TMI Tax Updates - e-Newsletter
December 5, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Service Tax
Indian Laws
Highlights / Catch Notes
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GST:
Input Tax Credit - solar power panels procured and installed - blocked credit- When Electricity energy manufactured using the Solar Panels were supplied to TANGEDCO which involves no payment of GST, the supply chain get snapped at the point and the inputs or capital goods used for such supply would not be eligible for any input tax credit. - the tax paid on the inputs i.e. Solar Panels are not eligible for input tax credit as the same are used exclusively for supply of exempted goods in view of the provisions of Section 17(2) of the CGST Act, 2017 read with Rule 43(1)(a) of the CGST Rules, 2017. - AAAR
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Income Tax:
Validity of Reopening of assessment u/s 147 - applicability of period of limitation of 10 years - Relevant date for conducting search or survey - The search is conducted and against the 3rd person whose documents have been seized which goes to show that the information and the documents forms an asset and beyond 50 Lakh. Further the records suggest that investigating team has also alleged about the entries in the Books of Account. - Contentions of assessee rejected - HC
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Income Tax:
Disallowance of expenditure u/s. 40A(3) - AO without verifying necessary cash book to ascertain the quantum of payments has simply made disallowance with a vague observation on the basis of bonus register, ignoring the arguments of the assessee that cash payment in a single day to any person does not exceeded the prescribed limit as per the provisions of section 40A(3). - CIT(A) rightly deleted the additions - AT
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Income Tax:
Revision u/s 263 - Allowing other expenses from the House Property Income (Rental income) - apart from the expenditure provided under Chapter (iv) of the Income Tax Act, no other expenditure could be claimed. It is patently erroneous claim at the end of the assessee, which has been accepted by the AO therefore, this CBDT Circular is not attracted in the present case. - Revision order sustained - AT
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Income Tax:
Categorization of income - Undisclosed income surrendered during survey - Charging of tax rate u/s. 115BBE - CIT(A) granted relief to the assessee by charging income at normal rate of tax - We cannot subscribe to the view expressed by the CIT(A), since the AO has accepted the income offered by the assessee comes under the head ‘Income from Other Sources’ and offered higher rate of tax on the said income, therefore, there was no occasion for the AO to go into the integrities of the books of accounts to make them liable to be rejected. - AT
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Income Tax:
Adjustment of refund against demand - requirement of prior intimation under section 245 of the Act was a mandatory requirement and failure to comply with this mandatory requirement of prior intimation would make the entire adjustment as wholly illegal and, therefore, the respondents could not have made the adjustment as they wanted to. - HC
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Income Tax:
Taxability of income in India - offshore services (involving supply of related drawings design) - where offshore supply of plant and equipment are treated as not taxable in India, the supply of drawings and designs inextricably linked to such plant and equipment had to be considered as non-taxable in India, being part of supply of plant and equipment. - AT
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Income Tax:
Allowable business expenditure - compensation paid by the assessee for the closure of agreement - as per AO company to whom the compensation has been paid did not have any right and therefore compensation paid by the assessee is not allowable - Claim allowed by the CIT(A) is correct - AT
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Income Tax:
Addition u/s 68 - cash deposited during the demonetisation period - As the assessee failed to establish beyond doubt with any cogent evidence the nature and source of the cash deposit in its bank account, the addition made by the AO u/s 68 of the Act is affirmed. - AT
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Income Tax:
TCS of u/s. 206C(1) and interest u/s. 206C(7) - period of limitation - the show cause notice was issued by the A.O. on 27-06-2017 and order was passed on 26-07-2017 which is beyond 4 years. Therefore the order passed by the A.O. is construed to be an order passed after the period of limitation, the same is not maintainable in law - AT
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Income Tax:
Income taxable in India - Management Support Charges - the fee received by the assessee under the Centralized Services Agreement cannot be treated as FIS either under Article 12(4)(a) or 12(4)(b) of the India–US Tax Treaty. As a natural corollary, it can only be treated as business income of the assessee. Hence, in absence of a PE in India, it will not be taxable. - AT
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Customs:
Refund claim - The re-assessment of shipping bill is not final. Therefore, the appellant has no reason to challenge the assessment of the shipping bills. In that circumstances, the reasons for denying the refund to the appellant are not sustainable - AT
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Customs:
Revocation of Customs Broker License - Over-valuation of goods - To implicate the appellant with the commissioning of the fraud, the charge has to be led by positive and reliable evidence and vague hypothesis and presumptions cannot be the basis for any unilateral action initiated against the Broker - the department has failed to make out any sustainable case of violation of the provisions of the CBLR, 2018 by the Custom Broker. - AT
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Customs:
Non-imposition of redemption fine and penalty - Zero Duty EPCG Authorization - failure to fulfill the export obligation - when investigation started the respondent immediately paid duty and interest. Further, as per the condition of the Notification, the appellant is required to pay duty along with interest. In that circumstances, the adjudicating authority has rightly refrained from imposing redemption fine and penalty on the respondent. - Revenue appeal dismissed - AT
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Indian Laws:
Dishonour of Cheque - Legally enforceable debt or not - The explanation to Section 138 of the Negotiable Instruments Act defines the expression “debt or other liability” as a legally enforceable debt or other liability. Unless the two conditions set out in Section 138 of the Act are satisfied, no criminal liability can be fastened. - HC
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Service Tax:
Levy of service tax - supply of food and beverages at their counters provided in the cinema halls - whether the supply of food and beverage in the cinema complex falls within the definition of ‘service’ and ‘declared service’ in terms of Section 65B(44) and Section 66 E of the Act? - Held No - AT
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Service Tax:
Demand of service tax on the basis of 26AS (TDS statement) - Extended period of limitation - the figures reflected in Form 26AS cannot be used to determine Service Tax liability unless there is evidence shown that it was due to a taxable service - thus, the entire demand has been raised beyond the normal period of limitation. - Demand set aside - AT
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Service Tax:
Classification of service - Management Maintenance or Repair Services or not - SCN is very vague - Out of total 16 work orders, the Appellant has rightly collected service tax against 5 work orders where service tax was liable to be paid and deposited the same with the Department - No service tax was collected on works executed against rest 11 work orders, as the same was not liable to service tax under the category of 'Management, Maintenance or repair Service' as demanded in the impugned order. - AT
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Service Tax:
Levy of penalties - Extended period of limitation - the department has not brought in any evidence on record to substantiate the allegation of fraud, collusion, suppression or misrepresentation of fact. Thus, extended period cannot be invoked in respect of these demands and hence no penalty imposable on this demand. - AT
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Service Tax:
Classification of service - Supply of Manpower Service or not - A work contract agreement will involve supply of services for which certain manpower will be deployed. Just for the reason that the manpower was deployed by the appellant nature of agreement cannot be changed from the one that was intended between the contracting parties. - The present services do not qualify as Manpower Supply Service - AT
Articles
Notifications
Circulars / Instructions / Orders
Case Laws:
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GST
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2023 (12) TMI 106
Cancellation of GST registration granted to the petitioner - appeal preferred by the petitioner was dismissed on the ground of delay - HELD THAT:- The issue raised in the present case is squarely covered by a judgment of this Court in the case of M/S CHANDRA SAIN, SHARDA NAGAR, LUCKNOW THRU. ITS PROPRIETOR MR. CHANDRA SAIN VERSUS U.O.I. THRU. SECY. MINISTRY OF FINANCE, NEW DELHI AND 5 OTHERS [ 2022 (9) TMI 1047 - ALLAHABAD HIGH COURT] where it was held that In the present case from the perusal of the order dated 13.02.2020, it is found that clearly there is no reason ascribed to take such a harsh action of cancellation of registration. In view of the reasoning as recorded in the case of M/s Chandra Sain and the facts being similar, the order cancelling the registration dated 14.09.2022 cannot be sustained and is quashed with liberty to the respondents to pass a fresh order after issuing a show-cause notice in accordance with law and after considering the defense, if any. Petition allowed.
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2023 (12) TMI 105
Scope of Advance Ruling application - Input Tax Credit - solar power panels procured and installed - blocked credit under Section 17(5) (c) and (d) of CGST/ TNGST Act, 2017. The main ground of appeal is that the AAR had exceeded its jurisdiction in delivering a ruling on apportionment of credit in terms of Section 17(2) of the CGST Act, 2017, rather than delivering a ruling on the question of blocked credit. HELD THAT:- As the Appellants are not supplying works contract service for construction of an immovable property and since such their activity does not fall within the ambit of the Section 17(5)(c) or (d) of CGST Act, 2017, the question whether ITC is blocked or otherwise, in terms of the said provisions, does not arise at all and the issue raised before the AAR was totally irrelevant. Moreover, the issue raised is extraneous to provide a ruling, as it is not within the scope of Section 97(2)(d) of the Act i.e. admissibility of input tax credit. Moreover, the provisions of the Section 17(2) of the Act, read with the Rule 43(1) (a) of the CGST/TNGST Rules, 2017 (hereinafter referred to Rules) disentitles the ITC in this case on the Solar Power Panels used for installation of the Solar Power Plant which were used by the Appellant for supply of Electric Energy which is exempted from the whole of the GST payable under the Notification No: 2/20217 CT(R) dated: 28.06.2017 (Sl.No: 104). When Electricity energy manufactured using the Solar Panels were supplied to TANGEDCO which involves no payment of GST, the supply chain get snapped at the point and the inputs or capital goods used for such supply would not be eligible for any input tax credit. The further purchase of electricity from TANGEDCO at a different location is altogether a different supply and the fact that the billing is done by TANGEDCO in a consolidated matter does not alter the position. - the tax paid on the inputs i.e. Solar Panels are not eligible for input tax credit as the same are used exclusively for supply of exempted goods in view of the provisions of Section 17(2) of the CGST Act, 2017 read with Rule 43(1)(a) of the CGST Rules, 2017.
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Income Tax
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2023 (12) TMI 104
Income taxable in India - Gain or income arising from the transfer of shares of a company located outside India - whether Explanations 6 and 7 appended to Section 9(1)(i)which was inserted by the Finance Act 2015 with effect from 01.04.2016 are clarificatory and curative and, therefore, should be given retrospective effect or amendatory? - HELD THAT:- Section 9(1)(i) of the Act inter alia seeks to impose tax albeit via a deeming fiction qua all income accruing or arising, whether directly or indirectly, through or from any property in India or through or from any asset or through transfer of asset situate in India, or the transfer of a capital asset situated in India. The judgment of the Supreme Court rendered in Vodafone [ 2012 (1) TMI 52 - SUPREME COURT ] excluded from the scope and ambit of Section 9(1)(i) of the Act gain or income arising from the transfer of shares of a company located outside India, although the value of the shares was dependent on assets which were situated in India. It is to cure this gap in the legislation, Explanations 4 and 5 were introduced via FA 2012, which were given effect from 01.04.1962. Explanations 4 and 5 presented difficulties in that the expressions share and interest and substantially found in the explanations were vague, resulting in undue hardship for transferors/assessees where the percentage of share or interest transferred was insignificant. As evident upon perusal of Explanations 6 and 7, some recommendations were accepted. The Finance Minister's Speech while introducing the amendments via FA 2015 is revelatory since a dim view was taken of the retrospective amendment brought about by Explanations 4 and 5, effective from 01.04.1962. The legislature took a curative step regarding the vague expressions used in Explanation 5, i.e., share/interest and substantially . The argument advanced on behalf of the appellant/revenue, shorn of gloss, boils down to the fact that the insertion of Explanations 6 and 7 via FA 2015 was to take effect from 01.04.2016 and could only be treated as a prospective amendment. The argument advanced in support of this plea was that Explanations 6 and 7 brought about a substantive amendment in Section 9(1)(i) of the Act. In our view, this submission is misconceived because Explanations 6 and 7 alone would have no meaning if they were not read along with Explanation 5. Therefore, if Explanations 6 and 7 have to be read along with Explanation 5, which concededly operates from 01.04.1962, they would have to be construed as clarificatory and curative. The legislature took recourse to the mischief rule to clarify Explanation 5, which otherwise was in danger of being struck down as vague and arbitrary. If Explanations 6 and 7 are not read along with Explanation 5, no legislative guidance would be available to the AO regarding what meaning to give to the expression share/interest or substantially found in Explanation 5. There is good authority for us to conclude that although Explanations 6 and 7 were indicated in FA 2015 to take effect from 01.04.2016, they could be treated as retrospective, having regard to the legislative history which led to the insertion of Explanations 6 and 7. The observations made in Commissioner of Income Tax vs Alom Extrusions Ltd. [ 2009 (11) TMI 27 - SUPREME COURT ] and Commissioner of Income Tax I, Ahmedabad vs Gold Coin Health Food Private Ltd. [ 2008 (8) TMI 5 - SUPREME COURT ] to hold that the Finance Act, 2003, to the extent indicated above, is curative in nature, hence, it is retrospective and it would operate with effect from 1-4-1988 (when the first proviso came to be inserted). An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended. The language shall be deemed always to have meant or shall be deemed never to have included is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending Act is declaratory, it would not be so construed when the amended provision was clear and unambiguous. An amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal Act was existing law when the Constitution came into force, the amending Act also will be part of the existing law. Also decided in Copal Research Limited, Moody s Group Limited, Moody s Analytics, USA [ 2014 (8) TMI 606 - DELHI HIGH COURT ] even before the amendment was brought about by FA 2015, has taken the view that Explanation 5 had to be construed narrowly. The OECD Model Tax Convention on Income and on Capital provides a means of settling on a uniform basis the most common problems that arise in the field of international juridical double taxation. Article 13 of the said Convention deals with the taxes on capital gains. Article 13(1) provides that the gains derived by a resident of a Contracting State from the alienation of immovable property situated in another Contracting State may be taxed in that other State. Article 13(4) of the said Convention provides that the gains derived by a resident of a Contracting State from the alienation of shares or comparable interests deriving more than 50 per cent of their value directly or indirectly from immovable property situated in the other Contracting State may be taxed in that other State. In view of the above, gains arising from sale of a share of a company incorporated overseas, which derives less than 50% of its value from assets situated in India would certainly not be taxable under section 9(1)(i) of the Act read with Explanation 5 thereto. We are informed that the appellant/revenue has preferred an appeal concerning the aforesaid judgment, which has been admitted, although no stay has been granted. Thus, for the foregoing reasons, we are not inclined to interfere with the order passed by the Tribunal. According to us, no substantial question of law arises for consideration.
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2023 (12) TMI 103
Validity of Reopening of assessment u/s 147 - applicability of period of limitation of 10 years - as alleged notice beyond the limitation prescribed u/s 149 issued - Relevant date for conducting search or survey - whether with the amendment brought in by Finance Act 2021, the respective notices issued to the respective petitioners under Section 148 of the Act for the Assessment Year 2013-14 is/are beyond jurisdiction? - HELD THAT:- It is true that in the newer provision of reassessment, in cases where search is initiated after 01.04.2021, it is required to be made as per provisions contained in section, 148, 149 and 151. The discussions made herein above clearly states that no error has been committed by the AO in issuing Notice u/s 148 of the Act for the AY 2013-14. It goes without saying that Section 148A is not applicable in this case as information emanated from searched party and materials/documents pertained to/relates to the both Assessee i.e., where the search is conducted and against the 3rd person whose documents have been seized which goes to show that the information and the documents forms an asset and beyond 50 Lakh. Further the records suggest that investigating team has also alleged about the entries in the Books of Account. Thus, the first and the main contention of the learned counsel for the respective Assessee that the Notice u/s 148 is time barred, has no legs to stand in the eye of law in view of the discussions made in the preceding paragraphs. Accordingly, the judgments cited by the learned counsel is not applicable in the instant case, inasmuch as, the Notice issued by the Revenue is not time barred as discussed herein above. Contention of petitioner hat no search was made in the case of Assessee and only survey was conducted as such 10 years will not be applicable in its case - Even this submission is misconceived because of the fact that 153C (2) of the Act is very clear in explaining the manner of assessment. The provision of this sub-section in unequivocal term stipulates that the Assessing Officer shall issue Notice and assess or reassess total income of such other person of such assessment year in the same manner as provided in section 153A of the Act. Thus, so far as the argument of difference between survey and search as developed by the learned counsel for the petitioner is concerned; the same is misconceived and without any basis. Thus A.O was justified in reopening the assessment for A.Y.13-14 in case of both the Assessees for 10 years as they have rightly taken previous sanction of the competent authority. There is no illegality, whatsoever, with regard to initiation of reassessment proceeding by issuing notice under Section 148 of the Income Tax Act. Decided against assessee.
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2023 (12) TMI 102
Unproved bonus payment - disallowance of bonus paid to employees - HELD THAT:- As explained by assessee before the AO that, due to lapse of time he could not file necessary evidence to justify payment of bonus, but fact remains that he had paid bonus to staff on two occasions. CIT(A), after considering relevant facts has recorded categorical finding that, because of lapse of time for more than 8 years, the assessee could not able to gather necessary evidences. Therefore, taking into account totality of facts and circumstances of the case, and also to meet the ends of justice, restricted disallowance to the extent of 20% of amount disallowed by the AO. Although, the revenue has challenged findings of the CIT(A) on adhoc disallowance of expenses, but could not adduce any evidence to counter the findings or facts recorded by the CIT(A). Therefore, there is no error in the reasons given by the CIT(A) to restrict disallowance of bonus to the extent of 20% on actual expenditure disallowed by the AO and thus, we are inclined to uphold the findings of the ld. CIT(A) and reject ground taken by the revenue. Disallowance of expenditure u/s. 40A(3) - Payment of bonus on the ground that the appellant has paid bonus in cash exceeding Rs. 20,000/- to a person in a day, contrary to provisions of section 40A(3) - HELD THAT:- CIT(A), after considering relevant facts and also taking note of fact that, the tax auditor has not made any comments on cash payments in excess of prescribed limit contrary to section 40A(3), observed that the AO without verifying necessary cash book to ascertain the quantum of payments has simply made disallowance with a vague observation on the basis of bonus register, ignoring the arguments of the assessee that cash payment in a single day to any person does not exceeded the prescribed limit as per the provisions of section 40A(3). The findings of the facts referred by the ld. CIT(A) are uncontroverted by the revenue, except stating that the CIT(A) has given relief on the basis of presumption and unqualified report from the tax auditor. When the Assessing Officer has failed to make out a case of disallowance of expenditure u/s. 40A(3) with proper reasons, no fault can be attributed to the findings of the ld. CIT(A), which is based on evidences filed by the assessee. Therefore, we are of the considered view that there is no error in the reasons given by the ld. CIT(A) to delete additions made towards disallowance of expenditure incurred in cash u/s. 40A(3). Appeal filed by the revenue is dismissed.
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2023 (12) TMI 101
Association of the assessee with his employer in the bogus business activity - Addition being 1% of total credit amount in the bank accounts of the appellant not operated by him - AO has held that the employer of the assessee was running several proprietary concern through the connivance of the assessee and all the bank accounts were handled by his employer - Counsel contended that assessee has already shown the impugned commission and incentives received by the assessee from his employer for associating with his employer in his bogus business, thus further addition made on estimation basis in the hands of the assessee is not justified. HELD THAT:- After considering the above facts and findings of the assessing officer we consider it is appropriate to restrict the addition to the extent of .05% of the gross total of since, actually the business was run and controlled by the employer of the assessee and assessee had already shown the commission income received from the employer in the return filed. Unexplained cash credit u/s 68 - assessee explained that all these accounts were controlled and operated by his employer and he was just working as a benami person on the direction of his employer - HELD THAT:- AO accepted that assessee was not directly and fully involved in the running of two proprietary concern and the assessee was just acting as a benami person of his employer and the proprietary concern and bank accounts were controlled by his employer. Therefore, we consider because of association of the assessee in the bogus business activity of his employer addition of 15% of such cash deposit would be appropriate. Therefore, this ground of appeal of the assessee is partly allowed.
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2023 (12) TMI 100
Revision u/s 263 - case of the assessee was selected for limited scrutiny - As per CIT sum as debited in your P L A/c as Loss on shares under Other Expenses and allowed at the time of assessment in contravention to provisions of section 71(3) of the Income Tax Act, 1961 and amount as been claimed as Expenses on let out property and an amount as been claimed as Expenses against Rental Income and allowed at the time of assessment, even though such expenses were not covered under Chapter IV of the Income Tax Act, 1961 - as per assessee above two items cannot be looked into by the ld. Commissioner because it is a case for limited scrutiny. HELD THAT:- It is pertinent to observe that we have take note of all the issues on which limited scrutiny was to be carried out. The first item in these issues is income from heads of income other than business/profession mismatch . The other head of income of the assessee, is house property income and apart from the expenditure provided under Chapter (iv) of the Income Tax Act, no other expenditure could be claimed. It is patently erroneous claim at the end of the assessee, which has been accepted by the AO therefore, this CBDT Circular is not attracted in the present case. The scrutiny of the income of the assessee is not being converted from limited scrutiny to complete scrutiny. These items duly fall within the first issue provided in the limited scrutiny itself, therefore, neither the decision of the ITAT Indore Bench applicable nor CBDT Circular. The assessee has not appeared before the ld. Commissioner or filed any explanation qua the proposed errors. Therefore, considering the stand of both the sides as well as perusal of the impugned order of the ld. Pr. Commissioner, we do not find any error in it. The appeal of the assessee is devoid of any merit and accordingly dismissed.
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2023 (12) TMI 99
Categorization of income - Undisclosed income surrendered consequent to survey action u/s. 133A - excess stock found during the course of survey proceedings - Charging of tax rate u/s. 115BBE of Act on undisclosed investment - investment in stock remains unexplained and the assessee failed to substantiate such investment during the survey proceeding - assessee submitted a revised computation moving the undisclosed income surrendered under the head of income Income from other sources to Income from Business and Profession - HELD THAT:- As we held that the source of undisclosed income surrendered by the assessee could not be substantiated, the same should be covered as taxable income under the head Income From Other Sources . Therefore, the original computation and return of income filed by the assessee was with correct application of law, wherein the income was shown as income from other sources and the tax was offered at special rates under the provisions of sec.115BBE of the Act. The assessee s explanation before the Ld.CIT(A) which were accepted by the Ld.CIT(A) were found under the erroneous appreciation of facts by the Ld.CIT(A), wherein, there was no whisper or observation on the source of investment in excess stock found during the survey. CIT(A) has recorded that the assessee has offered income on account of excess stock found during the survey by crediting the capital amount of the assessee and subsequently, adding the excess stock to the closing stock in the balance sheet, the stock becomes part of regular books of accounts of the assessee and was made available for subsequent sale - Also further observed that the AO has not rejected the books of accounts of the assessee and rather accepted the entries passed in the books of accounts. We cannot subscribe to the view expressed by the CIT(A), since the AO has accepted the income offered by the assessee comes under the head Income from Other Sources and offered higher rate of tax on the said income, therefore, there was no occasion for the AO to go into the integrities of the books of accounts to make them liable to be rejected. Thus the order of the Ld.CIT(A) was not according to the facts and law and therefore, the same is liable to be quashed and the findings of the AO in his order deserves to be sustained. Consequently, appeal filed by the Revenue is allowed with the observation that surrender amount on account of excess stock accepted as undisclosed income by the assessee, source of which is unexplained nonetheless belongs to activities other than regular business of the assessee, as admitted by assessee himself, should be categorized as Income From Other Sources , and taxes to be charged at special rates in accordance with provisions of sec.115BBE of the Act. Appeal of the Revenue is allowed.
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2023 (12) TMI 98
Validity of reassessment against company not in existence - scheme of merger concluded - assessment against Transferor Company - Investment in the Mutual Fund had not been disclosed - HELD THAT:- No material to show that the petitioner Company had concealed any investment because once the petitioner Company/Transferor Company is merged with the Transferee Company, the entire investment will stand transferred in the name of the Transferee Company and same also got reflected in the Book of Accounts of the Transferee Company. Hence, the interest of the revenue was no way affected. However, without verifying the same, the respondent had issued notice in the name of the petitioner Company/Transferor Company [which is not in existence on and from 14.10.2011], even after receipt of the communication of merger vide letter dated 29.03.2012 and passed the impugned Assessment Order. Hence, for all the aforesaid reasons, the impugned Assessment Order is liable to be set aside and accordingly set aside. Assessee appeal allowed.
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2023 (12) TMI 97
Adjustment of refund against demand - petitioner's case that no such adjustment is permissible in the absence of the mandatory intimation required to be given u/s 245 - HELD THAT:- In Bharat Petroleum Corporation Ltd. v. Asst. DIT [ 2021 (11) TMI 1158 - BOMBAY HIGH COURT] the court has held that the requirement of prior intimation under section 245 of the Act was a mandatory requirement and failure to comply with this mandatory requirement of prior intimation would make the entire adjustment as wholly illegal and, therefore, the respondents could not have made the adjustment as they wanted to. On this ground alone prayer clause-(a) as quoted above has to be granted. Moreover it is also averred in the petition that the Income-tax Appellate Tribunal had stayed the demand for the assessment year 2014-15 and, therefore, the respondent could not have adjusted against the refund. We are not getting into that in view of what we have held above on the mandatory intimation under section 245 of the Act.
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2023 (12) TMI 96
Taxability of income in India - amount received by the assessee under the contract for offshore supply of plant equipment as well as for offshore services (involving supply of related drawings design) - India Germany Treaty - whether receipts claimed as non-taxable in India under the provisions of the Act as well as under the relevant Articles of the Double Taxation Avoidance Agreement (DTAA)? - AR made submitted that assessee is only a sub-contractor for civil construction of dam carried out by HCC and that Hydro Electrical work is done by another party - HELD THAT:- We hold that no part of consideration received outside India for offshore supplies of plant and equipment and spares could be deemed to accrue or arise in India as per section 9 of the Act in the hands of the assessee. Admittedly, there is no existence of any Permanent Establishment (PE) of the assessee in India. Such consideration would only be in the nature of business income not attributable to PE in India and hence not taxable under Article 5 read with Article 7 of the India Germany DTAA. There is no case to treat the receipt of such consideration for offshore supplies of equipment as income taxable in India. Hence we direct the AO to delete the addition made on account of consideration received for offshore supplies of Plant and Equipment outside India. The grounds raised in this regard by the assessee are allowed for various years and accordingly, the issue number 1 framed hereinabove by us is decided in favour of the assessee. Taxability of offshore services - assessee s case is that the entire work related to the drawings and designs were undertaken outside India and that the property both in the designs and drawings as well as in the equipment had passed outside India - HELD THAT:- It is not in dispute that the assessee indeed had supplied offshore drawings and designs together with the supply of plant and equipment. We find that the Contract for offshore services and the Contract for the offshore supply of Plant and Equipment were entered on the same date i.e. 12.06.2009 and are inextricably connected because the supply cannot be made without the drawings. Admittedly, the drawings and designs could not be utilised by HCC to get the manufacturing of plant from another manufacturer. The drawings and designs made by the assessee are tailor made to suit the requirements of the Plant and equipment supplied by the assessee. We find that the preamble in the offshore services contract specifically defines the scope of total services to be rendered by the assessee. Offshore service contract primarily involves preparation and supply of drawings and design for imported plant equipment and thus is inextricably linked with the offshore supply of plant equipment. Considering the nature of work undertaken by the assessee as per the Contract, in our considered opinion, the drawings and design as supplied are inextricably linked with the plant and equipment supplied by the assessee. We find that the similar issue had been addressed by the Hon ble Jurisdictional High Court in the case of Linde AG, Linde Engineering Division vs DIT [ 2014 (4) TMI 975 - DELHI HIGH COURT] Wherein it was held that if design and engineering is inextricably linked with the manufacture and fabrication of the material and equipment to be supplied from overseas, and form an integral part of the said supply, then the services rendered would not be amenable to tax as Fees for Technical Services. We find that the lower authorities had not disputed the position that the entire work related to the designs was carried out outside India and that the ownership in such designs was passed outside India. The lower authorities had relied on the provisions of section 9(1 )(vii) of the Act as well as Article 12 of the DTAA to come to the conclusion that the consideration received by the assessee is in the nature of fees for technical services and, therefore, the amount would be chargeable to tax in India on a gross basis under both the Act as well as the DTAA. We find that the issue in dispute is squarely covered by the decision of the Co-ordinate Bench of Delhi Tribunal in the case of SMS Concast AG [ 2023 (7) TMI 164 - ITAT DELHI ] wherein it has been held that supply of drawings and designs inextricably linked to sale and supply of equipment cannot be taxed in India as FTS - It was further concluded that where offshore supply of plant and equipment are treated as not taxable in India, the supply of drawings and designs inextricably linked to such plant and equipment had to be considered as non-taxable in India, being part of supply of plant and equipment. When the supply of drawings and designs is coupled with supply of equipment, which is manufactured in accordance with the designs supply, the amount received cannot be characterized as FTS. Thus offshore services that primarily involve offshore supply of drawings and designs are inextricably linked with the offshore supply of Plant and equipment and accordingly, the receipts from offshore services does not give rise to any income accruing or arising in India and therefore not taxable under the Act. Further, such consideration qualifies as business profits of the company in terms of the provisions of Article 7 of the DTAA, which cannot be attributed to India for computing taxable income in India. Hence, income arising therefrom should be treated as non-taxable in India. Accordingly, we have no hesitation in directing the Ld. AO to delete the addition made on account of FTS in respect of offshore designs and drawings for the various years under consideration. Assessee appeal allowed.
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2023 (12) TMI 95
Estimation of income - bogus purchases - assessee has not proved the identity of the seller - AO observed that the seller of goods is not found in the address provided by the assessee, therefore, the identity is not proved - CIT (Appeals) restricted the disallowance by estimating the gross profit at 4.81% - HELD THAT:- In the case on hand before us, we observe that the Assessing Officer did not dispute the sales recorded from out of the purchases made by the assessee. The quantitative details of the stocks are not found to be incorrect. Since the AO has accepted the sales made out of the purchases and there is no discrepancy in stocks found there is no justification in treating the entire purchases as not proved simply because the seller was not produced or not found in the address given. Therefore, following the decisions of Simit P. Sheth ( 2013 (10) TMI 1028 - GUJARAT HIGH COURT ) the profit element is estimated at 12.5% as against 4.81% estimated by the ld. CIT (Appeals). The decision relied upon by the ld. DR is distinguishable on facts. Thus, we direct the Assessing Officer to restrict the disallowance to 12.5% of the purchases and re-compute the income accordingly.
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2023 (12) TMI 94
Allowable business expenditure - compensation paid by the assessee for the closure of agreement - as per AO company to whom the compensation has been paid did not have any right and therefore compensation paid by the assessee is not allowable - Whether agreement executed between the assessee and the company was not an afterthought and not a sham agreement between related parties ? - whether the party to whom compensation paid by assessee is allowable as deductible expenditure in real estate development business of assessee or not? - HELD THAT:- The claim of the assessee is allowable if it is connected with the business of the assessee and payment is proved. There is no dispute with respect to the payment. There is also no dispute that same land for which compensation is paid has been sold, profit thereof is offered for taxation as business income. It is not the case of revenue that expenses of compensation incurred by assessee is not allowable as deductible expenses. Only reason for disallowance is that it is an afterthought and claim is not genuine. Allegation of ld AO is that agreement between assessee and Emtelle was an afterthought. Assessee has shown the annual accounts, agreement, claim of payment, certificate of banker, business justification, disclosure of compensation in annual accounts of recipient company shows that it is not an afterthought. Hence, we confirm appellate order of ld CIT (A). Thus, all the grounds in appeal of ld AO are dismissed.
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2023 (12) TMI 93
Addition u/s 68 - cash deposited during the demonetisation period - additional income offered before Hon ble ITSC - Addition made as assessee failed to furnish the documentary supporting and corroborative evidence in respect, of sources of the cash deposits - despite sufficient opportunity being granted, the assessee could not prove the live link/nexus between the additional income offered to tax before the Hon ble ITSC and the cash deposited in its bank account - HELD THAT:- We find no merits in the submissions of the assessee. The entire basis of arguments of the assessee appears to be a mere afterthought after receipt of the order dated 30/01/2018, passed by the Hon ble ITSC u/s 254D(4) - As from the aforesaid table of additional income offered by the assessee before the Hon ble ITSC, it is evident that the amount pertains to the assessment years 2009-10 to 201617. We are of the considered view that when the said additional income was not at all disclosed earlier by the assessee, the onus cannot be cast on the AO to prove its utilisation by the assessee for any other purpose. Rather, the onus is on the assessee to prove that the said undisclosed additional income was not utilised by it for any other purpose in the aforesaid years and was the source of the deposit in its bank account on 25/11/2016. We find that the decisions relied upon by the AR are factually distinguishable and thus not applicable to the present case. Accordingly, we find no merits in the findings of the CIT(A) and thus the impugned order is set aside. As the assessee failed to establish beyond doubt with any cogent evidence the nature and source of the cash deposit in its bank account, the addition made by the AO u/s 68 of the Act is affirmed. As a result, grounds raised by the Revenue are allowed.
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2023 (12) TMI 92
Validity of assessment made u/s 153C - reliance on statement recorded u/s 132(4) of the Act and without and any incriminating material - addition of unexplained cash credit u/s 68 towards the share premium received from around 17 entities - Share Premium received from different entities was a mere sham transaction as one of the Directors of the company has in his oath during the search proceedings stated that he was not aware of any transaction in the assessee company - AO held that the adverse inference has been drawn as per section 114 of Indian Evidence Act where the assessee has failed to furnish explanation or documentary evidences in support of its claim CIT(A) has deleted the impugned addition made u/s 68 of the Act on the ground that no addition can be made in the absence of any incriminating material found during the course of search in the case of unabated assessment - HELD THAT:- We find no infirmity in the finding of the Ld. CIT(A) in this context. It is also evident that as per the provisions of section 153C it is mandatory that the Ld. AO of the searched person should have recorded satisfaction. In the present case in hand it is evident that AO was unable to conclusively state that satisfaction note was duly recorded. In the case of failure to prove that the AO has recorded satisfaction, we do not find any justification in upholding the addition made by the Ld. AO and hence the assessment order is in itself void abintio. Therefore, the order of Ld. CIT(A) in deleting the impugned addition is upheld. Appeal filed by the revenue is dismissed.
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2023 (12) TMI 91
TCS of u/s. 206C(1) and interest u/s. 206C(7) - period of limitation - notice issued after 4 years period - HELD THAT:- Admittedly the assessment year involved in this cases A.Y. 2012- 13 and four years ends on 31-03-2016. However the show cause notice was issued by the A.O. on 27-06-2017 and order was passed on 26-07-2017 which is beyond 4 years. Therefore the order passed by the A.O. is construed to be an order passed after the period of limitation, the same is not maintainable in law and the same is liable to be quashed.
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2023 (12) TMI 90
Income taxable in India - Management Support Charges - taxable as Fee for Technical Services ( FTS ) - PE in India - India-Singapore DTAA - determinative factors/parameters to qualify as FIS - whether the services rendered by the assessee under Management Support Service Agreement are ancillary and subsidiary to the license granted for user of brand name, charges received from which are in the nature of royalty? - HELD THAT:- The issue of Management Support Charges/FTS and the issue of make available stands adjudicated by the order of the Tribunal in assessee s own case for the A.Y. 2012-13 in [ 2021 (10) TMI 443 - ITAT DELHI ] and in A.Ys. 2013-14 and 2014-15 in 2023 (3) TMI 1187 - ITAT DELHI] as held undisputedly, the assessee is neither the owner of the trademark nor has received any payment as a consideration for the use of, or right to use of trademark in terms of Article 12(3)(a). The payment was received by the group affiliates under a distinct and separate license agreement. Whereas, the assessee provided centralized services relating to marketing, advertisement, promotion etc. under a distinct and separate agreement. So, when the assessee is not the owner of the property, there is no question of allowing a third party to use or right to use of the property. That being the case, the services for which payments are received cannot be considered to be ancillary and subsidiary to the application or enjoyment of the right of property or information for which royalty has been paid. Thus we have no hesitation in holding that the fee received by the assessee under the Centralized Services Agreement cannot be treated as FIS either under Article 12(4)(a) or 12(4)(b) of the India US Tax Treaty. As a natural corollary, it can only be treated as business income of the assessee. Hence, in absence of a PE in India, it will not be taxable. Appeal of assessee allowed.
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2023 (12) TMI 89
TP Adjustment - comparable selection - HELD THAT:- Companies functionally dissimilar with that of assessee engaged in the business of rendering contract SWD and ITE services, need to be deselected from final comparable list. RS Software (India) Ltd.,Larsen Toubro Infotech Ltd.,Nihilent Ltd., Inteq Software Pvt. Ltd., Persistent Systems Ltd.,Infobeans Technologies Ltd.,Thirdware Solution Ltd.,Infosys Ltd.,Aspire Systems (India) Pvt. Ltd. and Cybage Software Pvt. Ltd.be deselected as functionally dissimilar to the assessee. Akshay Software Technologies Ltd. ( Akshay ) and Sasken Communication Technologies Pvt. Ltd. ( Sasken ) - As decided in Arm Embedded Technologies Pvt. Ltd. [ 2023 (1) TMI 399 - ITAT BANGALORE ] DRP has not considered the plea of the Assessee in proper perspective. The fact that the TPO rejected the TP study of the Assessee cannot be the basis not to consider the claim of the Assessee for inclusion of comparable companies. TPO excluded these companies only on the ground that information related to these companies was not available in the public domain and this fact was shown to be an incorrect assumption by the Assessee in the submissions before the DRP. In such circumstances, it was incumbent on the part of the DRP to have adjudicated the question of inclusion of these companies as comparable companies. The fact that these companies do not figure in the search matrix of the TPO is not and cannot be a ground not to consider inclusion of these companies as comparable companies. Since the DRP has failed to do so, we are of the view that the issue regarding inclusion of the aforesaid companies as comparable companies should be set aside to AO/TPO for fresh consideration in the light of the information available in public domain. Re- computation of margins of CG-VAK Software Exports Ltd. and Kals Information Systems Pvt. Ltd. - Findings recorded by the ld. DRP we also giving direction to the AO/TPO for computation of correct margin in the line of the direction given by the Ld. DRP. Accordingly this ground is allowed for statistical purpose. Comparable for ITeS Segment - Tech Mahindra Business Services Ltd., Infosys BPM Ltd., SPI Technologies India Pvt. Ltd., and Eclerx Services Ltd. which ought to be excluded from the final list of comparable as the companies are functionally dissimilar to the Appellant - We find the judicial decisions, applicable for the Assessment Year 2014-15 [ 2019 (8) TMI 1465 - ITAT HYDERABAD ] and based on the observations of the co-ordinate Bench, we consider the company Infosys BPO Limited E-Clerx Services Ltd. comparable has to be excluded and accordingly direct the TPO to exclude this company form the final list of comparable. SPI Technologies India Pvt. Ltd. be excluded. Tech Mahindra Business Services Ltd. - remitting issue to the file of ld.AO/TPO to consider in the above terms cited in NTT Data Information Processing Services Pvt. Ltd. v. DCIT [ 2022 (7) TMI 1401 - ITAT BANGALORE ] Microgenetic Systems Ltd is engaged in providing ITeS which are in the nature of medical transcription services. The said services would fall under the category of ITeS and, therefore, it is submitted that Microgenetic is comparable to the functional profile of ITeS rendered by the assessee. Ace BPO Services Pvt. Ltd. company is rendering health care, call centre, management service and transcription, which are in the nature of ITeS. Under the healthcare services, the company provides insurance eligibility, demographics, medical coding, charge posting, quality audits, claims transmission, payment posting, accounts receivables analysis, collection follow up and monthly reconciliation statement. Under the call centre services, the company renders insurance coverage verification, benefits verification, insurance follow ups, denials management, credit balance resolution, appointment scheduling etc. Under management services, the company provides collection services, trend analysis and process improvement. All the services rendered by the companies are comparable to the services rendered by the assessee. Further, the company passes all the filters applied by the TPO. Suprawin Technologies Ltd. - company is rendering business process outsourcing services, which are similar to the services rendered by the assessee. Further, the company passes all the filters applied by the TPO. - we remit the comparables back to the Ld.AO/TPO as sought by the assessee for inclusion and fresh consideration in the light of information available in public domain in above terms. Deduction u/s 80G - Assessing Officer did not allow the same while computing the total income without any reason - we direct to the AO for giving deduction after verifying the documents as per law. Accordingly, this ground is allowed for statistical purpose.
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Customs
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2023 (12) TMI 88
Seeking release of seized goods - Gold Dore Bars of Guinea - petitioner has come forward to pay 100% duty under protest. HELD THAT:- This Court is of the view that, it need not labour much to resolve the controversy raised in the Writ Petitions inasmuch as the petitioner has come forward to pay 100% duty under protest. The Authority concerned is directed to consider the petitioner's request and release the goods subject to payment of 100% duty by the petitioner within a week's time from the date of payment of 100% duty made by the petitioner in accordance with law - The petitioner, after making the payment of 100% duty, is at liberty to make an appropriate application seeking release of the goods, which shall be considered by the Authority concerned. Petition disposed off.
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2023 (12) TMI 87
Seeking prohibition from continuing the illegal investigations and from acting in an arbitrary manner, and to cease causing continued and repeated harassment to the Petitioner - seeking release of the goods detained by the DRI and waiver off the demurrage charges incurred by the Petitioner due to the continuous illegal detention - HELD THAT:- It is manifest that the detention of goods cannot be said to be unjustified. The record further reflects that the petitioner was not the original importer and only appeared subsequently before the respondents claiming to be the beneficial owner of the subject goods. Tested on facts and the principles enumerated by the Supreme Court in Mumbai Port Trust [ 2017 (7) TMI 977 - SUPREME COURT ], there are no justification to grant the reliefs as prayed for in the writ petition. Undisputedly, by the time the instant writ petition was taken up for consideration, it is informed that the goods had already been released and that the exercise of valuation had also been concluded - the prayers as framed in the writ petition are clearly rendered infructuous. Petition dismissed.
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2023 (12) TMI 86
Smuggling - heroin - contraband item - quantitative analysis of the sample not done even as per the report - sanction required to prosecute the accused for the offences under NDPS Act or not - HELD THAT:- It is not the case of the petitioner that the samples were opened or missing. As per the test report dated 09.08.2011 of Assistant Chemical Examiner that all the seals were intact and were tallying with the facsimile seals kept in the Court letter and in the memo. It is further reported that the samples are in the form of brown coloured powder. It answers the test for the presence of Diacetyl morphine (Heroin) and is covered under N.D.P.S. Act, 1985. In so far as the sanction is concerned, no sanction is required to prosecute the accused for the offences under NDPS Act. In so far as the Customs Act is concerned, the Principal Commissioner of Customs had accorded sanction to prosecute the accused for the offence under Section 135 of Customs Act. The petitioner is prosecuted for the offence under Section 135 of Customs Act and not for the offence under Section 132 of Customs Act. Further there is typographical error, instead of Section 9(c) of NDPS Act, it has been typed as Section 8(c) of NDPS Act in the complaint and it is nothing but a curable defect and it is not a ground for quashing the proceedings as against the petitioner. This Court is not inclined to quash the proceedings in C.C. No.56 of 2016 on the file of the Special Court under E.C. N.D.P.S. Act, Chennai as against the petitioner - Petition dismissed.
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2023 (12) TMI 85
Revocation of Customs Broker License - forefeiture of security deposit - levy of penalty - Over-valuation of goods - failure of exercising supervision required to ensure proper conduct over the employee. It is the contention of the appellant that there is nothing in the show cause notice as well as the order passed by the learned Commissioner which could associate or attribute the appellant for the offence relating to over-valuation of the export goods. HELD THAT:- While deciding the question of over valuation on part of the exporter, there is nothing on record to in any way conclusively link the conduct of the said offence with the connivance of the Customs Broker. There is nothing to decisively link the appellant with the commissioning of the said fraud and mere oral, unverified testimony cannot substitute as proof in the matter. It is also not established from records that the chartered engineer was fixed by the appellant. Further, the declaration of the export value is the sole prerogative of the exporter and not that of the Custom Broker, who files the Customs documents as per information supplied by the exporter/importer as the case be. If any conscious contumacious conduct is ascribed to the Custom Broker it has to be led by positive evidence which in this case is none. Also, there is nothing in the order or the show cause notice to link, the appellant with the non-realization of the export proceeds in respect of export shipments made in the past. There are no infringement of Regulation 10(q) as well in the matter as it is on record that the appellant has always co-operated in the enquiry. The fact that the chartered accountant could not expressly prove that the Custom Broker or his employee was the person who had represented before him as the exporter, only goes in to strengthen the appellant s case. Therefore, the allegation only exposes the hollowness of the department s claim with reference to Regulation 13(12) of CBLR, 2018 - the allegations levelled by the department as misdirected and mis-founded. To implicate the appellant with the commissioning of the fraud, the charge has to be led by positive and reliable evidence and vague hypothesis and presumptions cannot be the basis for any unilateral action initiated against the Broker - the department has failed to make out any sustainable case of violation of the provisions of the CBLR, 2018 by the Custom Broker. The order passed by the learned Commissioner being not legal and correct is therefore liable to be set aside - the order of revocation of the Customs Broker license is annulled.
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2023 (12) TMI 84
Non-imposition of redemption fine and penalty on the respondent - Zero Duty EPCG Authorization - failure to fulfill the export obligation within a block of 4 years (under wrong impression) - HELD THAT:- In this case no doubt the respondent in terms of Notification, has failed to fulfill the export obligation within a block of 4 years, the respondent is required to pay 50% of duty along with interest @ 15% within 30 days from the expiry of each block, but the respondent was not aware of this condition as they were under an impression that they were required to fulfill the export obligation within a period of 6 years - But, as and when investigation started the respondent immediately paid duty and interest. Further, as per the condition of the Notification, the appellant is required to pay duty along with interest. In that circumstances, the adjudicating authority has rightly refrained from imposing redemption fine and penalty on the respondent. As the respondent has complied with the condition of the Notification, therefore, there are no infirmity in the impugned order. Appeal filed by Revenue dismissed.
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2023 (12) TMI 83
Refund claim - rejection on the ground that the export duty was charged on the basis of Wet Metric Tonne (WMT), whereas the contract value was on Dry Metric Tonne (DMT) - no reason exists to challenge the assessment of the shipping bills - HELD THAT:- It is found that it is a fact on record that the appellant filed shipping bills at the time of export of goods and duty was to be paid on the basis of DMT instead of WMT. The Adjudicating Authority without assigning any reason, demanded duty on the basis of WMT in terms of Section 17 (4) of the Customs Act, 1962. As per the said provisions, where on verification or otherwise, it is found that the selfassessment is not done correctly, the proper officer may, without prejudice to any other action, which may be taken under this Act, reassess the duty leviable on such goods. Further, Section 17 (5) of the Customs Act, 1962, mandates that if any order passed by the proper officer under Section 17 (4) of the Act, he shall pass a speaking order on the re-assessment within 15 days from the date of reassessment of shipping bill. In this case, the assessments of shipping bills have been done under Section 17 (4) of the Act and further Section 17 (5) mandates that if any order is passed under Section 17 (4) of the Act, the proper officer is duty bound to pass a speaking order of re-assessment within 15 days of the order passed under Section 17 (4) of the Act - Admittedly, in the case in hand, no order under Section 17 (5) of the Act has been passed. The re-assessment of shipping bill is not final. Therefore, the appellant has no reason to challenge the assessment of the shipping bills. In that circumstances, the reasons for denying the refund to the appellant are not sustainable - the impugned order set aside - the adjudicating authority/proper officer is directed to pass a speaking order under Section 17 (5) of the Act and thereafter, if any refund claim is maintainable, the same is be decided in accordance with law. Appeal disposed off by way of remand.
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Service Tax
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2023 (12) TMI 82
Abatement claim - Erection, Commissioning and Installation service - contracts were indivisible contracts involving supply of material and labour - benefit of N/N. 12/2003 denied on the ground that their bill did not specifically show description or value of the item sold during the provision of the sale service - HELD THAT:- The show cause notice has been issued to the Appellant demanding service tax. The annexure to the show cause notice shows that the demand has been calculated considering the entire consideration received by the Appellant as the assessable value. It is seen that the Notification No. 1/2006-ST dated 01.03.2006 grants abatement in respect of Erection, Commissioning and Installation Service - It is seen that in terms of the aforesaid Notifications the Appellant to be entitled to benefit of abatement of 67% for the purpose of Erection, Commissioning and Installation Service. This aspect of the dispute has not been examined by the lower authority. The impugned order is therefore set aside and matter into the orders is remanded to the original adjudicating authority to examine if the Appellant are eligible to the benefit of Notification No. 01/2006-ST - Appeal allowed by way of remand.
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2023 (12) TMI 81
Levy of service tax - supply of food and beverages at their counters provided in the cinema halls - whether the supply of food and beverage in the cinema complex falls within the definition of service and declared service in terms of Section 65B(44) and Section 66 E of the Act? - HELD THAT:- The provisions of section 65B (44) and 66E of the Finance Act, defining service and declared services having been clarified by the Circulars and interpreted in the various decisions, the material issue is no longer res-integra. As noted in various decisions, in case of take away food, packaged items etc. over the counter, the same amounts to sale of goods and there is no element of service involved therein. The same principle would apply here in the case of PVR Cinemas where fixed menu which is ready to eat is sold by merely reheating, if required. The viewers who have come to watch the movie go to the counters during the interval period, stand in queue and buy the food items which are either already packed or are reheated and sold to people as and when their turn comes. After buying they bring those items to their respective seats and enjoy it while watching the movie. The duration of the interval is so short that it is not possible for the viewers to rush outside the cinema complex to buy food stuff and eat there. Just for making it convenient, the cinema complex provides some packaged or ready to eat food items and drinks. The choice of food stuff or soft drink is limited and the viewers have to accept from what is available. There is another aspect of the matter which is peculiar to the cinema complex, that these counters providing food items are not open to the public at large like any snack bar or restaurant but only those who have bought a ticket for viewing the movie can access them. Thus, the supply of food items and drinks to viewers through the counters in the cinema halls is equivalent to the transaction involved in sale of take away/packaged food. The Revenue has taken the plea that appellant has admitted their service tax liability for this activity and the same activity could not be vivisected as taxable for one category and non-taxable for other. Considering the said argument, we would like to distinguish the Gold Class category which is available in the PVR multiplex where apart from special comfortable seats, the viewers are provided with further facilities where a staff member of the multiplex / waiter comes to their seats and take the order and accordingly provide the food and drink to them on a small table like attachment to the seat. After the food is consumed by the viewers, the waiters come and collect the crockery back - the service tax is not leviable on the sale of food items in packed form or by process of reheating in the cinema halls as there is no element of service involved therein. Thus, no service tax can be charged on the sale of food stuff in the PVR complex to the viewers of the movie, the provisions of Service Tax (Determination of Value) Rules, 2006 will not be applicable - the impugned order deserves to be set aside - appeal allowed.
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2023 (12) TMI 80
Classification of service - Manpower Recruitment Supply Agency or not - material period executed various jobs entrusted to them in the plants of HEC, as per the Work Orders issued by HEC, on principal to principal basis - HELD THAT:- A plain reading of the definition of the term Manpower Recruitment or Supply Agency clearly reveals in order to fall within the above definition, the activity should be for providing any service directly or indirectly in any manner for recruitment or supply of man-power temporarily or otherwise to a client. A perusal of the Work Orders issued by HEC clearly reveals that the Appellant societies executed the jobs as the contractors by engaging the workers from their roll and it further reveals that the job was mentioned in terms of quantity and not based on number of workmen supplied or engaged. The rate was fixed per Ton basis. The agreements as per the Work Orders did not require or specify the number of workers to be employed and the number of days for which the workers would be engaged. It is for the respective appellant societies to execute the jobs, specified in the Work Orders by deploying as many numbers of workers as per its convenience and discretion. The Principal Company HEC was interested only in the execution of the job entrusted to the Appellant societies at the agreed rates and also within the specified time frame - The wage bills of the workers are not only properly prepared as per Minimum Wages Act, but also paid and their CPF, ESI etc. are properly deducted and deposited to the respective authorities. This does not means that the man power supplied were under the rolls of HEC. Thus, it is observed that the service rendered by the Appellant would not fall within the ambit of Manpower Recruitment Supply Agency as defined under Section 65(68) of the Act read with Section 65(105) (k). The impugned order confirming the demands under Manpower Recruitment Supply Agency service is not sustainable - Since the demand itself is not sustainable, the question of charging interest or imposing penalty does not arise - Appeal allowed.
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2023 (12) TMI 79
Classification of services - Manpower Recruitment or Supply Agency s service or not - executed various jobs entrusted to them in the plants of HEC, as per the Work Orders issued by HEC, on principal to principal basis - HELD THAT:- In order to fall within the definition of the term Manpower Recruitment or Supply Agency service, the activity should be for providing any service directly or indirectly in any manner for recruitment or supply of man-power temporarily or otherwise to a client - A perusal of the Work Orders issued by HEC clearly reveals that the Respondent societies executed the jobs as the contractors by engaging the workers from their roll and it further reveals that the job was mentioned in terms of quantity and not based on number of workmen supplied or engaged. The rate was fixed per Ton basis. The agreements as per the Work Orders did not require or specify the number of workers to be employed and the number of days for which the workers would be engaged. It is for the respective Respondent societies to execute the jobs, specified in the Work Orders by deploying as many numbers of workers as per its convenience and discretion. The Principal Company HEC was interested only in the execution of the job entrusted to the Respondent societies at the agreed rates and also within the specified time frame. HEC as a responsible Public Sector Company, apart from making profit has the social obligation to ensure that the workers employed by the contractors in their factory are not subjected to any exploitation and they are paid their legitimate dues which they are entitled to appropriately and also in time. The wage bills of the workers are not only properly prepared as per Minimum Wages Act, but also paid and their CPF, ESI etc. are properly deducted and deposited to the respective authorities. This does not means that the man power supplied were under the rolls of HEC. Thus, it is observed that the service rendered by the Respondent would not fall within the ambit of Manpower Recruitment Supply Agency as defined under Section 65(68) of the Act read with Section 65(105) (k). In the case of COMMISSIONER OF CUSTOMS, CENTRAL EXCISE SERVICE TAX VERSUS M/S. SHRI SAMARTH SEVABHAVI TRUST, M/S. AMRIT SANJIVANI SUGARCANE TRANSPORT CO. PVT. LTD., M/S. GODAVARI KHORE CANE TRANSPORT COMPANY (P) LTD. AND M/S. GANESH ARPIT SUGARCANE TRANSPORT PVT. LTD. [ 2015 (3) TMI 1170 - BOMBAY HIGH COURT ] , it has been held that Having regard to the nature of contract between the respondents and sugar factory and the scope of definitions mentioned above, it appears that the Appellate Tribunal has rightly come to the conclusion that the respondent s work, though provided services to the sugar factory, did not come within the mischief of the term Manpower Recruitment or Supply Agency. By following the decisions cited above, it is held that the impugned order has rightly dropped the demands under Manpower Recruitment Supply Agency service and hence the department's appeals are not sustainable. Appeal of Revenue dismissed.
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2023 (12) TMI 78
Extended period of limitation - entire proceedings has been carried out on the basis of information available in Form 26AS of Income Tax department - Entitlement for exemption provided under Serial No. 12A of Mega Exemption Notification No. 25 / 2012 ST dated 20.06.2012 - Revenue neutrality - HELD THAT:- The Service Tax Department has demanded service tax solely on the basis of the data provided by the Income Tax Department, which is the gross value as received by the Appellant. It is observed that the demand of Service Tax cannot be made solely on the basis of difference between Income tax return and 26AS Statement, as held by the Tribunal in the case of M/S KUSH CONSTRUCTIONS VERSUS CGST NACIN, ZTI, KANPUR [ 2019 (5) TMI 1248 - CESTAT ALLAHABAD] . The same view has been taken by the Tribunal, Kolkata, in the case of M/S LUIT DEVELOPERS PRIVATE LIMITED VERSUS COMMISSIONER OF CGST CENTRAL EXCISE, DIBRUGARH [ 2022 (3) TMI 50 - CESTAT KOLKATA] wherein it has been held that the figures reflected in Form 26AS cannot be used to determine Service Tax liability unless there is evidence shown that it was due to a taxable service - thus, the entire demand has been raised beyond the normal period of limitation. In view of the discussions above, the demand of service tax by invoking extended period is not sustainable in this case. Entitlement for exemption provided under Serial No. 12A of Mega Exemption Notification No. 25 / 2012 ST dated 20.06.2012 - Revenue neutrality - HELD THAT:- In all the cases, the services have been rendered to state Government authorities. The services rendered to the State Government has been exempted under Serial No. 12A of Mega Exemption Notification No. 25 / 2012 ST dated 20.06.2012. The Appellant is eligible for the exemption as the services in all the above cases have been rendered to State Government authorities - In the case of COMMISSIONER OF CENTRAL EXCISE VERSUS M/S ANGADPAL INDL. PVT. LTD. [ 2015 (10) TMI 1844 - SUPREME COURT] , the Hon'ble Supreme Court has held that where the situation is revenue neutral, no demand can sustain. Accordingly, the demand of service tax in the impugned order in respect of all the three agreements mentioned above are not sustainable on merit also. Demand of service tax on the services rendered to M/s World Vision India, I observe that they are registered as a Charitable Trust under Section 12AA of the Income Tax Act, 1961 - HELD THAT:- It is found that 'World Vision of India' and 'World Vision India' are one and the same. Accordingly, the appellant are eligible for the exemption provided under Serial 13(c) of Notification No. 25/2012 ST dated 20.06.2012. Thus, the demand of service tax on this count in the impugned order is not sustainable. The demand of service tax confirmed in the impugned order is not sustainable on merit as well as on limitation. Since, the demand itself is not sustainable, the question of demanding interest and imposing penalty does not arise and accordingly, the same is set aside - appeal allowed.
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2023 (12) TMI 77
Classification of service - Management Maintenance or Repair Services or not - executed various contracts for their client M/s Tata Steels Ltd. against different work orders awarded by them for Fabrication Erection Cleaning Up keep and Replacement Work - period 2006-07 to 2010-11 whereas the Show Cause Notice was issued on 21-10-2011 - invocation of extended period of limitation - Principles of natural justice - vague SCN. The Appellant has paid service tax on the activities which did not amount to manufacture. HELD THAT:- From the impugned order, it is found that the services mentioned in the said purchase order/work order has been held to be taxable broadly under the category of Management, Maintenance or Repair , Erection, Commissioning or Installation Commercial or Industrial Construction . However, the main services provided in the said purchase orders/work order are held as prima facie classifiable under the category of Management, Maintenance or Repair Services. Finally, it has been concluded that the Appellant is liable for payment of service tax under the category of Management, Maintenance or Repair Service. Thus, it Is observed that the finding in the impugned order is not very specific about the classification of the service rendered by the Appellant - it is also observed that the Show Cause Notice is very vague as there is no separate bifurcation under the three categories of service and there is no finding in the Order-in-Original as to how the value of services are taxable under the category of Management, Maintenance or Repair Service , Commercial or Industrial Constriction Service and Cleaning Service . The work of Fabrication undertaken by the Appellant amounts to Manufacture as held by the Larger Bench of the Tribunal in the case of MAHINDRA MAHINDRA LTD. VERSUS CCE., AURANGABAD, CHANDIGARH, KANPUR CHENNAI [ 2005 (11) TMI 103 - CESTAT, NEW DELHI] and hence, it cannot be made taxable under Chapter V of the Finance Act, 1994. Accordingly, we observe that the 'Repalcement' works and fabrication of immovable property work undertaken by the Appellant would not fall under the category of ' Management, Maintenance or Repair Service'. Also, Circular No.B1/6/2005-TRU Dated 27-07-2005, clarifies that maintenance is to keep a machine, building etc in a good condition by periodically checking and service or repairing, while repair is a one time activity, maintenance is a continuous process of which repairing may be incidental and ancillary. In this case, the Appellant has not undertaken any periodical maintenance. They have undertaken repair works as per work orders, as one time activity, which were not liable to service tax under the category of 'Management , maintenance or repair service' during the relevant period. Thus, the demand of service tax under this category is not sustainable. The Appellant has paid service tax on the activities which did not amount to manufacture. For Example, the work of Removal of silt from Drain Tunnel Cleaning Work , the work of Cleaning, Upkeep and removal of Silt are not related to manufacture process, accordingly, service tax has been collected and deposited by the Appellant and the subject matter is not in dispute in the instant case. Thus, out of total 16 work orders, the Appellant has rightly collected service tax against 5 work orders where service tax was liable to be paid and deposited the same with the Department - No service tax was collected on works executed against rest 11 work orders, as the same was not liable to service tax under the category of 'Management, Maintenance or repair Service' as demanded in the impugned order. The impugned order set aside - appeal allowed.
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2023 (12) TMI 76
Levy of penalties - Failure to Pay Service Tax on receipt of Advance during the FY 2008-09 - Failure to on receipt of Advance on 15.11.2008 and on 15.03.2009 - Short payment of service tax in terms of Rule 6 of the Service Tax Rules, 1994 - Short payment of service tax during the period from 23.08.2006 to 27.03.2008 - HELD THAT:- The entire service tax along with interest has been paid before issue of the Show cause Notice. Thus, as per Section 73(3) of the Finance Act, 1994, no need to issue show cause notice for this demand. Also, the department has not brought in any evidence on record to substantiate the allegation of fraud, collusion, suppression or misrepresentation of fact. Thus, extended period cannot be invoked in respect of these demands and hence no penalty imposable on this demand. Accordingly, the penalty imposed on these demands set aside. Short payment of Service tax during the period of FY 2006-07 and 2007-08 - demand occurred due to change in rate of duty - HELD THAT:- The service was provided by the Appellant prior to change in rate of duty and Invoices have also been raised prior to change in rate of duty. The recovery of the amount after the change in the rate of duty does not mean that the revised rate would be applicable for the services rendered prior to the rate change. This view has been held in the case of Commissioner of Service Tax Vs. Consulting Engineering Services (I) Pvt. Ltd [ 2013 (1) TMI 434 - DELHI HIGH COURT] - the demand confirmed by adopting the revised rate of duty is not sustainable. Non-payment of service tax during the period of FY 2007-08 for providing service as Subcontractor - HELD THAT:- The adjudicating authority has relied on the Board circular 96/7/2007-ST dated 23.08.2007 wherein it has been clarified that sub-contractor is also liable to pay service tax even if the main contractor pays service tax. It is observed that this clarification was issued on 23.08.2007. Thus, on merit the submission of the Appellant, cannot be agreed upon. However, it is observed that prior to this clarification, there were confusion about the liability of sub-contractor to pay service tax when the main contractor pays service tax on the full value. Also, the service tax paid by the sub contractor would be available as credit to the main contractor. In this case the main contractors Simplex Project Limited and Tata Projects Limited have paid service tax on the full value - Further, the demand is hit by limitation. The demand in this case pertains to the period 2007-08 and the show cause notice was issued on 19.04.2011, beyond the normal period of limitation. The department has not brought in any evidence to substantiate the allegation of suppression. Thus, the demand is hit by limitation. Short payment of service tax during the period of FY 2007-08 - demand has arisen due to payment of service tax by the Appellant under composition scheme for the period of July 2007 to March 2008 and non-complying the Notification No. 32/2007 dated 22.05.2007 - HELD THAT:- It is observed that no procedure has been laid down under the Rule and there is no statutory form for exercising the option for availing the composition scheme. In the absence of statutory format, the option can be exercised by paying the service tax equivalent to 2% of the gross amount charged for the works contract. Accordingly, the payment of an amount equivalent to 2% of the gross amount charged for the works contract implies that they have opted for the composition scheme. This view has been held by the Tribunal Mumbai in the case of ABL Infrastructure Private Limited v. Commissioner of Central Excise, Nashik [ 2015 (2) TMI 801 - CESTAT MUMBAI] - the Appellant has exercised the option to avail the Composition Scheme for the period 2007-08. Accordingly, the demand confirmed in the impugned order along with interest and penalty is not sustainable. Appeal disposed off.
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2023 (12) TMI 75
Classification of service - Supply of Manpower Service or not - Partial reverse charge mechanism - Notification No. 30/2012-ST dated 20.06.2012. Relying upon Section 68 of the Finance Act, 1994 read with Notification No. 30/2012-ST dated 20.06.2012 demand has been made under partial reverse charge mechanism, treating these supplies as taxable services under the category of Manpower Supply Agency Services . HELD THAT:- The invoices raised against the contracts are not for supply of labour but are for supply of material. Work done under these contracts is for undertaking a work activity involving supply of material also. Then on what basis revenue could have concluded that these activities amounted to Supply of Manpower Service to the appellant for demanding service tax - as per the General Terms and Conditions of the appellant s agreement, all these are works contract involving supply of material and labor. They cannot be in any case to be treated as supply of manpower. In the present case the demand has been made during the services received as Manpower Supply Services. On perusal of the documents and invoices it is found that in none of invoice has service tax of 25% for the supply of Manpower Services as required by the above notification has been paid by the service provider. The demand of 75% has been made by the recipient of the service. It is not available anywhere on the record whether any notices or any demands have been issued to the service provider, in terms of notification for payment of 25% of service tax for Supply of Manpower Services. The present services do not qualify as Manpower Supply Service, as it is associated with supply of material also, it is a work contract service which has been defined by Section 65 (54) of the Finance Act, 1994 as amended by Finance Act, 2012. In respect of the Works Contract Services the charge of service tax is on the service provider and not on the service recipient in terms of the above provisions. Accordingly, the demands made by the revenue by invoking the provisions of Section 68 (2) do not stand in the test of law. Accordingly, these demands are to be set aside. The contract/ agreement entered between the parties should be read as whole and understood as whole. There is no scope for interpreting the agreement differently from what has been stated in the contract/ agreement. A work contract agreement will involve supply of services for which certain manpower will be deployed. Just for the reason that the manpower was deployed by the appellant nature of agreement cannot be changed from the one that was intended between the contracting parties. There are no merits in the impugned order - appeal allowed.
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Indian Laws
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2023 (12) TMI 74
Dishonour of Cheque - Legally enforceable debt or not - whether the officials could have acted in such a manner and asked the applicants to make good the payment without there being any adjudication in accordance with the provisions of the Excise Act and the Rules framed therein? - HELD THAT:- In order to attract the penal provisions for the bouncing of a cheque, it is essential that the dishonoured cheque should have been issued in discharge, wholly or in part, or any debt or other liability of the drawer to the payee. The explanation to Section 138 of the Negotiable Instruments Act defines the expression debt or other liability as a legally enforceable debt or other liability. Unless the two conditions set out in Section 138 of the Act are satisfied, no criminal liability can be fastened. This is also in accordance with the general scheme as laid down in Section 118(a) of the Negotiable Instruments Act. It also enforces the doctrine of consideration as laid down in Section 2(d) of the Indian Contract Act, 1872. In the facts of the cases on hand where there is no legally enforceable debt is found and considering the above judgment which is passed in identical facts and the ratio laid down on the aspect that there should be legally enforceable debt existing on the date of issuance as well as presentation of cheques and accordingly considering the ratio laid down in the judgments of M/s Indus Airway Pvt. Ltd. [ 2014 (4) TMI 464 - SUPREME COURT ], Sampelly Satyanarayana Rao [ 2016 (9) TMI 867 - SUPREME COURT ] and Dashrathbhai Trikambhai Patel [ 2022 (10) TMI 424 - SUPREME COURT ], all these applications are allowed. Application disposed off.
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