) of Transfer of property Act nor any property right shall be deemed in favour of developer. The transferee should have taken possession in part performance of the contract and has done same act in furtherance of the contract. In the instant case, development agreement clearly specified on the possession of the property was not given and what was given is only license to enter the property. The question whether granting of such kind of license would amount to Possession within the meaning of sec.53A of Transfer of Property Act r.w.s sec. 2(47)(v) of Income tax Act was examined by the Bangalore SMC bench of Tribunal in the case of Smt. Lakshmi Swarupa [ 2018 (10) TMI 1345 - ITAT BANGALORE] In the instant case also, we have noticed that the assessee has given permissive possession and not legal possession as contemplated within the meaning of sec.53A of the Transfer of Property Act. Hence we hold that the provisions of sec.53A of the Transfer of Property Act are not applicable to the impugned Joint Development Agreement. In this view of the matter, the provisions of sec.2(47)(v) of the Act are also not applicable. Hence the tax authorities are not justified in invoking the above said provision and consequently, the capital gains assessed in the hands of the assessee is liable to be deleted - direct the AO to delete the assessment of short term capital gains.
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2021 (12) TMI 588
Levying MAT u/s 115JB - 100% reduction of the profit u/s. 80IB(10) - while computing the book profit u/s. 115JB appellant had reduced it from book profit and claimed that it was not liable for tax under, this Section - As per AO assessee is not entitled to reduce the book profit by claiming such deduction - HELD THAT:- For claiming deduction u/s. 80IB(10) from book profit, no case has been made out that this adjustment to book profit under 115JB falls under any of the adjustments mandated in section 115JB Explanation (1). Only reason given by the assessee for the purpose is that sub-section (5) mentions, save as otherwise provided in this section, all other provisions of this act shall apply to every assessee being a company, mentioned in this section. A bare reading of the above clearly shows that sub-section (5) clearly provides that save as otherwise provided in this section all the provisions of the I.T. Act will be applicable to the computation governed by section 115JB. Hence, this clearly means that what has been provided in this section shall prevail and thereafter all other provisions shall apply. Hence, explanation (1) to section 115JB clearly provides what can be adjusted from book profit. Hence, sub-section (5) duly saves the prescription of Explanation (1). Hence, this explanation (5) does not help the assessee to claim that section 80IB deduction permissible under the I.T. Act should be adjusted from book profit As decided in APOLLO TYRES LTD. VERSUS COMMISSIONER OF INCOME TAX [ 2002 (5) TMI 5 - SUPREME COURT] clearly shows that there is no bar on making adjustments to book profit as per law. The above pleading is absolutely not sustainable. Hon'ble Apex Court has clearly provided that except as provided in section 115J no adjustment to the book profit can be done. The said decision of Hon'ble Apex Court is clearly applicable as noted by us hereinabove. Insertion of sub-section (5) in section 115JB in no way dilutes prescription of Explanation (1) to section 115JB which clearly specifies adjustment being made in the book profit. We are conscious that other High Courts have taken different view in this context. However, Hon'ble Bombay High Court in several decisions has followed the aforesaid decision of Hon'ble Apex Court and held that profit shown in book profit cannot be tinkered or adjusted in any manner otherwise than the manner which is mandated in the said section of the Act. Even in cases where the assessee has taken capital receipt directly to the capital reserve without routing it through profit and loss account, Hon'ble Bombay High Court has held that the Assessing Officer cannot tinker the book profit duly disclosed in the profit and loss account on the touchstone of Hon'ble Supreme Court decision in the case of Apollo Tyres Ltd. (supra). No tinkering to the book profit is permitted except as provided in Explanation (1) of Section 115JB of the Act. Various ITAT and other High Court decisions quoted by learned counsel cannot take precedence over Hon'ble Bombay High Court decision referred hereinabove. It is settled law that the decisions of other High Courts have persuasive value but decision of Hon'ble Jurisdictional High Court is binding upon all subordinate courts and Tribunals. In accordance with the discussion and precedent hereinabove we do not find any infirmity in the orders of authorities below. Hence, we uphold the same.
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2021 (12) TMI 587
Addition being late remittance of employees contribution to PF and ESI under the respective Acts - as stated that the assessee had paid the employees contribution to PF and ESI prior to the due date of filing of the return u/s 139(1) - HELD THAT:- Bangalore Bench of the Tribunal in the case of M/s. Shakuntala Agarbathi Company [ 2021 (10) TMI 1196 - ITAT BANGALORE] by following the dictum laid down by the Hon ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT] had held that the assessee would be entitled to deduction of employees contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s 139(1) of the I.T.Act. Thus the amended provisions of section 43B as well as 36(1)(va) of the I.T.Act are not applicable for the assessment year under consideration. As further hold by following the binding judgment in the case of Essae Teraoka Pvt. Ltd Vs. DCIT (supra), the employees contribution paid by the assessee before the due date of filing of return of income u/s 139(1) of the I.T.Act is an allowable deduction - Decided in favour of assessee.
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2021 (12) TMI 586
Bogus LTCG - bogus exempted income - Amount of capital gain treated as unexplained cash credit u/s 68 - HELD THAT:- The income generated by the assessee cannot be held bogus only one the basis of the modus operandi, generalisation, and preponderance of human probabilities. In order to hold income earned by the assessee as bogus, specific evidence has to be brought on record by the Revenue to prove that the assessee was involved in the collusion with the entry operator/ stock brokers for such an arrangements. In absence of such finding, it is not justifiable to link the fact or the finding unearthed in case of some third party or parties with the transactions carried out by the assessee. Further the case laws relied by the AO are with regard to the test of human probabilities which may be of greater impact but the same cannot used blindly without disposing off the evidence forwarded by the assessee. In simple words, there were not brought any evidence from independent enquiry to corroborate the allegation. As relying on Smt. Krishna Devi [ 2021 (1) TMI 1008 - DELHI HIGH COURT ] we hold that in absence of any specific finding against the assessee in the investigation wing report, the assessee cannot be held to be guilty or linked to the wrong acts of the persons investigated as far as long term capital gain earned on sale of share of M/s AGIL is concern. Capital gain earned by the assessee cannot held bogus merely on the basis of some report finding unearthed in case of third party/parties unless cogent material brought against particular assessee are brought on record. Therefore, we set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him. Hence the grounds of assessee appeal is allowed.
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2021 (12) TMI 585
TDS u/s 195 - payments made by to parent company, Bain Company Inc. (Bain US) on account of payments made to third parties - technology was made available to the appellant and hence tax was required to be deducted on these payments under Article 12 of India-USA Double Tax Avoidance Agreement ( DTAA ) - whether there is no evidence that such expenses were reimbursement of expenses on a cost to cost basis? - whether services were not technical services so as to fall within the ambit of FIS under the India- USA DTAA.? - HELD THAT:- CIT(A) has only held that technical services were made available to the assessee, but, he is silent on whether technology was made available to the assessee or not which, in our opinion, is a sine qua non for holding payment as FIS under the Indo-USA DTAA. Further, the submission of the ld. Counsel that services were rendered outside India and, therefore, payments for the services could not qualify as fee for technical services in view of the decision of the Hon ble Supreme Court in the case of Ishikawajima-Harima Heavy Industries Ltd. [ 2007 (1) TMI 91 - SUPREME COURT] which was applicable at the relevant time, could not be controverted by the ld. DR. We find, the Hon ble Supreme Court in the case of Ishikawajima-Harima Heavy Industries Ltd. (supra) has held that for a nonresident to be taxed in India, two events need to be fulfilled i.e., not only should the services be utilized in India, but, the same should also be rendered in India. We find, the above proposition was amended retrospectively by the Finance Act, 2010 with retrospective effect from 1st June, 1976. Therefore, we find merit in the argument of the ld. Counsel that it was under a bona fide belief that the payments were not taxable in India. We find, the Hon ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P) Ltd. [ 2021 (3) TMI 138 - SUPREME COURT] has thoroughly discussed the issue regarding royalty under the Income-tax Act and has held that a person mentioned in section 195 of the Income-tax Act cannot be expected to do the impossible, namely to apply the expanded definition of royalty inserted by Explanation 4 to section 9(1)(vi) of the Income-tax Act for the assessment years in question at a time when Explanation was not actually and factually in the statute. We are of the considered opinion that the assessee was not liable to withhold tax payment on account of the four items the details of which are given at para 12 of this order. Accordingly, the order of the CIT(A) is set aside and the grounds raised by the assessee are allowed.
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2021 (12) TMI 584
Unexplained cash credit - addition of cash deposit in bank account - non mentioning of relevant section to make addition - HELD THAT:- AO as well as that of the CIT(A) that they have not specifically mentioned as to under which section of the Act the additions have been made. As relying on SMT. SUDHA LOYALKA, C/O M/S RRA TAXINDIA VERSUS ITO, WARD 35 (2) , NEW DELHI [ 2018 (7) TMI 1892 - ITAT DELHI] sustaining of impugned addition is not justified as non-mentioning the precise provision of law makes the impugned addition bad in law. CIT(Appeals) has not specifically mentioned as to under which section of the Act addition has been done. Also, assessee during the course of assessment proceedings has submitted that the cash deposits are not the income of the assessee. The cash deposits and other credits in the bank statement of the assessee comprises of cash received on behalf of the parties, home loan disbursement from bank and cash deposits out of own sources. In respect of invoices and receipts were submitted during the assessment proceedings. However, the AO ignoring the explanation given by the assessee on the basis of entries in the bank statement considered the cash deposits of the assessee as the income of the assessee. It is important to mention here that the bank statements cannot be termed as books of accounts for the purposes of Sec. 68 - Also as found from perusal of the record that in the A.Y. 2007-08 2009-10 such cash deposits in the same bank account has been treated as sales executed through the assessee on which the assessee has earned commission income @ 7.5% on sale - A.O. as well as ld. CIT(A) have not specifically mentioned as to under which Section of the Act the additions have been made and also keeping in view the fact that Bank statement is constantly held to be not books of account for the purpose of Section 68 - we direct to delete the addition made U/s 68 - Decided in favour of assessee.
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2021 (12) TMI 583
TP Adjustment - adjustment pertaining to marketing cost and functional differences claimed by the assessee and rejected by the Transfer Pricing Officer (TPO) - adjustment of functional difference has been denied by Ld. TPO on the ground that there was no mention in the agreement that product license and lab test expenses were to be borne by the AE and reduction in profitability of AE would not be relevant for determining ALP - HELD THAT:- CIT(A) noted that these adjustments were found to be part of contract between the assessee and AE. We find that product license maintenance cost and lab analysis were borne by AE which in case of sales to non-AE was borne by the assessee. The assessee s function in case of sales to AE is restricted to manufacturing only. The assessee performs the function of contract manufacturer. The product licenses were held by the AE who was also responsible for maintenance of the product licenses. The manufacturing was done in strict adherence to Product License and the labeling on products was of assessee s AE. The same is evident from Technical agreement (page no. 342-356 of the Paper Book) between the assessee and FDC-UK (AE). In case of non-AE sales, these expenses are to be borne by the assessee, which fact remains undisputed before us. Therefore, the adjustment of this component has rightly been allowed by Ld. CIT(A). Adjustment of Marketing Costs - The marketing costs differ with geographical conditions. Sales in local markets are prescription drugs and therefore, sale promotion forms major expenses. In exports, the marketing expenses are not as high as compared to local markets as the sale would be made to fixed distributors. Marketing costs may not vary with pack size but it would vary with selling price as marketing costs are calculated as percentage of selling price. Since Ld. TPO is comparing local sale price with that of export sale price, the adjustment of marketing expenses need to be allowed as the same are already incorporated in the selling price since expenses incurred in local markets would be high and therefore, selling price of products sold in local market would also be high. We concur with the aforesaid submissions made by Ld. AR since the marketing costs would vary with geographical locations and would impact the ultimate selling price. Therefore, this adjustment has rightly been allowed by Ld. CIT(A). Adjustment of Non-variable cost - TPO has denied the same on the ground that overheads would not vary with pack size - CIT(A) upheld the same in the absence of data based evidence - This adjustment would be available to the assessee since pack-size is not similar in case of Allercom eye-drops and Moisol eye-drops. While computing ALP, hypothetical selling price and costs have been considered in proportion to the pack size. In such a case, the adjustment arising out of hypothetical non-variable cost based on the same proportion should be allowed. In case of Timolol 0.5% eye-drops, overheads were more in case of domestic sale due to manufacturing from old machineries which consumed more labour hours for packaging and maintenance costs. This fact is undisputed before us. Therefore, the same is required to be factored-in while benchmarking the prices. Hence, we direct lower authorities to allow this adjustment. Sales Return Adjustment - only reason of rejection of this adjustment is the observation of Ld. CIT(A) that the same was to be considered only in the year when the sales returns have actually taken place - As per the terms, once the products are released for sale by designated quality testing facility, the supplier s liability towards cost, expenses and losses to the extent of any claims, returns, rejection, recall would cease and the same would be on AE only without any recourse to the supplier. In case of non-AE sales, the said liability would be on assessee. Therefore, this crucial factor would require adjustment in the selling price while benchmarking the transactions. We order so. Adjustment of Competition - We are of the opinion that the competition in two geographical locations would vary due to market conditions and government regulations prevailing in the market. The assessee, vide letter dated 06/01/2014, has submitted detailed chart scientifically quantifying the competition effect. The assessee has also produced invoices raised by the AE to its customers to prove competition effect. In UK, National Health Service determines reimbursement price of each drug and reimburses the same to retailers. The assessee has also submitted its value chain of UK drug market and functions performed by each party in value chain to justify its margins and arm s length price. In the absence of any adverse findings by lower authorities, we concur with these submissions and accordingly, the assessee s plea is to be accepted. Accordingly, we direct Ld. AO / TPO to grant this adjustment. Wrong claim of R D Deduction u/s 35(2AB) for Jogeshwari Unit - expenditure has been accumulated as work-in-progress in earlier years and no deduction thereof has even been claimed by the assessee, in any manner - HELD THAT:-. The assessee has already furnished permission from Directorate General of Health Service in support of the fact that the technology became operative in this year only. We find that the Accounting Standard-26 (AS-26) on intangibles as issued by The Institute of Chartered Accountants of India mandate the assessee to recognize / capitalize intangibles only if it is probable that future economic benefits will flow to the enterprise, the asset is commercially viable and the cost of the asset can be measured reliably. Following the same, the assessee has capitalized the expenditure in this year and made the claim which is in line with the mandate Accounting Standard issued by ICAI. Therefore, in our opinion, the current year would be the correct year of claiming deduction u/s 35(2AB). Non-availability of Form 3CM - once existence of R D facility was not disputed and expenditure for that purpose was genuine in nature and recognition to facility was valid during relevant period, then merely for reason of non-issuance of approval for certain period in prescribed Form 3CM by competent authority, weighted deduction as claimed u/s 35(2AB) could not be denied. Similar is the view of Pune Tribunal in Minilec India (P.) Ltd. [ 2018 (4) TMI 1058 - ITAT PUNE] wherein it was observed by the bench that non-receipt of Form No. 3CM is at best a procedural lapse and is not fatal for denial of claim of deduction u/s 35(2AB). Therefore, considering the entirety of facts and circumstances, we reverse the adjudication of Ld. CIT(A) and direct Ld. AO to grant weighted deduction u/s 35(2AB) as claimed by the assessee. Disallowance of R D Exp. pertaining to Roha and Goa unit-III - Assessee, during the course of proceedings before lower authorities, furnished ample evidences to substantiate its claim - assessee has sufficiently demonstrated the carrying out of R D Activities at Roha as well as Goa-III Unit. The Ld.AO, in the remand report, has accepted the affidavit of officials clarifying their statements and has not re-examined them. Therefore barring statements taken during survey proceedings, the revenue is unable to controvert the assessee s documentary evidences and bring on record any cogent material to dislodge the same. Another undisputed fact is that Survey Team never visited Goa Unit and therefore, the conclusion that no R D activity was being carried at this unit has no legs to stand. Observation of lower authorities that Form 3CM was not available - We find that the aforesaid units had valid approvals from DSIR during the year and non-availability of Form 3CM would not be fatal to claim of deduction. Our adjudication as given in preceding para 3.6 shall mutatis-mutandis apply to the findings of lower authorities - direct Ld. AO to grant weighted deduction u/s 35(2AB) against both the units. Disallowance of Publicity Expenses u/s 37(1) - promotional items were given to stockiest under an incentive scheme to promote the sale of products - HELD THAT:- We find that the assessee is a pharmaceutical company engaged in the manufacturing of formulation (final medicinal products) and API (Active Pharmaceutical Ingredients). The pharmaceutical industry is prohibited from advertising its products and the biggest customer for this industry is practicing doctors who in the course of professional practice prescribe medicines for consumption by patients. Due to existence of competition in the market because of availability of pharmaceuticals from different suppliers, it would be necessary for the assessee to ensure awareness and visibility of its products amongst doctors as against advertising its products - The nature and the type of items distributed amongst doctors are not the type which can be considered as intended to influence the decisions of the Doctors. It could be gathered that the value of items given to doctors is generally below ₹ 1000/- per article. Assessee has incurred aggregate expenditure of ₹ 2922.18 Lacs during the year out of which expenditure of ₹ 1921.55 Lacs has been incurred between the period 01/04/2009 to 09/12/2009 whereas balance expenditure of ₹ 1000.63 Lacs has been incurred from 10/12/2009 to 31/03/2010. The expenditure incurred before 10/12/2009 has fully been allowed but expenditure incurred thereafter has been disallowed primarily in terms of CBDT Circular No. 5/2012 dated 01/08/2012 which provide that the medical freebies offered by the assessee in terms of violation of MCI guidelines would be inadmissible deduction. We find that the issue of applicability of CBDT circular to pharmaceutical companies has been examined in various decision of this Tribunal and it has finally been settled that the Circular do not apply to AY 2010-11 as it was issued on 01/08/2012 and the same is not applicable retrospectively - we would hold that CBDT circular was not applicable to the assessee during this year. Accordingly, the promotional / recall items being distributed to doctors for ₹ 633.13 Lacs would not be hit by cited CBDT circular and therefore, these expenses would be an allowable deduction. We order so. Remaining items viz. books, journals, reference articles, prescription pad / chit block, calendars / new-year dairies items given for use in dispensaries nature of these items is similar as incurred by the assessee before 10/12/2009 which has been fully allowed by Ld. AO himself. Therefore, there is no reason as to why these are not allowable thereafter. We find that the assessee, during assessment proceedings as well as during remand proceedings, has filed sufficient documentary evidences including sample confirmations from stockiest, copies of invoices etc. in support of the expenditure and no infirmity could be found in the same by Ld. AO except for the allegation that these documents were not sufficient. Therefore, we would hold that all such expenses were incurred for business purposes and allowable u/s 37(1). Expenditure incurred on stockiest for the purpose of promoting the sale of one of the products i.e. Electral (ORS) - AO, in the remand proceedings, simply reconfirmed the disallowance by holding that confirmations are in identical Performa and seem to have been given at the insistence of the appellant. However, no investigation or third party confirmations have been obtained whereas the assessee has well documented its claim. Therefore, the observations of Ld. AO are merely on the basis of presumption, surmises and conjectures. It could also be seen that similar claim has been allowed in subsequent AYs 2012-13 2013-14 in scrutiny assessment proceedings and therefore, there could be no occasion to doubt the same in this year. Hence, we delete the addition. Bogus purchases - receipt of certain information from Sales Tax Department, Maharashtra, it transpired that the assessee made suspicious purchases - HELD THAT:- As relying on assessee own case [ 2018 (9) TMI 2066 - ITAT MUMBAI] we direct Ld. AO to restrict the additions to the extent of 12.5% of suspicious purchases. Allocation of Corporate Expenses to 80-IB / 80-IC Units - reallocation of expenditure as paid to Vision Research foundation - assessee claimed deduction u/s 80-IB @ 30% on two units viz. Goa (ORS) and Goa (Unit-III) whereas it claimed deduction u/s 80-IC @100% on Baddi Unit - HELD THAT:- It is the submissions of Ld. AR that the same may not be reallocated since such contribution is in the form of contribution / donation and is not in any way related to any of the plants. Since it is in the nature of a corporate expense, no such allocation should be made. Concurring with the same, we direct Ld. AO consider the nature of receipt and if the same is in the form of donation, no allocation thereof should be made while computing the deduction. Exclusion of other income while computing the deduction - only grievance of the assessee is exclusion of scrap sale - HELD THAT:- Issue decided in favour of assessee as relying on case HARJIVANDAS JUTHABHAI ZAVERI AND ANOTHER [ 1999 (12) TMI 5 - GUJARAT HIGH COURT] as held that it cannot be said that the learned Tribunal has committed any error in holding that the deduction under Section 80-IB of the Act is allowable for the income from sale of scrap. Under the circumstances, substantial question of law raised is answered against the revenue. Disallowance u/s 14A - assessee earned exempt dividend income of ₹ 483.13 Lacs and offered suo-moto disallowance of ₹ 28.91 Lacs in the return of income - HELD THAT:- The assessee has sufficient opening and closing free funds in the shape of share capital and reserves to make the investments. The free funds are way more than the investments made by the assessee and therefore, as per cited decisions, the presumption would run in assessee s favor that the investments were made out of free funds available with the assessee. Further, in terms of cited decision of special bench, no such disallowance could be made while computing Book-Profits u/s 115JB. Therefore, the additional disallowance as made by Ld. AO while computing income under normal provisions as well as while computing Book-Profits u/s 115JB is not sustainable in law. The Ld. AO is directed to delete the same. This ground stand allowed. Claim of Education Cess - HELD THAT:- We find that this issue is covered in assessee s favour - As in the case of Sesa Goa Ltd. [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] has held that while the income tax is not allowable as deduction in view of Sec.40(a)(ii) of the Act, the expression Cess cannot be read into the said provisions and hence the amount of education cess and higher and secondary education cess are allowable as deduction in computing the income of the assessee. Therefore, Ld. AO is directed to verify the claim of the assessee and allow the deduction in terms of the cited decision. This ground stand allowed for statistical purposes. Erroneous levy of interest u/s 234C on tax liability determined under MAT provisions - HELD THAT:- We admit this ground of appeal. Accordingly, we direct Ld. AO to bring on record the relevant factual matrix for this issue and adjudicate the issue of levy of interest u/s 234C in the light of above judicial pronouncements. This ground stand allowed for statistical purposes.
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2021 (12) TMI 582
Exemption u/s 11 - registration u/s 12AA Cancelled - Denial of natural justice - assessee contended that the Ld. PCIT(C) without waiting the appraisal report of the A.O. and without giving opportunity of being heard, invoked and exercised the Jurisdiction under section 12AA(3) 12AA(4) - assessee contended that the Ld. PCIT(C) without waiting the appraisal report of the A.O. and without giving opportunity of being heard, invoked and exercised the Jurisdiction under section 12AA(3) 12AA(4) - HELD THAT:- In the present case it is not in dispute that the Ld. Pr. CIT passed the impugned order exparte on 22/03/2021 and cancelled the registration already granted to the assessee under section 12AA of the Act by invoking the provisions of section 12AA(3)/12AA(4) From the provisions contained in proviso to sub section 3 of Section 12AA of the Act, it is crystal clear that no order under this sub section shall be passed unless such trust or institution has been given reasonable opportunity of being heard. Reasonable opportunity of being heard is to be given and the fact that in the past, adjournments had been sought for would not be of any materiality. In the present case, the Hon'ble Jurisdictional High Court directed the Ld. Pr. CIT vide order dt. 17/03/2021 to dispose off the objections raised by the assessee and the letters furnished in the response to the show cause notice. However, the Ld. Pr. CIT, without providing any opportunity of being heard to the assessee passed the impugned order on 22/03/2021 exparte which is against the provisions contained in proviso to sub section 3 of section 12AA of the Act. No assessment was framed by the A.O. therefore it is not clear that how and in what manner the Ld. Pr. CIT considered the details examined by the A.O. when the assessment had not been completed by the A.O - Pr. CIT while cancelling the registration of the assessee trust considered the provisions contained in section 11, 12 and 13 of the Act and also mentioned that to decide the eligibility of section 12AA of the Act subsequently after having been granted earlier, the tests to be applied are as to whether the activity of the Trust are being carried out as per the stated object and income was derived only from the property held under the Trust (Source Trust)and as to whether the Trust was applying entire receipt / income solely for the charitable purpose of the Trust as required under section 11, 12 and 13 (application test). Application test under section 11, 12 and 13 of the Act, could have been applied only after the outcome of the examination by the A.O. from the record. In our opinion, the A.O only after proper examination of the assessee s record may be in a position to come to the conclusion as to whether the benefit directly or indirectly from the property or the income has been derived by the person mentioned under section 13(3) of the Act or as to whether the assessee Trust record entire receipt or expenses in the books of accounts. In the present case nothing is brought on record to substantiate that the A.O. had undertaken aforesaid exercise as regards to the provisions contained in Section 11, 12 and 13 of the Act. Pr. CIT without waiting the outcome of the assessment framed by the A.O. cancelled the registration already granted under section 12AA of the Act vide order dt. 22/02/2011, the said action of the Pr. CIT in the present case was a premature one particularly when no submissions were made dt. 04/01/2021 01/02/2021 by the assessee on merits of the case and this fact has been pointed out by the Ld. Pr. CIT of the impugned order wherein it has been mentioned that the submissions contained mostly the legal issues. Reasonable opportunity of being heard was not provided by the Ld. Pr. CIT to the assessee after the direction given by the Hon'ble Jurisdictional High Court on 17/03/2021 and the impugned order passed by the Ld. Pr. CIT on 22/03/2021 exparte, against the provisions as contained in the proviso of sub section 3 of section 12AA of the Act which provides that the reasonable opportunity of being heard is to be provided before cancellation the registration. Pr. CIT (Central) is set aside and the issue is remanded back to his file to be adjudicated afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee and also by keeping in view the findings given by the A.O. as regards to the violation of the provisions contained in Section 13(1)(c) - Appeals of the assessee are allowed for statistical purposes.
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2021 (12) TMI 574
Deposit of employees contributions qua ESI PF after the due date - non-applicability of the provisions of Section 43B of the Act to the employee s share qua PF ESI and applicability of the amended provisions of Section 36(1)(va) and 43B of the Act wherein Explanations have been inserted by Finance Act, 2021 - HELD THAT:- The Hon ble jurisdictional High Court in the case of CIT Vs. M/s Hemla Embroidery Mills (P) Ltd. [ 2013 (2) TMI 41 - PUNJAB AND HARYANA HIGH COURT] and M/s Mark Auto Industries Ltd. [ 2013 (1) TMI 448 - PUNJAB AND HARYANA HIGH COURT] clearly held that the assessee is entitled to claim deduction of employee s share of ESI PF u/s.43B of the Act, if the same has been deposited prior to the filing of return of income u/s.139(1) of the Act. It is clear that the Hon ble Court has not drawn any distinction between the employee s and employer s share qua PF ESI contributions. Admittedly there are no contrary judgements of the jurisdictional High Court against the assessee on the aspect under consideration hence, first determination of the Ld. CIT(A) qua non-applicability of the provisions of Section 43B of the Act to the employee s share qua PF ESI, is unsustainable. Determination to the effect that the amendment made in Section 36(1)(va) and 43B of the Act by Finance Act 2021 has to be considered as clarificatory in nature and having retrospective effects, therefore would be applicable to the previous assessment years as well - We may observe in the case of Value Momentum Software Services Pvt. Ltd.[ 2021 (5) TMI 989 - ITAT HYDERABAD] have taken into consideration the identical issue qua applicability of the amendment to Section 36(1)(va) and Section 43B of the Act, by inserting Explanations by the Finance Act, 2021 and clearly held that the amendment shall be applicable from 1st April, 2021 onwards . It is also relevant to note that the CBDT has also issued Memorandum of Explanation qua applicability of the amended provisions of Section 36(1)(va) 43B of the Act w.e.f. 1st April, 2021, and Assessment Year 2021-21 onwards, hence there is no doubt qua applicability of the amended provisions referred above, prospectively. On the aforesaid discussion, the second aspect as considered/determined by the ld. CIT(A) qua retrospective application of the amended provisions of Section 36(1)(va) and 43B of the Act wherein Explanations have been inserted by Finance Act, 2021 qua employees share in respect of PF ESI Act, is also unsustainable - Decided in favour of assessee.
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Central Excise
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2021 (12) TMI 581
CENVAT Credit - input - Coal - denial on the ground that since the appellant has not paid duty at the Central Excise tariff rates and have paid duty less than that, as per Customs Notification No. 12/2012-Cus, appellant are not eligible for Cenvat credit - Time Limitation - HELD THAT:- The appellant have availed Cenvat credit in respect of 2% CVD paid as per Notification No. 12/2012-Cus. Specific bar was provided under Rule 3(1)(i)(a) and (b) for availing Cenvat credit in respect of goods exempted from payment of excise duty under Notification No. 1/2011-CE and 12/2012-CE. However, there is no bar provided in respect of CVD paid under Customs Notification No. 12/2012-Cus. For this reason itself, the Cenvat credit availed by the appellant in respect of CVD cannot be denied - Revenue has disallowed Cenvat credit to the appellants in respect of CVD paid on imported Coal at the rate of 2% in terms of Notification No. 12/2012-Cus dated 17.03.2012. Only on the ground that the appellant have not paid CVD equivalent to the excise duty leviable on the Coal specified under clauses (i), (ii), (iii), (iv), (v), (vi) and (via) and applied clause (vii) of Rule 3 of Cenvat Credit Rules. Tribunal has considered various decisions given by the different benches and also distinguished the decisions relied upon by the Revenue and concluded that the appellant is entitled for Cenvat credit in respect of 2% CVD paid under Notification No. 12/2012-Cus. Time Limitation - HELD THAT:- The issue involved is purely of interpretation of Cenvat Credit Rules, levy of CVD in terms of Customs Tariff Act. It is also the fact that on identical issue many cases were made out by the department across the country in respect of different assessees which clearly shows that the issue involved is of interpretation of law. In this situation, malafide intention cannot be attributed to the appellant. The appellant have been declaring availment of Cenvat credit in respect of 2% CVD and the same were reflected in monthly ER-1 returns. Therefore, there is absolutely no suppression of facts or mis-declaration etc. on the part of the appellant. Accordingly, the demand for extended period is not sustainable on the ground of time-bar also. The appellants are eligible for Cenvat credit in respect of 2% CVD paid under Notification No. 12/2012-Cus. - Appeal allowed - decided in favor of appellant.
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2021 (12) TMI 580
CENVAT Credit - input services - credit was availed after one year from the date of issue of invoices - HELD THAT:- There is no dispute that the appellant have availed the cenvat credit after one year from the date of issue of invoices. However, the dates of issue of invoices are undisputedly prior to the amended Rule 4(1) whereby the time limit of six months/ one year form the date of issue of invoices was fixed for availing the cenvat credit. In various judgements, it has been held that when on the date of issue of invoices, the time limit for taking credit was not prescribed, therefore, in respect of those invoices, the subsequent amendment stipulating the time limit for availing the credit shall not apply. An identical issue has been considered by this Tribunal in VIJAY KUMAR SRIVASTAW AND ALOK MASTERBATCHES LTD VERSUS C.C.E. S.T. -DAMAN [ 2021 (4) TMI 804 - CESTAT AHMEDABAD] and held that in respect of invoices issued prior to the amendment, the time limit prescribed in the amended Rule 4(1) and 4(7) shall not apply. In respect of invoices issued prior to the amendment, the time limit prescribed in the amended Rule 4(1) and 4(7) shall not apply - Appeal allowed - decided in favor of appellant.
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2021 (12) TMI 579
Levy of Special Excise duty - Air Conditioners and parts thereof falling under Chapter 8415 of Central Excise Tariff Act, 1985 - case of the department is that the goods which have been cleared by the appellant are having essential characteristic of complete air conditioner therefore, is liable to special excise duty - HELD THAT:- The issue in the appellant s own case has been settled vide this tribunal s Order in SEAGULL COOLING PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, VAPI [ 2006 (8) TMI 466 - CESTAT, MUMBAI] , the said decision was given considering the board circular dated 25.9.2002. where it was held that entities by apparent description and application of Boards instruction by themselves cannot be considered to be a complete Air Conditioner or have essential character of Air Conditioner to classify them as other than parts. No duty demands can be worked out on such. Thus, it is clear that the assembly which were cleared by the appellant were not contained either one or more items specified in the board circular. Therefore, if this is correct then the goods cleared by the appellant do not have essential characteristic of complete air conditioner therefore, the same shall not be liable for levy of special excise duty. On going through the impugned order, it is found that the learned adjudicating authority has not discussed about the nature of the assembly cleared by the appellant that whether the assemblies have contained all the six items mentioned in the board circular or otherwise which was claimed by the appellant therefore, the matter needs to be reconsidered only on the point that whether the goods cleared by the appellant contains all the six items mentioned in the board circular or otherwise. If it is found that if one or more items specified in the board circular is absent in the assembly supplied by the appellant, the same shall not be considered as complete air conditioner whereas, the goods shall be considered as parts of air conditioner accordingly, there shall not be any levy of special excise duty. Appeal allowed by way of remand.
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2021 (12) TMI 578
CENVAT Credit - input services - GTA Services - denial on the sole ground that the appellant have not supplied the CAS4 Certificate to ascertain the cost of product - inclusion of freight element in assessable value or not - HELD THAT:- The sale of the goods is on Principle to Principle basis. As per Section 4 of the Central Excise Act, 1944 the transaction value at which the goods are sold has to be taken for the purpose of assessment. In case of the value arrived at, as per Section 4(1)(a) no question can be raised. Moreover, in the facts of the present case the freight is deemed to have been included in the assessable value and on such assessable value excise duty was charged which is evident from the sale invoice which shows that the appellant have not collected the freight separately from the customer. The freight charge was borne by the appellant themselves. In this case the transaction should be considered as FOR sale and accordingly, the buyer s place shall become place of removal as all the expenses up to the delivery of the goods at the buyer s place was borne by the appellant. It can be seen in the case of M/S. SALASAR COPPER VERSUS COMMISSIONER OF CENTRAL EXCISE ST, DAMAN [ 2019 (4) TMI 11 - CESTAT AHMEDABAD] that on the basis of CA Certificates produced by the appellant regarding the nature of sale i.e. FOR Sale and also the inclusion of freight charge, this tribunal has taken a view that appellant is entitle for Cenvat Credit - In the present case also there is no dispute that the appellant have produced the CA Certificate wherein, it was certified that the sale is on FOR Basis and the freight is included in the sale value accordingly, the facts of the present case as well as the case cited are identical. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2021 (12) TMI 577
Maintainability of reassessment under Section 43 of the OVAT Act - absence of completion of assessment under Sections 39, 40, 42 or 44 of the OVAT Act - HELD THAT:- A comparison of the language used in the amended Section 43 (1) of the OVAT Act with its version prior to 1st October, 2015 makes it clear that a new system has been put in place as far as reopening of returns filed as self-assessment is concerned. Now such reopening is permitted even if there was no formal acceptance of the return originally filed. The concept of a deemed acceptance of the return has been introduced for the first time since 1st October, 2015. This is not a mere procedural change. Further, the amending statute itself makes it clear that the amendments are with effect from 1st October, 2015 and not with retrospective effect from an earlier date. Therefore, the Court is precluded from presuming that the amendment to Sections 39 (2) and 43 (1) of the OVAT Act and correspondingly to Rule 50 of the OVAT Rules are either merely clarificatory or retrospective. The picture that emerges is that if the self-assessment under Section 39 of the OVAT Act for tax periods prior to 1st October, 2015 are not accepted either by a formal communication or an acknowledgment by the Department, then such assessment cannot be sought to be re-opened under Section 43 (1) of the OVAT Act and further subject to the fulfillment of other requirements of that provision as it stood prior to 1st October, 2015. The reopening of the assessment sought to be made in the present case under Section 43 (1) of the OVAT Act is held to be bad in law - Revision petition disposed off.
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2021 (12) TMI 576
Seeking reconsideration of application for rectification of mistake - opportunity of being heard also sought - validity of assessment order - HELD THAT:- Ext.P5 is received by the respondents on 26.3.2021 and the grievance of the appellant at Ext.P5 is not disposed of till date. Hence, the prayer of the appellant with a direction to dispose of Ext.P5, can be granted. The 2nd respondent is directed to dispose of Ext.P5, as expeditiously as possible, preferably within four weeks from the date of receipt of a copy of this judgment, after affording an opportunity of being heard to the appellant. The appellant is also given liberty to re-submit Ext.P5 accompanied by a copy of this judgment within one week from today. Appeal disposed off.
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Indian Laws
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2021 (12) TMI 575
Dishonor of cheque - insufficiency of funds - compoundable offence or not - Settlement agreement between parties - HELD THAT:- Section 138 of the N.I. Act stipulates the punishment for dishonour of cheque for insufficiency, etc. of funds in the account. As per Section 147 of the N.I. Act, notwithstanding anything contained in the Cr.P.C., every offence punishable under the N.I. Act is deemed to be compoundable. Therefore, the offence of dishonouring of a cheque is a compoundable offence. The facts of the instant case indicate that in pursuance of Order dated 14.02.2020 of the Ld. Trial Court, a Mediation Settlement dated 22.09.2020 was signed by both the parties as per which Respondent No.2 was directed to pay a sum of ₹ 3,00,000/- by way of cash against receipt/DD/account transfer in four instalments. This settlement agreement was signed by both the parties out of their own volition. It can safely be said that when the offence under Section 138 N.I. Act is compounded in accordance with Section 147 N.I. Act, the question of imposition of a sentence on Respondent No.2 does not arise. Section 357(3) Cr.P.C. states that when a Court imposes a sentence, of which fine does not form a part, the Court may order the accused person to pay, by way of compensation any amount that the Court deems fit to the person who has suffered any loss or injury. This Court, therefore, finds no legal infirmity in the impugned Order dated 24.12.2020 of the Ld. Trial Court, and is of the opinion that the decision rendered by the Ld. Trial Court is well-considered and showcases application of judicial mind. This application is completely misconceived and only demonstrates the avarice of the petitioner who wants compensation after settling the dispute. This application is nothing but an abuse of the process of law - petition is dismissed.
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