TMI Tax Updates - e-Newsletter
February 23, 2023

Case Laws in this Newsletter:

GST Income Tax Customs Service Tax Central Excise Indian Laws

Articles

1. BUSINESS @ 49TH GST COUNCIL MEETING

   By: Dr. Sanjiv Agarwal

2. INJURIES OBTAINED BY FALL OF SIGNBOARD – TORTIOUS NEGLIGENCE

   By: DR.MARIAPPAN GOVINDARAJAN

3. Assessee directed to approach competent authority to prove ownership of the detained goods by moving proper application

   By: Bimal jain

4. Bail Condition to deposit INR 70 Lakhs for alleged wrongful availment of ITC is not sustainable

   By: Bimal jain

5. आम,साधारण,छोटे वरिष्ठ शेयरधारकों की समस्या निदान हेतु प्रचलित कानून अंतर्गत ही ठोस सुझाव

   By: G Binani

News

1. PM to address 12 post-budget webinars to be held between 23rd February and 11th March

2. Union I&B Minister Shri Anurag Thakur addresses inaugural session of 2nd Finance and Central Bank Deputies (FCBD) Meeting in Bengaluru

3. Shri Piyush Goyal calls for the issuing of Quality Control Orders (QCOs) across sectors in the electrical industry

4. DRI seizes 101.7 kg smuggled gold worth ₹51 crore in Golden Dawn Operation across India

5. 1st G20 Finance Ministers & Central Bank Governors and 2nd G20 Finance & Central Bank Deputies Meetings from 22nd-25th February 2023 begins tomorrow in Bengaluru

Notifications

Income Tax

1. 07/2023 - dated 21-2-2023 - IT

Income-tax Amendment (3rd Amendment) Rules, 2023

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/ITD/ITD_VAPT/P/CIR/2023/032 - dated 22-2-2023

Advisory for SEBI Regulated Entities (REs) regarding Cybersecurity best practices

Customs

2. 05/2023 - dated 21-2-2023

Amendment in Circular No. 26/2016-Customs dated 09.06.2016

3. 04/2023 - dated 21-2-2023

Amendment in Circular No. 25/2016-Customs dated 08.06.2016 for including details of ex-bond Bill of Entry / Shipping Bill in Form A

Companies Law

4. 04/2023 - dated 21-2-2023

Extension of Time for filing of 45 company e-Forms, PAS-03 and SPICE+ Part A in MCA 21 Version 3.0 without additional fee

Highlights / Catch Notes

GST

• Appellate Tribunal Delay Halts Implementation of Orders Under Central Goods and Services Act, 2017. Tribunal Yet to Form.

  Case-Laws - HC : Validity of order passed in appeal by Appellate authority under Central Goods and Services Act, 2017 - Appellate Tribunal is not yet constituted - The appealable orders (to the Tribunal) would not be implemented till the Tribunal becomes functional. - HC
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• Appellate Authority Rules: Construction of Water Projects Not Eligible for 12% Concessional GST Rate from 2022.

  Case-Laws - AAAR : Classification of supply - construction commissioning and maintenance of entire work for water supply projects/sewerage projects/facilities - with effect from 1st January 2022, the Appellant is not eligible for concessional rate of tax of 12% - AAAR
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• Dried Plant Bouquets Exempt from Tax Under AAR Ruling; Classified Under Tariff Items 06039000 or 06049900.

  Case-Laws - AAR : Bouquet made with dry parts of plants, foliage, flower buds, grasses and branches of plant which are dried, bleached, dyed and coloured for decorative and ornamental purposes and sold with plastic foil packaging will be classifiable under Tariff Item Nos. 06039000 or 06049900, depending on its constituents and supply of the aforesaid goods is exempted from payment of tax - AAR
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• Wheat Milling for West Bengal's Public Distribution System is a Composite Supply, Tax Exempt per AAR Ruling.

  Case-Laws - AAR : Conversion of wheat provided by the State Government - This composite supply of services by way of milling of wheat into flour (atta) to Food & Supplies Department, Govt. of West Bengal for distribution of such flour under Public Distribution System is eligible for exemption - AAR
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• Gold Jeweler's Excess Retention of 10g Wastage Breaches Limits, Affects GST Taxability on Job Work Services.

  Case-Laws - AAR : Supply or not - taxability of 10 grams of pure gold, retained by the applicant, in the course of manufacture of gold jewellery from 1000 gm of pure gold provided to the applicant by his principal - Since the applicant admittedly retains 10 gm of pure gold on account of wastage which is beyond the permissible limit of wastage in the nature of normal loss, the value of pure gold so retained by the applicant shall form a part of value of supply of job work services. - AAR
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• Alcohol Sales Deemed 'Exempt Supply' Under GST Act; Input Tax Credit Reversal Required Per Section 17(2) AAR Ruling.

  Case-Laws - AAR : Reversal of Input Tax Credit - sale of alcoholic liquor for human consumption effected by it at its premises - Section 17(2) of the CGST Act - the activities of selling of alcoholic liquor for human consumption by the applicant would be treated as ‘non-taxable supply’ and therefore falls under the category of ‘exempt supply’ under the GST Act, the applicant is required to reverse input tax credit attributable to the exempt supply - AAR
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• Dredging Services for Andhra Pradesh's Prakasam Barrage Classified as Works Contract, Taxable Under Entry 3(vii) of Notification 39/2017.

  Case-Laws - AAR : Supply or not - providing of dredging service which predominantly involves earth work - The instant supply being undertaken by the applicant to the Water Resource Department, Government of Andhra Pradesh for desilting of the foreshore of Prakasam Barrage is a composite supply of works contract involving predominantly earth work and would be taxable vide entry No. 3 (vii) of the Notification No. 39/2017- Integrated Tax (Rate) as amended - AAR
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Income Tax

• Director Not Liable for Company's Tax Debts u/s 179; No Evidence of Misconduct or Negligence Found by AO.

  Case-Laws - HC : Liability of directors of private company u/s 179 - the AO has not specifically held the petitioner to be guilty of gross neglect, misfeasance or breach of duty on part in relation to the affairs of the company. Not a single incident, decision or action has been highlighted by the AO, which would be treated as an act of gross neglect, breach of duty or malfeasance which would have the remotest potential of resulting in non-recovery of tax due in future. - HC
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• Court Rules Non-Service of Intimation Not Grounds for Reopening; Highlights Tech Advancements in Faceless Assessments.

  Case-Laws - HC : Validity of reopening of assessment - non-service of the intimation - Department has now made an advancement with the use of employment of technologies advance. The assessment is also faceless and if return of income is to be filed, is also in e-mode, the entire materials were available with the officer concerned in e-mode and therefore, lack of inter-departmental co-ordination or nonapplication of mind to the materials already available with the department, is hardly be a ground for the Court to hold nonservice of the intimation. - HC
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• Penalty Waived for Late Audit Report Filing if Delay Due to Genuine Reason, Like Data Crash u/s 271B.

  Case-Laws - AT : Penalty u/s 271B - failure to file audit report on due date - penalty levied u/s 271B cannot be levied for the reason that there was a failure on the part of the assessee to obtain tax audit report was on account of a bona fide reason of crashing the compute data and thus has to rewrite the same. The revenue could not show that the belief of the assessee was mala fide. - AT
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• Critical Error: Assessment Conducted Under Wrong Section, Section 153A Instead of 153C, Cannot Be Rectified.

  Case-Laws - AT : Assessment u/s 153A - The assessment has been made u/s 153A and not u/s 153C, and this has led to a fatal error in the assessment order which is not curable. As rightly contended by the ld. Counsel of the assessee that the presumption u/s 132 (4A) cannot be extended to material found at somebody else place and de hors corroborating documents, these cannot be linked to the assessee. - AT
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• Compromise settlement for breach of contract is a capital asset transfer u/s 2(47), subject to capital gains tax.

  Case-Laws - AT : Capital gain - compromise settlement for breach of contract - Transfer u/s 2(47) - the compensation received by the assessee arises out of the transfer of capital asset in the nature of relinquishment of the specific performance of the contract shall be treated as transfer of capital asset within the meaning of section 2(47) of the Act, and hence it is a capital gains under the Income Tax Act, 1961 and exigible to tax. - AT
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• Tax Additions Removed for Bhushan Power & Steel: Protective Assessment and Section 69C Enhancement Deleted.

  Case-Laws - AT : Protective assessment/addition - No substantive assessment/addition in the hands of other assessee - It is therefore a case where no substantive additions have been made in hands of M/s Bhushan Power & Steel Ltd and at the same time, only protective assessment has been made in the hands of the assessee - Accordingly, the protective addition so made by the AO and confirmed by the ld CIT(A) is hereby directed to be deleted. The enhancement done by the ld CIT(A) by an amount under section 69C of the Act, the same being consequential in nature is also directed to be deleted. - AT
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• Revised Tax Return Accepted: Enhanced Loss Amount Eligible for Carry Forward, Replacing Original Return Date.

  Case-Laws - AT : Claiming carry forward of loss at a higher level - Revised return - Since the assessee furnished the revised return within the stipulated period claiming loss at a higher level, it is this enhanced amount of loss which will be considered for carry forward to the next year(s) as the original return has been held to be validly filed and consequently the revised return will substitute the original return in all respects including the aspect of date of filing also. - AT
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• Factory Shed Renovation Costs Classified as Revenue Expenditure, Not Capital, Due to Lack of New Asset Creation.

  Case-Laws - AT : Nature of expenses - repairs and maintenance expenses - revenue or capital expenditure - It is a fact that there was an existing factory shed. The assessee has merely renovated it to suit for his purposes. By doing so, no new asset has been created. It was merely repairs of the existing asset to make it suitable for the purposes of the assessee. - allowed as revenue expenditure - AT
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• Tax Reassessment and Penalties: Original Conclusion Prevails Despite Transaction Clarity u/ss 147, 271D, and 271E.

  Case-Laws - AT : Reopening of assessment u/s 147 - ‘loan given” was believed to be undisclosed income of assessee - penalty u/s 271D and 271E - the “original-conclusion” was not faulty at the time of initiating re-assessment / passing of order of reassessment / launching of penalty-proceedings. It is a subsequent matter that the dust was clear about the nature of transaction and “original-conclusion” was reversed. Hence, it would be apt to give preference to the “original-conclusion” which has set the proceedings in motion. - AT
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• Court Upholds AO's Use of Section 50C for Calculating Long-Term Capital Gains on Land Exchange.

  Case-Laws - AT : Long term capital gains - exchange of land - determination of full value of consideration and cost of acquisition - application of section 50C - AO has allowed cost of acquisition in accordance with law and has arrived net capital gains in respect of both the properties. In our considered view, the method adopted by the AO is in accordance with law and does not called for any interference from our end. - AT
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Customs

• Court Orders Release of Seized Imports; No Show Cause Notice Issued u/s 124(a); Duty Already Paid.

  Case-Laws - HC : Release of imported goods - seizure of goods - demand of differential duty - failure to issue show cause notice under Section 124(a) - the differential duty having been paid, the department does not gain in keeping the goods detained any longer - thus, a workable order should be passed so that the interest of revenue is protected, at the same time, the appellant importer is also able to clear the goods. - HC
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• Refunds from Adjudication, Commissioner (Appeals), or CESTAT Orders Must Be Granted If No Stay Order Exists.

  Case-Laws - AT : Refund of Cost recovery charges paid - The CBEC has repeatedly clarified that when any refund arises out of any order of adjudication/Commissioner (Appeals)/ CESTAT unless a stay order is obtained refund must be granted after 3 months from the date of the order. - The revenue has no option except to grant the refund to the respondent. - AT
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Indian Laws

• Supreme Court Rules Power of Attorney Holder Can Lawfully Delegate to Special Counsel in Cheque Dishonor Case.

  Case-Laws - SC : Dishonour of Cheque - entitlement to power of attorney holder to depose further delegate / appoint special counsel - the power of attorney holder was appointed under the resolution of the board of directors of the appellant company and the draft of the power of attorney was duly approved by the board. The said power of attorney as discussed above do provide for the sub-delegation of the functions of the general power of attorney holder and thus the filing of the complaint on behalf of the appellant company through its authorised representative is not at all illegal or bad in law. - SC
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• High Court Upholds Trial Court's Decision on Interim Compensation for Cheque Dishonor u/s 143-A of Negotiable Instruments Act.

  Case-Laws - HC : Dishonour of Cheque - interim compensation u/s 143-A of Negotiable Instruments Act - The Act provides the discretion to the court for granting interim compensation not exceeding 20% of the cheque amount. In the present case, learned Trial Court has not exceeded the upper limit of 20%. - Petition dismissed - HC
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Service Tax

• Extended Limitation Period Applies for Wilful Suppression When Bank Fails to Disclose Figures for Nearly Three Years.

  Case-Laws - HC : Invocation of Extended period of limitation - When the correct figures are not brought to the notice of the department and when the suppression is unearthed through an intelligence report, the failure of the bank in remitting the amounts thereafter i.e., nearly three years can be brought under the words ‘wilful suppression’. The time for which default occasioned is equally important. - HC
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• CENVAT Credit Approved for Jetty Construction as Input Service; Expansion of Existing Facility Qualifies for Credit.

  Case-Laws - AT : CENVAT Credit - iinput services - setting up of a new factory, construction of building of service provider is not excluded from the definition of Input service. In this case the construction of Jetty is clearly in the nature of expansion of existing Jetty therefore, credit is clearly admissible. - AT
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Central Excise

• Development Commissioner's Authority to Review Orders on DTA Sale Permissions for 100% EOUs Remains Unsettled.

  Case-Laws - SC : 100% EOU - power of review own order - Power of Development Commissioner - grant of DTA sale permission - when the orders impugned are not being sustained on merits, we would leave this question open to be examined in an appropriate case. - SC
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Case Laws:

• GST

• 2023 (2) TMI 882
  Seeking grant of bail - allegation of misuse of input credit under the Central Goods and Services Act, 2017 - huge loss to exchequer - HELD THAT:- Resisting the plea for bail, Mr. Deepak Thukral, Deputy AG of Haryana submitted that the loss to the exchequer caused by the accused persons is to the extent of rupees six crores and no recovery has as yet been made. But for this reason above, further detention of the appellant pending trial is not necessary. The State has not filed any petition for special leave to appeal in regard to the co-accused who has been enlarged on bail by the High Court. The appellant are directed to be released on bail in connection with the subject-proceeding on such terms and conditions the Trial Court may deem fit and proper - appeal allowed.

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• 2023 (2) TMI 881
  Seeking suspension of fake GST account (created in the name of street vendor, without his knowledge) - seeking direction to respondents to trace out the fraudsters/gang who had created fake GST Account without the knowledge of petitioner and further to ensure that other such fake accounts opened by the said gang is acted upon. HELD THAT:- It is directed that the present petition be treated by the Commissioner GST/ State GST Authorities as a representation and the grievance of the petitioner be examined as per law. The petitioner shall disclose the identity of his friend to whom he claims to have handed over his identity documents, to the Police Authorities as well as to the State GST authorities. The petitioner shall fully cooperate with the concerned authorities and provide them all the information as required. In the event the petitioner s grievance is not allayed, the petitioner is at liberty to avail of such remedies as available in law. Petition disposed off.

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• 2023 (2) TMI 880
  Validity of assessment order - total non application of mind to the Notification No.41/2017 - Integrated Tax (Rate), dated 23.10.2017 issued by the Ministry of Finance, Department of Revenue, Government of India - non-speaking order - violation of principles of natural justice. HELD THAT:- The contentions of the petitioner as raised in this writ petition have not been considered in the impugned Assessment Order. However, the impugned Assessment Order is dated 30.12.2021. The petitioner has also not filed any statutory appeal as against the said order. He has chosen to file this writ petition only now i.e., after a lapse of more than thirteen months. Therefore, even if principles of natural justice have been violated by the respondent and the impugned Assessment Order is a non speaking order with regard to the petitioner s contention, the petitioner must be put on terms for quashing the impugned Assessment Order on account of the inordinate delay in approaching this Court. This Court is of the considered view that 50% of the amount demanded under the impugned Assessment Order which includes penalty has to be deposited by the petitioner, within a period of four weeks from the date of receipt of a copy of this order and on deposit of the said amount, within the stipulated time, the impugned Assessment Order can be quashed and remanded back to the respondent for fresh consideration on merits and in accordance with law, within a time frame to be fixed by this Court. The petitioner is directed to deposit 50% of the amount demanded under the impugned Assessment Order, dated 30.12.2021 with the respondent, within a period of four weeks from the date of receipt of a copy of this order. On deposit of the aforesaid amount by the petitioner, within the stipulated time, the impugned Assessment Order, dated 30.12.2021 stands quashed and is remanded back to the respondent for fresh consideration on merits and in accordance with law - Petition disposed off.

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• 2023 (2) TMI 879
  Jurisdiction - impugned Show-Cause Notices issued by two different authorities in respect of the same subject matter - Section 112(3) of JGST Act, 2017 - HELD THAT:- Department has not invoked any higher Forum against the Appellate order and that way accepted the order in Appeal. There is no demand pending in respect thereof. As such, the impugned Show-Cause Notices issued by two different authorities in respect of the same subject matter are without jurisdiction and in teeth of the provisions of Section 112(3) of JGST Act, 2017. Learned counsel for the State prays for and is allowed three weeks time to obtain instruction and file counter affidavit. One week time thereafter is allowed to the petitioner to file reply, if so advised - List the case on 29. 03. 2023.

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• 2023 (2) TMI 878
  Validity of order passed in appeal by Appellate authority under Central Goods and Services Act, 2017 - Appellate Tribunal is not yet constituted - large pendency of such cases - HELD THAT:- What emerges from the Circular No. 132/2/2020-GST dated 18 March 2020 and Affidavit filed by the Chairman of the Board is that the appeal to the Appellate Tribunal can be filed within three months (six months in the case of Appeals by the Government) from the date of the communication of the order or date on which the President or State President, as the case may be, of the Appellate Tribunal enters office, whichever is later. As of date, there are no positive statement from the respondents to the exact time or date on which the contingency provided in Clause 4.2, that is, President or State President entering office, would occur. The question is whether the Petitions need to be kept pending in this Court. In most of the Petitions filed on the ground that the Tribunal is unavailable, this Court has granted interim protection - The Chairman of the Board, in the affidavit, has indicated that no hardship would be caused to the taxpayers because of the non-constitution of the Tribunal. Reading the affidavit along with Circular, it is clear that the Government does not intend that taxpayers are prejudiced for want of the Tribunal. With that intent, the period of limitation has been extended. The appealable orders (to the Tribunal) would not be implemented till the Tribunal becomes functional. That being the position, the writ petitions do not need to remain pending in this Court. Some time after the tribunal becomes functional as above can be given - Petition disposed off.

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• 2023 (2) TMI 877
  Classification of supply - construction commissioning and maintenance of entire work for water supply projects/sewerage projects/facilities - applicable rate of tax - supplies made to a Governmental Authority - Government Entity eligible for concessional rate of 12% with effect from 1st January 2022, as per N/N. 15/2021 CT (Rate) dated 18-11-2021 read with Notification No 22/2021 CT (Rate) dated 31-12-2021 or not. HELD THAT:- The Municipal Committees, the Zilla Parishad and the District Boards, as mentioned in clause (c) of Section 2(69) of the CGST Act, represent the units of Local Self Government where people of a local area govern themselves through their elected representatives in respect of a large number of matters including construction of buildings, roads, parks, lighting of streets, sewerage, conservancy and water works etc. These Local Self Governments are constituted under statutory provisions which elaborately provide who, on being elected, become members of the Municipal Boards, the District Board or the Zilla Parishad These Boards are basically independents bodies with very little or minimal of Government control and that too in the limited field. They formulate their own policies and implement those policies through the machinery provided under law. They have power to levy Panchayat, municipal or other local taxes and have also the power to realise those taxes through coercive processes, if they are not paid immediately on demand - an authority in order to be a local authority must be of like nature and character as a Municipal Committee, Zilla Parishad or a District Board - BWSSB does not satisfy this principle of statutory interpretation in as much as BWSSB is not a wholly independent entity but is largely controlled by the State Government - thus, BWSSB is not a local authority. The Appellant has also taken pains to emphasise that BWSSB has been registered with the Income Tax Department and the GST Department as a local authority ; that when both the departments have acknowledged the status of BWSSB as a local authority and accordingly granted them a PAN and GSTIN, the lower Authority cannot take a u-turn and change the status of BWSSB to a Governmental Authority and not a local authority. This argument does not impress us much. GST Registrations are granted based on the information furnished by the applicant - BWSSB does not qualify as a local authority as defined in Section 2(69) of the CGST Act. Thus, with effect from 1st January 2022, the Appellant is not eligible for concessional rate of tax of 12% in terms of entry Sl.No 3(iii) of Notification No 11/2017 CT (Rate) dated 28-06-2017 as amended by Notification No 15/2021-CT (Rate) dated 18-11-2021 on the supplies made to BWSSB - the order passed by the lower Authority with regard to the rate of applicable tax on the supplies of works contract service made by the Appellant to BWSSB with effect from 1st January 2022, is upheld.

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• 2023 (2) TMI 876
  Classification of supply - exempt supply or not - bouquets made with dry parts of plants, foliage, flower buds, grasses and branches of plant which are dried, bleached, dyed and coloured for decorative and ornamental purposes and sold with plastic foil packaging - to be classified under HSN code 06049000 or not - applicability of Sl. No. 34 of Notification No. 02/2017-CT (Rates) dated 28/06/2017. HELD THAT:- The applicant s final product i.e. Bouquet, made with Dried and/or Dyed flower buds will be classifiable as Other under Tariff Item No. 06039000. Heading 0604 deals with Foliage, Branches and Other Parts of Plants, without Flowers or Flower Buds, and Grasses, Mosses and Lichens, Being Goods of a Kind Suitable for Bouquets or for Ornamental Purposes, Fresh, Dried, Dyed, Bleached, Impregnated or Otherwise Prepared (emphasis supplied). Therefore, the applicant s final product i.e. Bouquet, made with Dried and/or Dyed parts of plants, foliage, grasses and branches of plant, will be classifiable as Other under Tariff Item No. 06049000. It is found that vide serial number 34 of Notification No.2/2017-Central Tax (Rate) dated 28.06.2017, as amended [corresponding West Bengal state Notification No. 1126 F.T. dated 28.06.2017], the whole Chapter 6 which deals with Live trees and other plants; bulbs, roots and the like; cut flowers and ornamental foliage is exempted from payment of tax. Hence, supply of goods by the applicant under Tariff Item Nos. 06039000 and 06049900, whether individually or in combination, is also exempt from payment of tax.

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• 2023 (2) TMI 875
  Maintainability of Advance Ruling application - supply, where applicant is a recipient of services - Exemption from GST - upfront premium payable by the applicant towards the services of leasing of the land for industrial purposes by SMPK - applicability of entry 41 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017. HELD THAT:- In the instant case, the applicant being the recipient of services has sought an advance ruling on the applicability of the exemption notification i.e., whether the services to be provided to him by the supplier can be regarded as an exempt supply or not. Exempt supply as defined in clause (47) of section 2 of the GST Act means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply - A conjoint reading of section 2(6) and 2(47) clearly denotes that it is the supplier of services who is required to account for his outward exempt supply in order to determine his aggregate turnover and further to claim exemption in respect of services specified in column (3) under serial number 41 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 [corresponding West Bengal State Notification No. 1136 F.T. dated 28.06.2017], as amended. Here, the intention of the legislature is to provide exemption to the taxable person who is supplying the services since other than the supply on which the recipient is liable to pay tax under reverse charge, tax is payable by the taxable person who is making the supply. If an application is filed by the recipient of goods or services or both on the taxability of his inward supply of goods or services and ruling is pronounced accordingly, such ruling shall be binding only on him and on the concerned officer or the jurisdictional officer of him. In no way, the ruling shall be binding on the supplier of such goods or services. The application is rejected.

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• 2023 (2) TMI 874
  Valuation of supply of services provided by the applicant Company to the State Government - composite supply/principal supply - rate of tax - conversion of wheat provided by the State Government and owned by the State Government, at all times, into atta/ fortified atta, for distribution by the State Government through Public Distribution System - exempt supply or not - What components are to be included in calculation of the % of value of goods in the total value of composite supply for the purpose of Notification No. 2/2018- Central Tax (Rate)? HELD THAT:- The applicant has been selected for empanelment for crushing of wheat into wholemeal atta and fortify it by premixing of micro-nutrients containing Iron, Folic acid, Citrate, EDTA and Vitamins to a specific percentage. The agreement further requires the applicant to pack the crushed stock of wholemeal atta after fortification into properly labelled poly-packs having thickness of 50 microns or above. It, therefore, appears that the activities undertaken by them for milling of wheat into wheat flour, along with fortification and supplied upon packing of the same qualify the definition of composite supply under clause (30) of section 2 of the GST Act where the supply of services by way of milling is the principal supply. Whether this composite supply is made in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution? - HELD THAT:- The agreement between the applicant and the State Government for supply of fortified Wholemeal Atta/Atta is found to be executed in terms of G.O. No. 2834-F.S. dated 6th September, 2017. The said Notification provides guidelines for the procedure of empanelment of flour mills/ attachakki to convert wheat into fortified atta/wholemeal atta in pursuance of clauses 36 and 37 of the West Bengal Public Distribution System (Maintenance Control) Order, 2013 and clauses 33 and 34 of the West Bengal Urban Public Distribution System (Maintenance Control) Order, 2013 - reference made to Para 3.1 of the Circular No. 153/09/2021-GST dated 17.06.2021 where it is stated that Public Distribution specifically figures at entry 28 of the 11th Schedule to the constitution, which lists the activities that may be entrusted to a Panchayat under Article 243G of the Constitution. Hence, the instant composite supply made by the applicant is found to be in relation to any function entrusted to a Panchayat under article 243G of the Constitution. Whether the value of supply of goods in this case exceeds 25 percent of the total value of the supply or not? - HELD THAT:- Such activities undertaken by the applicant for milling of wheat into wheat flour, along with fortification and supplied upon packing of the same qualify the definition of composite supply under clause (30) of section 2 of the GST Act where the supply of services by way of milling is the principal supply. The State Government agrees to pay the applicant a total amount of Rs.179.48 for crushing of 100 kgs of wheat which includes fortification cost of Rs.10/- and packing charges of Rs.50/-. In para 3.1 of Circular No. 153/09/2021-GST dated 17.06.2021, it has been clarified that entry No. 3A would apply to composite supply of milling of wheat and fortification thereof by miller, or of paddy into rice, provided that value of goods supplied in such composite supply ( goods used for fortification, packing material etc ) does not exceed 25% of the value of composite supply. The total non-cash consideration for bi-products and gunny bags allowed to flower millers is Rs.124 only for each 100 kg wheat . So, in the instant case, the amount of Rs.124 may be considered as equivalent to the consideration not in money for the purpose of determination of value of supply under clause (b) of rule 27 of the GST Rules and such amount is admittedly known to the applicant at the time of supply - the value of goods involved in the instant supply stands at Rs.60/- against total value of supply of Rs. 260.48, thereby the value of goods involved in the instant composite supply stands at 23.03% of the total value of supply i.e., it does not exceed 25% of the value of the composite supply. Thus, the instant supply of services by way of milling of food grains into flour (atta) to Food Supplies Department, Govt. of West Bengal for distribution of such flour under Public Distribution System is eligible for exemption under serial no. 3A of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended, since the supply satisfies all the conditions specified in the said entry.

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• 2023 (2) TMI 873
  Supply or not - taxability of 10 grams of pure gold, retained by the applicant, in the course of manufacture of gold jewellery from 1000 gm of pure gold provided to the applicant by his principal - contention of the applicant in this regard is that the provision for allowing such wastage is in the nature of normal loss that occurs during the course of manufacturing and it is an industry-wide practice to allow such provision for wastage or normal loss. HELD THAT:- Government of India, Ministry of Commerce and Industry, Department of Commerce, Director General of Foreign Trade, in the HANDBOOK OF PROCEDURES [1st April, 2015 31st March, 2020] has prescribed the Wastage Norms for the Gems and Jewellery Sector. It would be pertinent to mention that in course of personal hearing, the authorised representative of the applicant has been asked to provide a certificate from the competent authority in respect of quantum/percentage of wastage allowed in manufacturing of gold ornaments - the percentage of wastage that may be allowed for gold ornament manufacturing process has been specified by Government of India, Ministry of Commerce and Industry. The wastage norms, though meant for items of export, may also be accepted as a general guideline for domestic market. In the instant case, the applicant submits that the principal allows him a wastage of 4% (40 gm wastage is agreed to be allowed against 1000 gm of pure gold) and the applicant, out of such wastage allowed to the extent of 4%, retains 1% of pure gold i.e., 10 gm of pure gold. In other words, the applicant delivers to his job worker 990 gm of pure gold thereby allowing 3% of wastage to his job worker. Whether any wastage claimed which is in excess of the specified limit can be treated as consideration for the purpose of value of taxable supply under sub-section (1) of section 15 of the GST Act? - HELD THAT:- Sub-section (1) of section 15 of the GST Act speaks that the value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply . In the instant case, the applicant agrees to provide job work services for manufacturing of gold ornaments to his principal against consideration which is in money. At the same time, the applicant has been allowed wastage by his principal on account of manufacturing loss which exceeds the wastage norm limit that enables the applicant to retain certain amount of pure gold. The process of making gold jewellery involves melting, cutting, moulding, polishing etc. which may result in some amount waste of gold. However, retaining a certain amount from the input (10 gm of pure gold for the instant case) before it put into the manufacturing process cannot be treated as wastage or normal loss - here the price is not the sole consideration for the supply and the value of such excess wastage allowed to the applicant shall be considered as non-monetary consideration for the purpose of determination of value of supply of job work services provided by the applicant to his principal. Therefore, the value of supply of services, i.e., making charges on which the applicant is liable to pay tax @ 5% would be determined as per provision of section 15 of the GST Act read with rule 27 of the CGST/ WBGST Rules, 2017. Since the applicant admittedly retains 10 gm of pure gold on account of wastage which is beyond the permissible limit of wastage in the nature of normal loss, the value of pure gold so retained by the applicant shall form a part of value of supply of job work services.

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• 2023 (2) TMI 872
  Reversal of Input Tax Credit - sale of alcoholic liquor for human consumption effected by it at its premises - Section 17(2) of the CGST Act read with Rule 42 of the Central Goods and Services Tax Rules, 2017 - HELD THAT:- The sale of alcoholic liquor for human consumption is a supply under the GST Act on which tax is not leviable. A supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services Tax Act is defined as Non-taxable supply in clause (78) of section 2 of the GST Act. Thus, sale of alcoholic liquor for human consumption shall be treated as non-taxable supply - Further, exempt supply as defined in clause (47) of section 2 of the GST Act includes non-taxable supply. A conjoint reading of section 2(47) and 2(78) thus denotes clearly that the aforesaid supply would also be treated as exempt supply under the GST Act. Sub-section (2) of section 17 of the GST Act read with rule 42 of the GST Rules allows a registered person to utilize input tax credit to the extent of input tax paid on inputs and input services that are used for making taxable supplies including zero-rated supply. Credit of input tax attributable to exempt supplies is to be reversed as per the prescribed formula - As it is held that the activities of selling of alcoholic liquor for human consumption by the applicant would be treated as non-taxable supply and therefore falls under the category of exempt supply under the GST Act, the applicant is required to reverse input tax credit attributable to the exempt supply under sub-section (2) of section 17 of the GST Act read with rule 42 of the GST Rules. Applicability of maxim Quando aliquid prohibetur fieri, prohibetur ex directo et per obliquum - applicant contends that reversal of input tax credit would other way mean discharging of GST liability on output supply of alcoholic liquor for human consumption - HELD THAT:- The statutory scheme, as envisaged under the Act requires reversal of tax which is charged on inward supply of goods or services or both. Input tax is totally different and distinct from outward supply. Since tax is not leviable on supply of alcoholic liquor for human consumption under the GST Act, there cannot be any inward supply to the applicant of the said item on which tax is to be charged by its supplier or the applicant is liable to pay tax under reverse charge mechanism - the reversal of tax charged on inward supplies which are altogether different from outward exempted supplies of alcoholic liquor for human consumption would no way lead to discharging of GST liability on outward supply.

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• 2023 (2) TMI 871
  Supply or not - providing of dredging service which predominantly involves earth work to the Government of Andhra Pradesh - Government of Andhra Pradesh Water Resources Department - comes under the purview of State Government or not - Whether amendment made vide Notification No. 39/2017 dated 13-10-2017 Integrated Tax (Rate) in the table against Serial No. 3 for the item (vii) will be applicable in this case? HELD THAT:- It is evident that the applicant undertakes the work of dredging in the foreshore of Prakasam Barrage. Dredging is the process of removing the silt and other materials from the bottom of bodies of water. As per Wikipedia, Dredging is the excavation of material from a water environment. Possible reasons for dredging include improving existing water features; reshaping land and water features to alter drainage, navigability, and commercial use; constructing dams, dikes, and other controls for streams and shorelines; and recovering valuable mineral deposits or marine life having commercial value. In all but a few situations the excavation is undertaken by a specialist floating plant, known as a dredger . On due consideration of the cost of the materials involved in the instant supply, as certified by the Executive Engineer, Krishna Central Division, Vijayawada, we are of the opinion that the work being undertaken by the applicant is a composite supply of works contract which predominantly involves earth work i.e., constituting more than 75 per cent. of the value of the works contract as specified under serial number 3(vii) of Notification No. 39/2017- Integrated Tax (Rate) dated 13.10.2017. Whether the supply being provided by the applicant to the Water Resource Department, Government of Andhra Pradesh would be considered as supply to the State Government so as to cover under serial number 3 (vii) of the Notification No. 39/2017- Integrated Tax (Rate) dated 13.10.2017? - HELD THAT:- A department of Central/ State Government shall be regarded as Central/State Government and therefore, supply being provided by the applicant to the Water Resource Department of Government of Andhra Pradesh qualifies as a supply to the State Government.

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• Income Tax

• 2023 (2) TMI 870
  Reopening of assessment u/s 147 - Reasons to believe - as argued entire reassessment proceedings are unsustainable as the AO has reviewed the earlier order passed under section 143(3) - HELD THAT:- From the reasons recorded, it does not appear that there was any fresh tangible material which has come to the notice of the AO between the date of the passing of the order under section 143(3) of the Act and the date of issuance of notice under section 148 of the Act. AO has only tried to re-visit and reconsider the decision rendered in the earlier regular assessment proceedings on the ground that the addition ought not to have been limited only to Rs.27,27,657/- and ought to have been extended to Rs.3,60,135/-. This, in our opinion, was nothing but a change of opinion on the part of the AO, and therefore, impermissible in law. No hesitation in holding that jurisdictional conditions with regard to section 147 of the Act have not been satisfied in the present case, which makes the order impugned unsustainable in law. Decided in favour of assessee.

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• 2023 (2) TMI 869
  Liability of directors of private company u/s 179 - petitioner did not have any independent operational control over the company - CIT rejected the application for revision u/s 264 - HELD THAT:- The petitioner having brought on record material to suggest lack of financial control, lack of decision making powers in the light of her stand that she had a very limited role to play in the company as a director and that the entire decision making process was with the directors appointed by the investors, i.e., KFI which was the single largest shareholder of the JVC had, in our opinion, sufficiently discharged the burden cast upon her in terms of section 179 to absolve herself of the liability of the company. AO appears to have applied himself more on the issue of the petitioner participating in the affairs of the company for purposes of pinning liability in terms of section 179 rather than discovering the element of gross neglect , misfeasance or breach of duty on the part of the petitioner in relation to the affairs of the company and establishing its corelation with non-recovery of tax dues. The petitioner having discharged the initial burden, the AO had to show as to how the petitioner could be attributed such a gross neglect, misfeasance or breach of duty on her part. As in the present case, the AO has not specifically held the petitioner to be guilty of gross neglect, misfeasance or breach of duty on part in relation to the affairs of the company. Not a single incident, decision or action has been highlighted by the AO, which would be treated as an act of gross neglect, breach of duty or malfeasance which would have the remotest potential of resulting in non-recovery of tax due in future.

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• 2023 (2) TMI 868
  Addition u/s 14A r.w.r. 8D - Disallowance attributable to earning of exempt income - HELD THAT:- There is no discussion by the AO with regard to the computation of inadmissible expenditure made by the assessee forming part of the return of income. AO has not recorded any satisfaction that the working of inadmissible expenditure u/s 14A is incorrect with regard to the books of account of the assessee. The provision u/s 14(2) does not empower the AO to apply Rule 8D straightaway without considering the correctness of the assessee s claim in respect of expenditure incurred in relation to the exempt income. We agree with the view of the ITAT that in the present case the AO has neither examined the claim in respect of expenditure incurred in relation to exempt income of the assessee nor has recorded any satisfaction with regard to the correctness of assessee s claim with reference to the books of account. Consequently, the disallowance made by applying the Rule 8D is not only against the statutory mandate but contrary to the legal principles laid down. In our view too, the CIT (A) has rightly deleted the addition made on account of interest expenditure as the assessee had sufficient interest free surplus fund to make the investment and the ITAT has rightly deleted the disallowance made by the AO u/s 14A r.w Rule 8D. Consequently we hold that, the interest expenditure cannot be disallowed u/s14A r.w. Rule 8D(2)(ii) under any circumstances. Decided in favour of assessee.

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• 2023 (2) TMI 867
  Reopening of assessment u/s 147 - Validity of notice issued to transferor company post amalgamation - information received by the assessing officer arising from the transaction of sale of immovable property - HELD THAT:- In the present case involving reassessment, it has material bearing that the reassessment notice was never issued against the transferee company i.e. the present petitioner. In fact, no notice was ever issued to the petitioner company at its email address etc. Also, in the context of reassessment proceedings, the assessing authority is always required to act mindful of the earlier assessment, if any. On the own showing of the revenue, the assessing authority of the transferor company has proceeded to issue the reassessment notice without examining the record of that assessee and without taking note of the event of merger and the subsequent order passed in the case of the merged entity i.e. the present petitioner. Unless that assessment order had been first examined by the assessing authority, it is difficult to visualize a situation where he may have entertained any reason to believe that any income had escaped assessment. The present observation has been made conscious of the discussion in the original assessment order dated 30.12.2017 wherein not only the fact of the merger of the two entities had been taken note of but also that assessing authority had taken note of the transaction of sale of immovable property at Rs. 68 crores. That transaction alone appears to have given rise to re-assessment proceedings against the transferor company. Therefore, it does appear, it has escaped the attention of assessing authority to examine the effect of original assessment order. What exact inference the assessing authority may draw on such material is left to be considered by that authority. Any observation made in this order may not bind that authority to that extent. Thus the assessment order made against the transferor company is without jurisdiction - Decided in favour of assessee.

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• 2023 (2) TMI 866
  Transfer of case u/s 127 - nexus established between the assessee on whom search and survey operation - Transfer of jurisdiction of the case from ACIT / Deputy Commissioner of Income Tax, Circle 13(1), Kolkata to Deputy Commissioner of Income Tax, Central Circle 1, Kanpur - HELD THAT:- Language of Section 127 is clear that the assessee should be given a reasonable opportunity of being heard in the matter before the power u/s 127 is invoked. The statute is also clear that such opportunity of being heard is to be given wherever it is possible to do so. If the authority proposes to dispense with the opportunity of hearing, the statute states that reasons have to be recorded for not providing such an opportunity. On perusal of the order impugned in the writ petition we find that no such reasons have been recorded by the authority for dispensing with the opportunity of personal hearing as no show cause notice was issued to the assessee prior to order of transfer. In any event, Single Bench was of the opinion that the appellant had made out a prima facie case for entertaining the writ petition. But, however, if the assessment proceedings are to be proceeded by the assessing authority at Kanpur, then the writ petition itself would become infructuous. In any event, we are of the view that since no reasons have been recorded by the authority for dispensing with the opportunity of being heard, we find that there are no such reasons to do so. Therefore, the authority is bound to issue notice to the appellant and afford them a reasonable opportunity of being heard before a decision is taken. We are inclined to remand the matter back to the authority for a fresh decision - appeal stands disposed of along with the writ petition by directing the appellant to treat the order passed by the PCIT-5, Kolkata as a show cause notice and the appellant shall submit their objection within fifteen days from the date of receipt of the server copy of this judgment and order after which the PCIT shall afford an opportunity of hearing to the authorised representative of the assessee and pass a speaking order on merit and in accordance with law. It appears that consequent upon the order, AO in Kanpur has taken up the re- assessment proceedings and has passed an order under Section 148A(d) of the Act and also issued a notice u/s 148. The order passed u/s 148A(d) and the notice issued u/s 148 shall be kept in abeyance and shall abide by the fresh order that may be passed by the Principal Commissioner of Income Tax 5, Kolkata in terms of the above direction.

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• 2023 (2) TMI 865
  Addition under the heading Trading Account being the estimated profit at the rate of 8.4% on the excess stock - HELD THAT:- Tribunal took note of the facts recorded by the authorities and found that there was no dispute that the assessee was dealing in clothes and hosiery wherein stock has been inventorised by the survey team in the presence of the partners of the assessee and the same was valued which was in excess of what was entered in the books of accounts. Thus, in the absence of any explanation given by the assessee either before the AO or before the CIT(A) or before the Tribunal, the Tribunal rejected the plea. Thus, we find that the learned Tribunal rightly took note of the facts and refused to interfere with the order passed by the CIT(A) which had granted partial relief to the assessee and in the absence of any error or perversity in the order passed by the Tribunal, we are not inclined to interfere with the same. Accordingly, the substantial question of law no.1 is answered against the assessee. Estimating the profit on excess stock on the basis of Khata itself - HELD THAT:- Tribunal, on going through the entire facts, held that the assessee did not produce any material to substantiate their submission and rebut the findings recorded by the AO which was affirmed by the CIT(A). Therefore, in absence of any evidence produced by the assessee, the addition was sustained. We find that there is no error in the approach of the Tribunal which had taken note of the facts, more particularly, that the assessee failed to discharge the burden cast upon him but producing evidence. For such reason, the substantial question of law no.2 is answered against the assessee. Money paid to the different parties by the assessee-firm - payments were not found recorded in the books of account of the assessee firm - AO treated the same as undisclosed income and added it to the total income - HELD THAT:- Tribunal noted that the assessee could not produce any evidence or material before the lower authorities or before the Tribunal and merely stated that the transactions were not related to the business of the assessee-firm. Tribunal noted that despite opportunity granted by the Tribunal on the earlier occasion when the matter was remanded to the AO for fresh decision, the assessee did not avail the opportunity. This could be confirmed by perusal of the assessment order from which it is seen that in spite of repeated notices issued to the assessee, the assessee did not turn up nor respond to those notices thus showing that the did not cooperate in the assessment proceedings. Thus, we find no error in the order passed by the learned Tribunal confirming the said addition - Decided against assessee.

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• 2023 (2) TMI 864
  Validity of reopening of assessment - non-service of the intimation - Notice to company which is no longer in existence and amalgamated - HELD THAT:- As decided in Kunvarji Fincorp Pvt. Ltd. [ 2023 (2) TMI 357 - GUJARAT HIGH COURT] and 2023 (2) TMI 644 - GUJARAT HIGH COURT] intimation was given in reply to the notice under Section- 142 in the month of March, 2018 by specifically intimating to the concerned officer of the factum of amalgamation by the petitioner and of its having acquired both the companies. Again, it is the very officer who after three years of such amalgamation has issued notice which is impugned in the name of that company, which no longer existed and therefore, the grievance on the part of the petitioner requires to be sustained and the action of the respondent authority warrants interference. We noticed that the intimation given to the Department in the year 2016 2018 and thereafter, the notice, which is impugned in the instant case is of March 2021, after three years of intimation. We could notice that the notice is issued by the Officer, Circle 4(1)(1), Ahmedabad whereas, the intimation under Section-142 was also issued by the Officer, Circle 4(1)(1), Ahmedabad. The show-cause notices issued by the respondents are quashed and set aside with consequential reliefs. This could not in any manner preclude the respondents to initiate the action against the present petitioners in accordance with law. Department has now made an advancement with the use of employment of technologies advance. The assessment is also faceless and if return of income is to be filed, is also in e-mode, the entire materials were available with the officer concerned in e-mode and therefore, lack of inter-departmental co-ordination or nonapplication of mind to the materials already available with the department, is hardly be a ground for the Court to hold nonservice of the intimation.

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• 2023 (2) TMI 863
  Revision u/s 263 - validity of Assessment u/s 144B - non-compliance of mandatory statutory provisions and for grant of less than four hours to respond to the notice - HELD THAT:- This is in gross violation of the principles of natural justice as to ask some one to respond to the same in less than four hours, amounts to nearly achieve impossible. When it is being terms as violation of principles of natural justice, it is mild expression to the conduct of the respondent. The least that could have been done was to regard the objective and very purport of introducing service of show-cause notice cum draft assessment order u/s 144B. Such Faceless Assessment Scheme 2019 has been incorporated under the Tax regime vide Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, whereby, Section 144B was inserted from 1st April 2021. The circular of Central Board of Direct Taxes (CBDT) deals with the procedure of faceless assessment, scope of work to be done by different units such as assessment unit, verification unit, technical unit etc. Non-compliance of sub-section (9) of Section 144B of the Act would render the issue non est. Our attention is drawn that the provisions of sub-section (9) of Section 144B of the Act though have been omitted from the statute book, there is no running away from the fact that the time given is in no manner can be said to be in due compliance of the statutory provisions or in satisfaction of fulfilling the objectives of newly introduced provisions. Resultantly, this petition is allowed quashing and setting aside the action of the respondent of passing the order of assessment for the Assessment Year 2016-2017 with all consequential actions and notices.

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• 2023 (2) TMI 862
  Reopening of assessment u/s 147 - addition u/s 68 - tribunal sustained the deletion of addition - HELD THAT:- None of the findings of the fact recorded by the Tribunal have been assailed before us. We have no difficulty in agreeing with the Tribunal that the respondent/assessee was put to scrutiny with regard to the infusion of share capital and had furnished the relevant information sought by the AO when the initial assessment order was framed under Section 143(3) of the Act. The Tribunal, therefore, was right in reaching the conclusion that this was a case of change of opinion, and therefore, the first proviso to Section 147/148 was applicable, the pre-requisites of which having not been fulfilled, re-assessment proceedings could not have been triggered. For the foregoing reasons, we are not inclined to interdict the order passed by the Tribunal. No substantial questions of law.

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• 2023 (2) TMI 861
  Delay in paying the audit fee - Petitioner was engaged as an auditor in exercise of the Assessing Officer s (AO) powers u/s 142(2A) - HELD THAT:- There is enormous delay in each case in payment of the determined audit fee. The delay is nearly four years in each case. Insofar as the interest is concerned, it is payable if there is statutory enactment i.e., substantive law to that effect, or if trade, usage, custom or practice, which is enforceable in law mandates the grant of interest, or there is an agreement to that effect. The other eventuality where interest is awarded, is in circumstances where the Court, exercising equitable jurisdiction, seeks to preserve the real value of money. This is one such circumstance, given the inordinate delay in remitting the audit fee to the petitioner for no cause. The petitioner is, thus, in our view, entitled to be compensated for delay in payment of money that it could have used, had the money been remitted to it within a reasonable timeframe. Four years and above cannot be construed as a reasonable period. Thus interest ought to be paid to the petitioner at the rate of 7% per annum. Interest will run from the date of determination in each case till the date of payment of audit fee was made.

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• 2023 (2) TMI 860
  Addition under the head Interest Free Loans and advances given to subsidiaries u/s 36(1 )(iii) - Proof of commercial expediency in giving interest free funds to its subsidiary - HELD THAT:- As observed that the assessee was issued notice u/s 142(1) to explain commercial expediency in giving interest free funds to its subsidiary but the AO failed to take cognizance of the nature of work and fund flow of the company of assessee as being in business of being agent of international and domestic airlines so it had fast movement of funds, due to recovery of commission. The finding of the AO that assessee company did not have enough funds to lend to the subsidiaries as bulk of its borrowed funds were invested in fixed assets, investments and debtors, so lending of funds to subsidiaries out of surplus fund, is not sustainable and is a finding not backed by any valid reasons. As a matter of fact, these loans to body corporate and two subsidiaries were not new but were part of previous assessments. The commercial expediency, factor has to be examined at the initial stage when money is lend and there cannot be year to year basis explanation of commercial expediency of giving interest free funds, to its subsidiaries, by assessee. The fact that the revenue appeals stand dismissed in regard to the assessment years 2010-11 to 2012-13 by this Tribunal further, bolsters the findings of this Bench that the question of commercial expediency of the interest free loans attaining finality for previous assessment years, then for the present assessment year of 2014-15, the question of commercial expediency require no further adjudication. The order of FAA and of the AO are liable to be set aside. The appeal of assessee is allowed. AO is directed to delete the addition under the head Interest Free Loans and advances given to subsidiaries u/s 36(1 )(iii). - Decided against revenue.

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• 2023 (2) TMI 859
  Unexplained cash credit u/s 68 - assessee failed to discharge the onus explaining the increase in the unsecured loan amounts - difference of opening balance of unsecured loan and closing balance of unsecured loan - HELD THAT:- It is not a case of the AO that the assessee has taken bogus loan leading to invoking of section 68 of the Act and the loans from same entity has been treated as genuine in the preceding and succeeding assessment years, then the addition made by the AO u/s 68 has no legs to stand on the touchstone of provisions of section 68 - all required elements such as identity and credit worthiness of lender as well as genuineness of the transaction has been satisfied by the assessee then the loan received by the assessee during the relevant financial period cannot be treated as bogus or sham or non-genuine. Therefore, the ld.CIT(A) was right in deleting the addition on this count. Accordingly, ground No.1 of the Revenue being bereft of merit is dismissed. NP estimation - rejecting books of accounts - AO estimated @ 8% of the total receipts/turnover as 5% admitted by the assessee - HELD THAT:- We are in agreement with the conclusion drawn by the ld.CIT(A) that the AO was right in estimating the profits in absence of compliance from the assessee, but, there was no basis adopted for estimation of income u/s 144 of the Act @ 8% of total receipts/turnover. Disallowance of loss after rejecting books of accounts which have been restricted being 40% of total expenses - CIT(A) was right in disallowing the expenses @ 40% of the total expenses setting aside the estimation of net profit @ 8% of gross receipts which was calculated by the AO - CIT(A) was also right in allowing losses increased by the assessee during the relevant financial period and did not allow to be carried forward by holding that there is a substantial change in the management and control of the company. The above noted facts have not been controverted by the ld. Sr. DR in any manner. Revenue appeal dismissed.

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• 2023 (2) TMI 858
  Addition u/s 43B - TDS deposited not within the due date of Filing of Income Tax Return - Addition to the Returned Income being the TDS payable as on 31.3.2016 - whether TDS outstanding on the last day of the previous year and deposited in current financial year be allowed as deduction? - HELD THAT:- DR could not dispute the fact and cite any other relevant proposition of law to distinguish the findings in favour of the assessee in its own case. It can be appreciated form the record that Assessee has placed a statement of all the TDS paid with copies of their challan showing that assessee has paid the TDS amount before the due date i.e. before the date on which return of Income u/s 139(1) of the Act has to be filed. The grounds are determined in favor of assessee. AO shall delete the addition. Addition on account TDS Income mismatch - As argued there is no mismatch of TDS and corresponding Income as the assessee is following cash system of accounting and the income has been credited to income account when received in subsequent financial year and appropriate reconciliation filed - HELD THAT:- Assessee has claimed that it is maintaining cash system of accounting and claims that income has been credited to accounts when received in subsequent financial year. On behalf of the assessee at page no. 2 of the paper book statement of difference and reconciliation of TDS as per 26 AS vs. ITR for A.Y. 2016-17 has been filed. Assesee has also filed details of receipt in subsequent year along with copies of bills raised and the receipt in Bank Account. The same require verification. So the issue is restored to the files of AO who after giving opportunity to the assessee make a verification of statement of difference and reconciliation of income corresponding to Tax credit statement as per 26 AS vs. ITR for A.Y. 2016-17 and accordingly the grounds are allowed for statistical purposes. Allowability of travelling expenses - adhoc disallowance of the travelling expenses for want of evidence to establish that the expenses were wholly and exclusively for the business - CIT(A) has also sustained the disallowance to the extent of 10% on assumption that the expenses could have been for purposes other than the business - HELD THAT:- The Bench is of view that such adhoc allowances without any inquiry and evidence is not sustainable. Such disallowances earlier made in assessee s case for the year 2014-15 and 2013-14 were deleted as there was no case of revenue that the expenses were disproportionate to the income earned or professional activities carried by the assessee. Accordingly, this ground is sustained. AO shall delete the impugned disallowance.

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• 2023 (2) TMI 857
  Characterizing the income earned from sub-licensing of Designated Rights - Royalty receipt - sub-license of designated right - fee received towards live transmission - distinction between a copyright and a broadcasting right, broadcast or live coverage - HELD THAT:- As decided in the case of Fox Network Group Singapore Pte. Ltd.[ 2020 (3) TMI 1428 - ITAT DELHI] here is a clear distinction between a copyright and a broadcasting right, broadcast or live coverage which does not have a copyright, and therefore, payment for live telecast is neither payment for transfer of any copyright nor any scientific work so as to fall under the ambit of royalty under Explanation 2 to Section9(1)(vi). In so far as reference of phrase process in Explanation 6 the same will not be applicable in the case of the assessee because admittedly it is SIPL which is doing the transmission and makes the payment to Asia Satellite and it is not a case of transfer of process. On similar set of issues on live broadcast of sporting and cricket events, in the case of Neo Sports Broadcast (P.) Ltd. [ 2011 (11) TMI 23 - ITAT MUMBAI] and Nimbus Communication Ltd. [ 2013 (9) TMI 795 - ITAT MUMBAI] have held that there is no copyright on live events, and therefore, it is not taxable as royalty , thus, we hold that the fee received towards live transmission cannot be taxed as royalty in terms of Section 9(l)(vi) as held by the Hon ble Jurisdictional High Court and also by the Coordinate Bench of ITAT. Accordingly, we decide this issue in favour of the assessee. Short credit of taxes deducted at source though reflected in Form 26AS - HELD THAT:- We direct the Assessing officer to verify the same and grant correct credit of taxes deducted at source. Ground is allowed for statistical purposes. Charging of interest of interest u/s 234B is consequential - AO will recalculate the charging of interest, if any, while giving effect to the appellate order.

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• 2023 (2) TMI 856
  Assessment u/s 153A - Disallowance of exemption u/s 11 - HELD THAT:- It is not in dispute that the Coordinate Bench of the Tribunal [ 2018 (3) TMI 1079 - ITAT DELHI] has granted the benefit of Section 11 of the Act to the assessee trust. Therefore, the action of the CIT(A) in relying on the order of the assessee and deleting the disallowance of exemption u/s 11 of the Act requires no interference. Therefore, we do not find merit in the grounds of appeal of the Revenue.

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• 2023 (2) TMI 855
  Allowability of sec.80IA deduction - want of a valid return filed so as to comply with the rigor of sec.80A(5) r.w.s.80AC - mere filing a letter or a belated revised return - Whether the assessee could claim sec.80IA deduction without even filing a return but by way of mere letter in assessment year 2014- 15 and by filing a belated revised return in assessment year 2015-16 - HELD THAT:- We first of all quote hon ble jurisdictional high court s decision in EBR Enterprises vs. Union of India [ 2019 (6) TMI 484 - BOMBAY HIGH COURT] that filing of the return for claiming the impugned deduction is a mandatory condition u/s.80A(5) of the Act. The assessee s arguments in assessment year 2014-15 stands rejected on the very analogy by adopting stricter interpretation as accepting such an argument would indeed lead to frustration of the said specific statutory embargo. The legal position would hardly be any different for the latter assessment year 2015-16 as well wherein the assessee s revised return could not have been accepted u/s.139(5) of the Act in light of hon ble apex court s landmark decision in PCIT vs. Wipro Ltd. [ 2022 (7) TMI 560 - SUPREME COURT] settling the issue in department s favour. A revised return could be filed only if there is an omission or a wrong statement but a claim which was not earlier raised could not be raised at a latter stage. Learned counsel at this stage quoted sec.139(4) of the Act as applicable in the relevant assessment year which does not cover any of the specified twin eventualities i.e. the assessee having not furnished any return earlier who is allowed to do so within the time prescribed in sec.142(1) notice. We make it clear that the AO had issued his sec.142(1) notices on 6th and 17th October, 2017 whereas the assessee had submitted its alleged revised return very well before that on 04.02.2017. Faced with the situation, we exercise our statutory jurisdiction vested u/s.254(1) of the Act in wider terms to reject the assessee s letter claiming sec.80IA deduction dated 07.11.2016 for assessment year 2014-15 and revised return dated 04.02.2017 in assessment year 2015-16 as non-est in the eye of law in above terms by adopting stricter construction in light of CIT vs. Dilip Kumar [ 2018 (7) TMI 1826 - SUPREME COURT] as reiterated in PCIT vs. Wipro Ltd. (supra). Decided against assessee.

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• 2023 (2) TMI 854
  Deduction u/s 80P - disallowing 80P deduction while processing return u/s 143(3) - HELD THAT:- The issue of deduction has already been allowed by the Ld. CIT(A) in 143(3) proceedings and therefore, the Revenue should have reduced the demand raised u/s 143(1) of the Act also. The Ld. AO is accordingly directed to give effect of the finding of the Ld. CIT(A) in the impugned order that order u/s 143(1) already merged with the section 143(3) of the Act and the said addition u/s 143(3) has been deleted by the Ld. CIT(A) vide order dated 01.12.2022. CPC authorization to make adjustment u/s 143(1) as the issue of deduction u/s 80P of the Act was of debatable nature - CPC was not authorized to carry out such adjustment for disallowance of deduction u/s 80P of the Act. The adjustment made by the CPC is accordingly deleted on this ground also.

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• 2023 (2) TMI 853
  Penalty u/s 271B - failure to file audit report on due date - HELD THAT:- When the assessee has voluntarily complied the law, the revenue has not substantiated by placing anything on record that the explanation given by the assessee are not genuine. The assessee has filed the return has paid the taxes and the returned income is accepted by the revenue. Therefore, based on these facts and voluntary compliance made by the assessee the lower authorities should have exercised the discretion available with him in not penalizing the assessee as there is no direct or indirect loss of delay in submission of the audit report and there is no malafide intention and the assessee has voluntarily complied though belatedly. The reasons based on upon it the audit report was filed belated is explained by the assessee by filling a correct fact on record and the assessee immediately filed the audit report after getting rewriting the books of account and the reason placed on record are the genuine and it may happen to anyone and has to face technical bugs in the system and the delay based on that technical bug in filling the audit report is based on genuine reasons. Therefore, she has sufficient reason to file the audit report delayed. We find that this is a reasonable cause which has resulted into failure of the assessee to comply with the law. We find that penalty levied u/s 271B cannot be levied for the reason that there was a failure on the part of the assessee to obtain tax audit report was on account of a bona fide reason of crashing the compute data and thus has to rewrite the same. The revenue could not show that the belief of the assessee was mala fide. There are various judicial precedents of not levying the penalty under such circumstances. In view of this, we reverse the orders of the lower authorities and direct the learned assessing officer to delete the penalty levied u/s 271B of the Act. Appeal of the assessee is allowed.

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• 2023 (2) TMI 852
  Levy of penalty u/s 221 - delay in deposit of tax deducted at source (TDS) - HELD THAT:- As the case of assessee M/s. Barak Valley Cements Ltd., during the financial year 2016-17, assessee was required to deposit TDS arrears. As per the chart indexed with the order u/s 221 there is a delay of one month to twelve months in depositing such tax. Similarly, in case of M/s. Meghalaya Minerals Mines Ltd., the TDS liability which the assessee was liable to deposit during various dates during the year. There is a delay of two months to twelve months. Details of such delay are also forming part of the order u/s 221. During the proceedings u/s 221 of the Act, no plausible reason was given by both the assessees for the said delay and even before the CIT(A), the assessees failed to appeal nor could place any evidence on record towards the reasons for such delay. We fail to find any infirmity in the findings of the ld. CIT(A) confirming the penalty u/s 221 - All the grounds of appeal raised by the assessees in these two appeals are dismissed.

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• 2023 (2) TMI 851
  Assessment proceedings in name of a non-existing entity - notice to company predecessor post amalgamation - HELD THAT:- AO was specifically informed of the fact of merger of the assessee. AO was specifically informed, upon his own questionnaire, about the date of merger and the fact that the successor company - Inspite of the aforesaid facts being in the knowledge of the AO and the specific directions of the ld DRP as reproduced above, the AO preferred to pass the assessment order upon the predecessor of appellant which no longer existed and upon the PAN account of the predecessor of the appellant. Catena of judgments cited by the ld AR firmly hold that the assessment orders passed on non existing entities are void - See MARUTI SUZUKI INDIA LIMITED [ 2019 (7) TMI 1449 - SUPREME COURT] - Moreover in the case in hand when ld DRP had given a specific direction. Failure of the ld AO to follow the same and also makes the assessment order not sustainable. Decided in favour of assessee.

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• 2023 (2) TMI 850
  Credit of TDS - unmatched tax deduction at source entries - HELD THAT:- We find that assessee has given proper details in the return of income filed therefore, there is no reason that why the assessee should not be granted tax credit as claimed in the return of income. Reduction of the claim of the assessee in rectification proceedings under section 154 is in clear violation of the provisions of section 154 (3). That section specifically provides that if any amendment made to the order which is effect of enhancing an assessment and reducing the refund of the assessee, proper notice should be given to the assessee and he must be allowed a reasonable opportunity of being heard. In the present case when the tax credit already granted to the assessee is withdrawn, no such notice was issued to the assessee. Therefore the withdrawal of tax credit already granted to the assessee is not in accordance with the law. In the present case the only dispute was unmatched tax deduction at source entries aggregating to Rs. 1,682,860. Therefore, we direct the learned assessing officer to grant tax credit to the assessee as per claim of the assessee in the return of income. If the AO wants to verify on sample basis with respect to the tax deduction at source he may do so. Assessee may also show to the learned assessing officer on sample basis how the income is shown in the return of income as well as the relevant tax deducted at source claimed as credit during the year. In the nutshell, we direct the learned assessing officer to allow the claim of the assessee of tax credit claimed on above verification. Appeal of assessee allowed.

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• 2023 (2) TMI 849
  Assessment u/s 153A - unaccounted profits or investments made - purchases have been suppressed and the investments have been acquired at a much lower price and hence AO has made addition of suppressed income in the hands of the assessee - HELD THAT:- In the present case, we note that ld. CIT (A) has given a categorical finding that there is nothing on record which suggest that assessee has incurred higher expenditure on purchase than reflected in the books of account. CIT (A) placed strong reliance upon the decision of Hon ble jurisdictional High Court in the case of Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] which is fully applicable. Assessee has purchased share of 6 companies at the face value with book value of these shares on the date of purchase was much higher - In this regard, mere such submission cannot fortify the case of the assessee. In the case of K.P. Varghese [ 1981 (9) TMI 1 - SUPREME COURT] duly expounded that there must be evidence to show that the actual consideration was more than the consideration shown in the books. In this regard, ld. Counsel of the assessee referred to catena of case laws. We find that this aspect is fully applicable in the assessee s case. No evidence whatsoever is on record that actual consideration paid is any how suppressed. Hence, the assessee s case is covered on the touchstone of Hon ble Apex Court in the case of K.P. Varghese (supra). Apart from the value of investment, another addition made by the AO is with regard to credit card payments. In this aspect, ld. CIT (A) has given a finding that there is no incriminating material and in this view of the matter, addition is not sustainable on the touchstone of Hon ble Delhi HIgh Court in the case of Kabul Chawla (supra). - Decided against revenue. Whether assessment should have been done under section 153C and not under section 153A ? - Section 153C permits documents found from another search to be sent to the AO of that person after due satisfaction and then on the basis of those documents assessment u/s 153C can be done. In the present case, material found at the premises of Rajiv Gupta has been taken as if they are material found during search at the assessee, Atul Kumar Gupta, which is not at all correct. Hence, the very basis of addition is missing. The assessment has been made u/s 153A and not u/s 153C, and this has led to a fatal error in the assessment order which is not curable. As rightly contended by the ld. Counsel of the assessee that the presumption u/s 132 (4A) cannot be extended to material found at somebody else place and de hors corroborating documents, these cannot be linked to the assessee. Assessee s plea that assessee s name is nowhere directly mentioned in these documents found at Rajiv Gupta place whereas it is mentioned as Dildar (Atul sir) which ipso facto cannot mean the assessee. Hence, we set aside the order of the authorities below and delete the addition in this regard.

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• 2023 (2) TMI 848
  Capital gain - compromise settlement for breach of contract - Transfer u/s 2(47) - assessee has entered into an agreement for purchase of a property by paying an amount partially but subsequently the seller expired in 2007 by executing a Will in favour of his son and same property was sold to another five vendees - assessee has relinquished her right on the specific performance of the contract by agreeing to the compromise settlement for receiving a compensation - whether extinguishment of a right of specific performance of a contract shall be covered under the definition of capital asset as defined U/s. 2(14)(a)? - HELD THAT:- Extinguishment of a right of specific performance of a contract shall be covered under the definition of capital asset as defined U/s. 2(14)(a) of the Act. In the instant case, the assessee has relinquished her right on the specific performance of the contract by agreeing to the compromise settlement for receiving a compensation of Rs. 3 Crs. The argument of the Ld. AR that there is no transfer of any capital asset for receiving the compensation and it is merely a right to sue for damages cannot be considered as a capital asset could not be accepted. As decided in H. Anil Kumar [ 2011 (1) TMI 1159 - KARNATAKA HIGH COURT] since the word transfer in relation to capital asset is defined under the IT Act, 1961 it is not necessary to import the meaning assigned to them under the provisions of the Transfer of Property Act. The word Capital Asset as defined in the IT Act, 1961 means any kind of property held by the assessee which is not necessarily be confined to the immovable property. Similarly, the definition of word transfer in relation to capital asset includes sale, exchange or relinquishment of the asset . The said asset need not necessarily be an immovable property. In the instant case, the assessee has paid an amount during 2001 while entering into an agreement with the seller. We are therefore of the considered view that the compensation received by the assessee arises out of the transfer of capital asset in the nature of relinquishment of the specific performance of the contract shall be treated as transfer of capital asset within the meaning of section 2(47) of the Act, and hence it is a capital gains under the Income Tax Act, 1961 and exigible to tax. Accordingly, this ground raised by the Revenue is allowed. Deduction u/s. 54F - We direct the Ld. AO to look into the facts of the owning of the residential properties by the assessee afresh and accordingly the deduction U/s. 54F shall be decided after providing a reasonable opportunity to the assessee. Accordingly, this ground raised by the Revenue is allowed for statistical purposes.

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• 2023 (2) TMI 847
  Addition u/s 68 - sources of fund introduced in the nature of share capital and share premium unexplained - AO remained to be unsatisfied with the identity, creditworthiness and genuineness - HELD THAT:- Firstly the financials of the assessee company itself are so poor that by no stretch of imagination the assessee company can attract the investors to invest in its share capital and pay a huge premium of Rs. 9,990/- without having certainty of the return on such investments since there is hardly any future prospect of the assessee company giving rise to profitability. This fact itself shows that the genuineness of the transaction is in doubt. As far as identity of the share applicants is concerned, there cannot be any doubt because they all are registered with the Registrar of Companies having PAN number and regularly filing the income tax return. So far as the creditworthiness of the share applicants is concerned, we notice that there is a common pattern that in all such companies the income is very meagre and in comparison, of such income in the present as well as in the past period do not carry a weight and is beyond human probability to venture for a huge investment in the assessee company which itself has poor financials. All the transactions involving the issuing of share capital on the equity shares of face value of Rs. 10/- and share premium of Rs. 9,990/- as well as the huge investments by alleged shareholders neither prove the genuineness of the transaction nor prove the creditworthiness of such shareholders. Therefore, we fail to find any infirmity in the finding of ld. CIT(A) and the same is confirmed. Accordingly, the addition made by ld. AO u/s 68 of the Act stands confirmed. Decided against assessee.

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• 2023 (2) TMI 846
  Reopening of assessment - tangible material for reopening - Scope of change of opinion - HELD THAT:- Reproduction of reasons show that merely by wording the reasons differently ld AO had tried to invoke the jurisdiction of reassessment. The fundamental question in earlier assessment was the analysis of the income occurring form the deposits collected through its agent. Once the additions from were made in original assessment and re-examined in reassessment proceedings, the same could not have been subject matter of reasons to believe by merely expending the scope of enquiry of the manner and nature of deposits collected by the assessee. The order of the ld CIT(A) reflects that he had duly taken into consideration all the legal aspect of the issue with regard to reopening while sustaining the submission on behalf of the assessee. AO had certainly far stretched the powers u/s 147. There is no force in the contention of the ld DR that the ld CIT(A) has failed to invoke plenary power by looking at the special audit as in fact the special audit report and same was already available at the time of first reassessment itself. Reopening being barred by limitation provide u/s 149 - AY 1993-94 - Since amendment in section 149 restricting the limitation of period for reopening the reassessments to six years, had come into effect from 01.06.2001, which being one of the nature of amendment in procedural laws would be applicable to the case of the assessee for AY 1993-94. Reliance in this regard has been rightly placed by judgment of C. B. Richards 2012 (6) TMI 37 - DELHI HIGH COURT] , Ellis Mauritius Ltd. Vs. ADIT [ 2012 (6) TMI 37 - DELHI HIGH COURT ] and Elam Vs. N. Illamathy [ 2020 (9) TMI 924 - MADRAS HIGH COURT] and Mon Mohan Kohli [ 2021 (12) TMI 664 - DELHI HIGH COURT] Thus on this basis also the reopening for AY 1993-94 is bad in law, which Ld. CIT(A) failed to appreciate.

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• 2023 (2) TMI 845
  Protective assessment/addition - No substantive assessment/addition in the hands of other assessee - Assessment under section 153A(1)(b) r.w.s 143(3) - Order passed by Settlement Commission u/s 245D(4) - HELD THAT:- As in the instant case, at the time of passing of the assessment order where the protective addition was made in the case of the assessee, no substantive additions were made in the hands of M/s Bhushan Power Steel Ltd and thus, no substantive additions were in existence. Even in the order so passed by the Settlement Commission u/s 245D(4) subsequent to passing of the impugned assessment order), no substantive additions were made in the hands of M/s Bhushan Power Steel Ltd. It is therefore a case where no substantive additions have been made in hands of M/s Bhushan Power Steel Ltd and at the same time, only protective assessment has been made in the hands of the assessee. In light of aforesaid legal proposition and respectfully following the decisions cited supra, in absence of substantive addition made in hands of M/s Bhushan Power Steel Ltd or any other person, protective addition cannot be sustained in the hands of the assessee. Accordingly, the protective addition so made by the AO and confirmed by the ld CIT(A) is hereby directed to be deleted. The enhancement done by the ld CIT(A) by an amount under section 69C of the Act, the same being consequential in nature is also directed to be deleted. Appeal of assessee allowed.

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• 2023 (2) TMI 844
  Revision u/s 263 by CIT - leave encashment being allowed to the assessee despite the same being not allowable under law - HELD THAT:- The issue of assessment order being erroneous on account of the Assessing Officer having allowed the assessee an otherwise ineligible claim of leave encashment amounting to Rs.9,63,399/-, we uphold the order of the Ld. Pr. CIT on account of the same. Provision for diminution in the value of investments - CIT s finding that the assessee s claim of provision for diminution in the value of investment was not in accordance with the RBI guidelines and CBDT circulars - HELD THAT:- Having noted the facts that the assessee s claim was in accordance with RBI guidelines and CBDT notifications in this regard, he appears to have given frivolous reason for holding that they were not in accordance with the same. Even the judicial decisions relied upon by the learned Counsel for the assessee, being decision in the case of Rajkot Dist. Co. Op. Bank Ltd. [ 2014 (3) TMI 110 - GUJARAT HIGH COURT] clearly supports the case of the assessee. CIT clearly has no basis for finding the claim of the assessee of Provision in the value of investments to be not in accordance with law. We hold that the issue of the claim of the assessee of Provision in the value of investments was duly examined by the AO during assessment proceedings when the assessee had demonstrated the same to be in accordance with RBI guidelines, CBDT notifications and judicial decisions in this regard and the AO therefore had allowed the claim taking a plausible view on the matter. CIT has been unable to demonstrate how the claim was not allowable to the assessee. Therefore, we hold, there is no error in the Order of the AO allowing claim of provision for diminution in the value of investment - The order of the Ld. Pr. CIT holding so is accordingly set aside. Deduction on account of amounts routed not through the P L account but through Rural Development Fund and Sahkar Prachar Fund (separate funds) - CIT has held that the Assessing Officer should have ascertained whether the amounts so paid could be categorized as incurred wholly and exclusively for the purposes of business of the assessee. Clearly, there is no finding by the Ld. Pr. CIT that this amount was not allowable to the assessee under Section 37(1) of the Act and it has been restored to the Assessing Officer for the purpose of determining the same. Moreover, as the facts demonstrate, the fund out of which the amount was paid related to advertisement fund of the assessee Co-operative bank bearing the name of Sahkar Prachar Fund and the amount of Rs.5,00,000/- had been paid for advertisement purposes only as per the facts noted by the Ld. Pr. CIT himself having been paid to souvenir for Run For Unity . Therefore, in the absence of any findings by the Ld. Pr. CIT of any reasons for the claim of deduction on account of the amount of Rs.5,00,000/- paid out of the Sahkar Prachar Fund being not allowable as per the provisions of Section 37(1) of the Act and facts not demonstrating otherwise, the assessment order clearly is not erroneous for having allowed this claim to the assessee. CIT s order holding the assessment order erroneous on account of allowance of claim of amounts paid through Rural Development Fund and Sahkar Prachar Fund respectively is set aside. The order of the Ld. Pr. CIT passed under Section 263 of the Act is upheld only to the extent of the issue of claim of leave encashment allowed to the assessee while on the remaining issues the order of the Ld. Pr. CIT is set aside. - Decided partly in favour of assessee.

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• 2023 (2) TMI 843
  Unexplained credits u/s 68 - Trade Payables and Other Payables - HELD THAT:- We find that the documents submitted by the assessee provides that the lender M/s Muah Retails Pvt. Ltd. received the unsecured loan from Ms. Neeru Bhargav, one of the Directors of the M/s.Muah Retails Pvt. Ltd. in whose hand, the source of this fund was a personal loan received from J K Bank. In the given facts and circumstances, there is evidence of identity of the lender, genuiness of the transaction, the creditworthiness is satisfied and therefore, the impugned loan amount can be held to be genuine. The sequence of events reveal that the assessee received loan from M/s. Muah Retails Pvt. Ltd. which is a sister concern who in turn received funds from the Director Ms. Neeru, who was financed the same as personal loan by J K bank. Hence, the addition made by the AO and confirmed by the Ld.CIT(A) is here by directed to be deleted. Disallowance of 25% of total trade payables owing to non-filing of confirmations with regard to the purchases - HELD THAT:- CIT(A) after examination of the books of accounts, ledger statement, bank statement, bills vouchers submitted by the assessee has accepted the transactions after duly issuing notices u/s 133(6) to the parties and getting the details verified. Since, the action of the ld. CIT(A) is after due diligence exercised and the examination of the sundry creditor, we decline to interfere with the order of the ld. CIT(A). Notwithstanding that, we hold that the action of the AO disallowing only 25% of the total outstanding amounts without any rhyme and ratio cannot be supported. Disallowance of PF ESI - delay in payment of employee s contribution for PF ESI - HELD THAT:- As per the judgment of the Hon ble Supreme Court in the case of Checkmate Services P. Ltd. [ 2022 (10) TMI 617 - SUPREME COURT] the assessee cannot claim the amounts wherein there was delay in payment of employee s contribution for PF ESI. The AO may examine the months in which there has been a delay and bring through amount to tax accordingly. Addition u/s 68 - Unsecured Loan - HELD THAT:- Additional evidences filed by the assessee have been forwarded to the AO and the remand report has been called for. Since, no adverse comment has been made by the AO with regard to the transactions with M/s Shelter Advisory Pvt. Ltd. CIT(A) deleted the addition. Since, the order of the CIT(A) is based on the remand report of the AO, we decline to interfere with the order of the ld. CIT(A). Sundry Creditors - parties of fabrication manufacturing expenses - Owing to non-reply of notices and in the absence of confirmations, AO disallowed the amount on account of sundry creditors and brought the same to tax - HELD THAT:- CIT(A) called for a remand report vide letter dated F.No. /CIT(A)-09/Remand Report/2017-18/1179 dated 12.02.2018. AO submitted that the confirmations/details have been test checked and found satisfactorily. Based on the remand report of the AO, CIT(A) deleted the addition. Since, the action of the ld. CIT(A) is based on the remand report of the AO, we decline to interfere with the order of the ld. CIT(A). In the result, the appeal of the revenue is dismissed.

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• 2023 (2) TMI 842
  Procedural requirement of furnishing the acknowledgement of the electronically filed return - Carry forward of loss denied as assessee did not furnish the acknowledgement to the CPC at the material time - revised return filed - scope of revised return is filed within the time permitted u/s.139(5) - original return filed by the assessee was invalid for her non sending of acknowledgement to the Central Processing Unit (CPC) and hence, the claim of carry forward of the loss was not admissible in terms of section 139(3) - HELD THAT:- It is evident that filing of return u/s.139(1) r.w.s.139(3) before the due date as per section 139(1) is sine qua non for carry forward of loss under the head Capital gains . In the instant case, the assessee furnished her original return electronically on 31-08-2015, which is otherwise before the prescribed due date. The only reason assigned for declaring the original return as invalid is her non sending of acknowledgement of such return to the Central Processing unit of the Department. Requirement of furnishing the return electronically had another procedural requirement of taking a print out of such electronically filed return and sending it to the CPC as an acknowledgement of having furnished the return electronically. A cursory look of these two requirement transpires that whereas the first one of furnishing the return electronically is a mandatory one, the second one of sending acknowledgement of such filed return to the CPC is only directory. Non-compliance or late compliance of the second procedural requirement cannot invalidate the compliance of the first mandatory requirement, so as to make an otherwise valid return a non est. Since the procedural requirement of furnishing the acknowledgement of the electronically filed return is only a directory requirement, one cannot equate the non-submission of such acknowledgement on one hand with not filing of the return at all, so as to make both the cases as those of non-filing of return. As assessee did not furnish the acknowledgement to the CPC at the material time but filed the same later on with a request to condone the delay. Evidence from the Income-tax Departmental portal in this regard has been placed before us, which records E-verified after due date. Your condonation request is forwarded for approval . Notwithstanding the fact that the assesee s request for condonation of the delay in furnishing the acknowledgement with CPC is still pending, in our considered opinion, this, being a procedural requirement, cannot invalidate the otherwise valid return filed u/s.139(1) of the Act. We order accordingly and hold that the assessee furnished original return within the time allowed u/s 139(1). Whether filing of the revised return, after the time stipulated u/s.139(1), claiming carry forward of loss at a higher level, can be allowed to be carried forward within the meaning of section 139(3) of the Act? - Once a revised return is filed within the time permitted u/s.139(5), it substitutes the original return in all respects. It is construed as if the particulars furnished in the revised return were the particulars furnished in the original return and that such return was filed on the date when the original return was filed. If that is the position, we fail to comprehend as to how the enhanced amount of carry forward of loss claimed in the revised return [filed after the due date u/s.139(1) but within the time prescribed u/s.139(5)] can be restricted only to the extent of loss [claimed in the original return u/s 139(1)]. Since the assessee furnished the revised return within the stipulated period claiming loss at a higher level, it is this enhanced amount of loss which will be considered for carry forward to the next year(s) as the original return has been held to be validly filed and consequently the revised return will substitute the original return in all respects including the aspect of date of filing also. We, therefore, overturn the impugned order pro tanto and direct to allow carry forward of loss. Appeal allowed.

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• 2023 (2) TMI 841
  Nature of expenses - repairs and maintenance expenses - revenue or capital expenditure - whether there was no enduring benefit emerging out of the said expenditure? - HELD THAT:- It is an admitted fact that assessee has purchased adjacent factory shed. After purchasing the factory, the assessee carried out renovation and repairs. On going through the list of expenses and vouchers submitted by the ld.AR in the paper book, it is observed that assessee has carried out flooring work i.e. assessee changed the flooring of the factory shed. It has also carried out plumbing work, painting work. It has also carried out the renovation of the compound wall. It is not the claim of the AO that a new asset has been created. It is a fact that there was an existing factory shed. The assessee has merely renovated it to suit for his purposes. By doing so, no new asset has been created. It was merely repairs of the existing asset to make it suitable for the purposes of the assessee. As relying on Oxford University Press case [ 1975 (7) TMI 19 - BOMBAY HIGH COURT] the expenditure incurred on repairs and renovation was revenue in nature and hence, allowable as revenue expenditure. Accordingly, grounds of appeal raised by the assessee are allowed.

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• 2023 (2) TMI 840
  Reopening of assessment u/s 147 - loan given was believed to be undisclosed income of assessee - penalty u/s 271D and 271E - HELD THAT:- As both sides agrees that on the basis of LPS-1, Page No. 21 to 23 , the authorities made an original-conclusion that the assessee had given loan to AIDPL, but at a later stage it was observed that AIDPL has given loan to the assessee. They further agree that the re-assessment proceedings as well penalty-proceedings u/s 271D / 271E were initiated on the basis of original conclusion . We observe that the original-conclusion was such that the assessee had given loan to AIDPL but the reversed-conclusion was just opposite i.e. AIDPL had given loan to assessee. Now, if we give weightage to original- conclusion , which could not be said to faulty as per understanding gained by authorities at that time, the result would be such that the order of reassessment would be valid but the penalty-proceeding would be invalid because penalty u/s 271D / 271E are not attracted in case of loan given . As against this, if we give weightage to reversed-conclusion i.e. the AIDPL has given loan to assessee, the consequences would be just opposite i.e. the re-assessment proceeding would be invalid but the penalty-proceeding shall be valid. Thus, if one proceeding is saved, other has to be quashed. Hence we have given our anxious thought in the matter. After a mindful consideration, we are of the view that the original-conclusion was not faulty at the time of initiating re-assessment / passing of order of reassessment / launching of penalty-proceedings. It is a subsequent matter that the dust was clear about the nature of transaction and original-conclusion was reversed. Hence, it would be apt to give preference to the original-conclusion which has set the proceedings in motion. Since the original-conclusion was to the effect that the assessee had given loan to AIDPL, the fate of present appeals / cross-objection, in our considered view, would be as under: (i) The order of re-assessment shall be valid for the reason that loan given was believed to be undisclosed income of assessee. Accordingly, we upheld the validity of reassessment and dismiss the Appeal of assessee. (ii) The order of penalty u/s 271D and 271E shall be invalid for the reason that loan given neither attracts section 271D nor section 271E. We, therefore, quash the penalty-order and allow the Cross- Objection of assessee.

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• 2023 (2) TMI 839
  Long term capital gains - transfer u/s 2(47) - exchange of land - determination of full value of consideration and cost of acquisition - application of section 50C - applicability of provisions of section 2(47) of the Act for exchange of lands - Assessee argued there is no consideration involved in exchange of land and further, the appellant had also explained the reasons for executing sale deed in exchange of other lands - HELD THAT:- Once, the impugned transfer or sale of land in exchange comes within the definition of transfer as defined u/s. 2(14) then capital gains arising out of transfer of said land needs to be computed in accordance with law by taking into account full value of consideration. In this case, the assessee had computed capital loss by taking into account market value of land transferred by him in exchange of market value of land received from other persons, and computed capital loss. AO has computed long term capital gains by taking into account full value of consideration accruing as a result of transfer by applying provisions of section 50C and has adopted guideline value of the property as on the date of transfer. AO has allowed cost of acquisition in accordance with law and has arrived net capital gains in respect of both the properties. In our considered view, the method adopted by the AO is in accordance with law and does not called for any interference from our end. Hence, we uphold the computation of long term capital gains with regard to transfer of both the properties and reject argument taken by the assessee. Admission of additional grounds - We find that petition filed by the assessee for admission of additional grounds is not maintainable because, the assessee failed to make out a case that grounds taken by the assessee in the petition is legal issues, which can be taken at any time of proceedings including proceedings before the Tribunal. Secondly, the assessee has also failed to make out the case that facts with regard to the issues are also on record before the AO and the AO has examined the same. Since, the additional grounds taken by the appellant is purely on question of fact, in our considered view, petition filed by the assessee is not maintainable There is no proof, that the assessee has transferred those lands in the impugned assessment year or in subsequent assessment years. Therefore, if at all the assessee claims fair market value of exchanged lands as cost of acquisition for computation of capital gains, the AO is directed to deal with the claim of the assessee in accordance with law, wherever the issue arises. But, for this year, we reject petition filed by the assessee for admission of additional grounds. Appeal filed by the assessee is dismissed

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• 2023 (2) TMI 838
  Addition u/s 68 - Unexplained share capital share premium money received - addition made as investor companies have low income - HELD THAT:- Assets in the form of investments have been created through rotation of money in between the group companies and that the assets mainly consist of cash and cash equivalents. The above contentions raised by the CIT(A), in our view, are not enough to prove that any unaccounted money of the assessee has been introduced in the assessee company, warranting addition under section 68 of the Income Tax Act. Even after making elaborate exercise of examining the documents, CIT(A) could not point out any rebuttal to the above evidences furnished by the assessee to prove the identity, creditworthiness of the share subscribers and genuineness of the transaction. In the case of PCIT vs. Anmol Stainless (P.) Ltd. [ 2022 (2) TMI 649 - CALCUTTA HIGH COURT] has held that that where it has been sufficiently established that share applicants had substantial creditworthiness and investments had been made by assessee s own sister concern/group companies having mostly common directors and thus, establishing creditworthiness and genuinity of investments, additions under section 68 had been rightly been deleted. Appeal of assessee allowed.

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• 2023 (2) TMI 837
  TP adjustment - SWD segment - Comparable selection - HELD THAT:- Companies whose turnover in the current year is more than Rs.200 Crores should be excluded from the list of comparable companies. R S Software Ltd. - As identical to the case of Barracuda Networks India Private Limited [ 2022 (5) TMI 322 - ITAT BANGALORE ] decided by the Tribunal and respectfully following the same, we hold that if R S Software Ltd. if at all to be considered as comparable the margins for AY 2014-15 2015-16 have to be ignored and not to be considered as comparable. Interest on delayed receivables - delay in realisation of receivables as separate international transaction -TPO computed the notional interest by applying the interest rate of 4.985% i.e. 6 months LIBOR + 450 basis points and considering the credit period of 45 days - HELD THAT:- The impugned issue is squarely covered by the decision of the coordinate Bench of the Tribunal in the case of Swiss Re Global Business Solutions India Pvt. Ltd [ 2022 (1) TMI 1275 - ITAT BANGALORE ] and the judgment of AMD (India) Pvt. Ltd [ 2018 (8) TMI 2094 - KARNATAKA HIGH COURT ], we hold that the treatment of interest on deferred receivables is rightly considered as an independent international transaction and benchmarked separately by the revenue authorities. With regard to calculation of interest, respectfully following the above decision we hold that it would be appropriate to take the LIBOR rate + 2%. For this purpose, we place reliance on the judgment of the Bombay High Court in the case of CIT v. Aurionpro Solutions Ltd. [ 2017 (6) TMI 1087 - BOMBAY HIGH COURT ] Disallowance of trade payable and certain other expenses u/s. 37 - AO made an adhoc disallowance of 30% of the actual expenses on trade payables, rent expenses, legal and professional expenses and forex losses - disallowances were made on the ground that the Assessee failed to furnish details with respect to the aforesaid expenditures - details were furnished before the AO under the rectification application - HELD THAT:- DRP has given a direction to consider the confirmations produced by the assessee and that the details listed above as submitted by the assessee have not been considered while deciding the disallowance. We therefore remit the issue back to the AO to take into consideration the details/confirmations submitted by the assessee to decide the allowability in accordance with law after giving reasonable opportunity of being heard to the assessee.

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• Customs

• 2023 (2) TMI 836
  Release of imported goods - seizure of goods - demand of differential duty - failure to issue show cause notice under Section 124(a) of the Customs Act, 1962 (the Act) for adjudication of the purported seizure for the imported consignment. Whether the goods should be any longer detained? - HELD THAT:- In the order of provisional release dated 29.3.2022 the respondent department has accepted the fact that the appellant has paid the entire differential duty of Rs.46,48,200/-. After taking note of the said payment in the order the appellant has been directed to execute a bond for the estimated value of the goods namely Rs.81,95,532/- and to submit a bank guarantee for a sum of Rs.90 lakh. So far as the full estimation of the goods is concerned, since the differential duty has already been estimated it may not be necessary for the appellant to execute a bond for the fully estimated value of the goods as estimated in the order dated 29.3.2022. So far as the submission of bank guarantee of Rs. 90 lakhs the order of provisional release does not state as to how the said quantification has been made. Even after giving credit to the sum of Rs.46,48,200/-, it is not clear from the order of provisional release or the communication dated 12th February, 2023 as to how the balance amount has been computed. In any event, the goods are lying with the Customs from 10th September, 2021 and the goods are stated to be readymade garments/apparels. Thus, the differential duty having been paid, the department does not gain in keeping the goods detained any longer - thus, a workable order should be passed so that the interest of revenue is protected, at the same time, the appellant importer is also able to clear the goods. Issuance of the show cause notice - HELD THAT:- If in the opinion of the respondent department, the case of the appellant can be split up from that of Vineet Goel, then nothing prevents the respondent department from issuing a show cause notice under Section 124(a) of the Act. However, this is left to the discretion of the department with a note of caution that issuance of show cause notice should not be unduly delayed, especially when the allegation of the department against the appellant is that earlier consignments might also have been grossly misdeclared. The appeal is disposed of by directing the respondents to release the subject goods subject to the appellant furnishing a bond for a sum of Rs.90,00,000/-. The goods shall be released within a period of seven days from the date on which such bond is furnished.

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• 2023 (2) TMI 835
  Request for amendment of the Shipping Bill - request was rejected on the ground that the Shipping Bill incorporated a declaration of no export incentive being claimed by the Exporter - whether the Tribunal examined the correctness or otherwise of the reasoning recorded by the Tribunal or considered the new circumstances for allowing the appeal? HELD THAT:- The amendment is ordered on the analogy that the proposed amendment changes numbers, and the procedure must be applied to further the cause of the adjudication. The view pursued by the Tribunal cannot be agreed upon because Section 149 no doubt gives ample discretion/power to consider the request for an amendment of shipping documents. In the case on hand, the reasons for refusing the request are Circular No.4/2004 dated 16.01.2004 and the unilateral declaration while exporting the commodity as free duty export. The Tribunal would have done better by testing the grounds resulting in the order of rejection. The grounds now stated by the Tribunal are not examining the validity of the reasoning of the Commissioner. Hence, we are convinced that ground is made for setting aside the order under appeal. To subject the controversy to adjudication, the matter is remitted to the Tribunal for disposal afresh in accordance with law. Appeal allowed.

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• 2023 (2) TMI 834
  Refund of Cost recovery charges paid - revenue submits that though the department has challenged the order of this Tribunal but no stay has been granted by the Hon ble High Court - HELD THAT:- The Learned Commissioner (appeals) has granted the refund in pursuance to this Tribunal s order in GOODEARTH MARITIME LIMITED VERSUS COMMISSIONER OF CUSTOMS, KANDLA [ 2020 (3) TMI 494 - CESTAT AHMEDABAD] , whereby on merit the demand of cost recovery charges was set aside. Hence this refund is consequential relief to the afore said Tribunal s order. Though the revenue has challenged the order of this tribunal before the High Court but, since there is no stay, the order of the Commissioner (Appeals) cannot be disturbed. Therefore, in view of this Tribunal s order, since the demand of cost recovery charges has been set aside, the appellant was rightly granted the refund by the learned commissioner (appeals). The Central Board of Excise and Custom has repeatedly clarified that when any refund arises out of any order of adjudication/Commissioner (Appeals)/ CESTAT unless a stay order is obtained refund must be granted after 3 months from the date of the order. In the above circular the board has reiterated its earlier circular No. 572/9/2001-cx dated 22.02.01 which clarified that against the order from which the refund arises is not stayed by the higher authority within 3 months the refund must be granted - In the present case the Department has withheld the refund merely for the reason that this Tribunal s order GOODEARTH MARITIME LIMITED, has been appealed against before the Hon ble High Court of Gujarat under tax Appeal No: 299 of 2020. However, even after 2 years of filing tax appeal no stay could be obtained by the revenue. The revenue has no option except to grant the refund to the respondent. Accordingly, neither the stay application nor the appeal against the order of the Commissioner (Appeals) granting refund are not maintainable - there are no infirmity in the orders of the Commissioner (Appeals), hence, the same are upheld Revenue s appeals are dismissed.

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• Service Tax

• 2023 (2) TMI 833
  Renting of immovable property - Airport/Civil Enclave - Constitutional Validity of levy, imposition, demand or collection of service tax from the petitioner by the respondents herein for the payment of license/rental fee paid by the petitioner to the fifth respondent - seeking Writ of Mandamus (command issued by the court to a public official asking him/her to perform his/her official duties) to forbear the respondents, their men, agents, sub-ordinates or anyone claiming under them from in any manner imposing, levying, demanding or collecting service tax from the petitioner towards the rent/license fee paid by the petitioner to the fifth respondent other than by authority of law. The specific case of the petitioner is that the fifth respondent has not provided any taxable service to the petitioner during the period between 10.09.2004 and 01.06.2007 and therefore, the attempt of the fourth, fifth and sixth respondents to fasten the service tax liability on the petitioner by passing on the incidence of tax on the petitioner under Section 65(105)(zzm) of the Finance Act, 1994 (Chapter V - Service Tax) was unsustainable and contrary to law. HELD THAT:- Service of renting of immovable property is a separate specie of service. It was brought within the purview of service tax separately vide Section 65(105)(zzzz) with effect from 01.06.2007. Ipso facto, it would not mean that any service tax which was payable by the fourth respondent for the service provided by it in any Airport or a Civil Enclave to any person between 10.09.2004 and 31.06.2007 was not taxable - Merely because the service of renting of immovable property was introduced as a separate levy with effect from 01.07.2007 ipso facto would not mean that service provided by the Airport Authority of India was not liable to tax w.e.f. 10.09.2004. By this Writ Petition, the petitioner has attempted to pre-empt the fourth, fifth and sixth respondents from passing on the incidence of service tax which was either borne by them or was proposed to be borne by them towards renting of space to them within the Airport or a Civil Enclave. Whether the fourth respondent is/was liable to tax or not is to be determined by the Authorities enforcing the provisions of the Finance Act, 1994. The present Writ Petition to scuttle any assessment and adjudication proceedings and proposal to pass on incidence of service tax on the petitioner by the Airport Authority of India namely, the fourth respondent cannot be countenanced - It is preemptory move in an anticipation of steps that would have been taken by the Airport Authority of India by passing on the incidence of service tax in terms of Section 65(105)(zzm) of the Finance Act, 1994 (Chapter V Service Tax) as it stood with effect from 10.09.2004. Considering the fact that the issue is pending before the Hon ble Supreme in S.L.P. filed against the above decision of Delhi Tribunal in Airport Authority of India Vs. Commissioner of Service Tax, Delhi, [ 2015 (1) TMI 1049 - CESTAT NEW DELHI ] , we refrain to give any final view on the subject - In case the above decision of Delhi Tribunal in Airport Authority of India Vs. Commissioner of Service Tax, Delhi, is upheld by the Hon ble Supreme Court, the fourth respondent Airport Authority of India can indeed pass on the incidence of the tax on the petitioner - In case the decision is reversed, it is open for the petitioner to either file a refund claim under Section 11B of the Central Excise Act, 1944 as made applicable to the provisions of the Finance Act, 1994 in terms of Section 83 of the Finance Act, 1994, in accordance with law and law settled by the Hon ble Supreme Court if the incidence of service tax was passed on it or in the alternative defend such proceedings that may be initiated to recover the amount of service tax from it. It is deemed fit to direct the respondents to maintain the status quo as on date pending further decision of the Hon ble Supreme Court in the above S.L.P. filed by the Airport Authority of India - petition disposed off.

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• 2023 (2) TMI 832
  Invocation of Extended period of limitation - no intent to evade payment of service tax - whether there is any error apparent on the face of the record to review the judgment? - HELD THAT:- Admittedly, Service Tax was paid by the individual branches till 31.03.2007 and from 01.04.2007, centralised registration was taken. It is an admitted fact that the assessee has not fully disclosed the value of taxable service for the period from 10.09.2004 to 31.07.2007 in the ST 3 Returns. The case of the assessee is that it is due to system failure that the entire amount was not paid. The intelligence report points out that the short levy was from 10.09.2004 to 31.07.2007, and only on a reference by the department after the intelligence report on 02.08.2007, the bank had remitted the differential amounts. The period from 2004 to 2007, around three years, the bank cannot contend that due to system failure, they were not able to remit the Service Tax - the argument of the review petitioner that, there is no finding that there has been suppression of any information and not intended to evade payment of Service Tax does not hold good. Another ground raised by the review petitioner is that there has been a mistake in paragraph 19 of the judgment, only when the department issued a show cause notice, the bank remitted the amount of tax. The said contention is valid for the fact that going by the order in the original as well as the show cause notice, it can be seen that the intelligence report was on 02.08.2007 and the amounts were paid on 22.08.2007, 16.11.2007, 07.12.2007, and 12.12.2007 and the show cause notice was issued on 03.09.2008. Therefore, the statement that the remittance was only after the show cause notice is an error of fact in the narration and needs to be reviewed and it is held that the payment was before the show cause notice, however after the intelligence report on 02.08.2007. When the correct figures are not brought to the notice of the department and when the suppression is unearthed through an intelligence report, the failure of the bank in remitting the amounts thereafter i.e., nearly three years can be brought under the words wilful suppression . The time for which default occasioned is equally important. Therefore, there is no error apparent on the face of the record, and also there are no grounds to review the judgment, therefore the review petition stands disposed of.

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• 2023 (2) TMI 831
  Taxability - amount collected as toll (user fee) from user of toll roads under the category of Business Auxiliary Service under proviso to section 73(1) of the Finance Act, 1994 - period of show cause notice is from 01.12.2010 to 31.03.2013 - collection of toll /user fee by the appellant on behalf of NHAI tantamount to a service or not? HELD THAT:- The allegation that the appellant worked as an Commission Agent on whose behalf he collects the toll, appears to have overlooked the underlying scheme of the tender which brought the appellant into this transaction. The contractual arrangement between the appellant and NHAI was for undertaking the collection of toll or user fee. The terms of the contract is very clear: possession of the Kanwaliyas Toll Plaza asset is transferred to the appellant for the stream of lumpsum payment guaranteed by the appellant. Any deficit returns owing to decreased vehicular traffic or any other reason affects the revenue steam of the appellant. A Commission Agent is akin to a channel partner in delivery of goods/service, wherein the Principal bears all the risks. In the instant case, the tax liability does not arise by way of being Commission Agent as per section 65(19) of the Finance Act, 1994 for the period prior to introduction of negative list regime. This issue under consideration is squarely covered by the order of this Tribunal in the case of SOUVENIR DEVELOPERS INDIA PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS SERVICE TAX I [ 2022 (5) TMI 868 - CESTAT MUMBAI] where it was held that Oversight by agencies of the state is intended to assure proper maintenance of the asset and fixation of rates is retained by the government to prevent exploitative exaction both of which are mandated by public interest and not as a facet of principal-agent equation. Thus, tax liability does not arise by way of being commission agent in section 65(19) of Finance Act, 1994 for the period prior to introduction of negative list regime. Appeal allowed.

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• 2023 (2) TMI 830
  Levy of Service Tax - Support Services of Business or Commerce or not - providing the Chepauk Stadium and assisting in the conduct of the Indian Premier League (IPL) twenty over cricket matches by M/s. India Cements Ltd. - case of the Department is that the said amount is a consideration received by the appellant from the BCCI for providing the Chepauk Stadium for conduct of IPL cricket matches - HELD THAT:- The Department has not been able to produce any evidence to show that there was an understanding between the appellant and the BCCI for providing such service for a consideration of Rs.10,00,00,000/-. Further, it is also established that the appellants had provided the Stadium to Chennai Super Kings and had received Rs.50,00,000/- per match, for which they have discharged Service Tax - The definition of Support Services of Business or Commerce has already been noticed above. Unless there is a service provided and a consideration received for the service that has been provided, there cannot be a levy of Service Tax. The decision in the case of M/S VIDARBHA CRICKET ASSOCIATION VERSUS COMMISSIONER OF CENTRAL EXCISE [ 2014 (1) TMI 204 - CESTAT MUMBAI (LB)] was relied upon by the Learned Counsel for the appellant to argue that cricket associations cannot be considered as business or commercial organizations. In the said decision, the Tribunal relied on the decision in the case of THE SECRETARY, MINISTRY OF INFORMATION BROADCASTING VERSUS CRICKET ASSOCIATION OF BENGAL ANOTHER [ 1995 (2) TMI 406 - SUPREME COURT] and it was held by the Tribunal therein that sports organizations are not business or commercial organizations; conduct of sports or sporting events and their broadcasting/telecasting is not assertion of commercial rights. Thus, there are no hesitation to conclude that the Department has failed to establish that the appellant has rendered a service falling within the definition of Support Services of Business or Commerce - appeal allowed.

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• 2023 (2) TMI 829
  CENVAT Credit - classification of service - Business Auxiliary Service or Sponsorship Service? - classification of service can be disputed at recipient end or not - denial on the ground that service being classifiable under Sponsorship Service, the appellant was supposed to discharge the service tax under GR-7 Challan - HELD THAT:- The service provider M/s. K.P.H. Dream Cricket Pvt. Ltd. has classified the service under Business Auxiliary Service, in such case it is the service provider who is suppose to pay the service tax and the appellant can take the cenvat credit only on the basis of invoice issued by the service provider. The entire basis of the department s case is dispute on the classification made by the service provider M/s. K.P.H. Dream Cricket Pvt. Ltd. M/s. K.P.H. Dream Cricket Pvt. Ltd. has classified the service under Business Auxiliary Service and discharged the service tax and issued the invoice. Firstly, the classification of service cannot be disputed at the recipient end secondly, the classification of service maintained by the service provider M/s. K.P.H. Dream Cricket Pvt. Ltd. has been considered in judgment of M/S COCA COLA INDIA PVT. LTD. VERSUS CST, DELHI-III [ 2014 (12) TMI 667 - CESTAT NEW DELHI] where it was held that Demand of service tax in respect of the same transaction on the ground that the deposit of service tax was under a different category whereas a different category of service has been provided cannot be held to be justifiable. Thus, it can be seen that the only difference is that in the present case the cenvat credit was denied on the same ground on which the service tax was demanded in the above case. The dispute was same that the service falls under Sponsorship Service however, the tribunal in the case of COCA COLA INDIA PVT. LTD. held that at the recipient s end the classification cannot be changed - since the classification of service cannot be challenged at the recipient s end, the cenvat credit availed by them cannot be disputed. Appeal allowed.

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• 2023 (2) TMI 828
  CENVAT Credit - input services - Management Business Consultant service - Technical Inspection and certification service availed for the purpose of proposed additional Jetty to be constructed adjacent to the existing Jetty - denial of credit on the ground that said services were used in connection with construction of a new Jetty which fall under the setting up of the project which is excluded as per the exclusion clause in the definition of Input Services under Rule 2(l) of Cenvat Credit Rules, 2004. HELD THAT:- From the facts it is undisputed that the appellant already had Jetty in operation and they proposed to construct one more Jetty adjacent to the existing Jetty. In this case it cannot be said that the appellant are setting up altogether a new Jetty. The additional Jetty is nothing but expansion of the existing Jetty. Therefore, the expansion, renovation or modernization of existing jetty, construction is still covered in inclusion clause of definition of Input Service under Rule 2(l) of Cenvat Credit Rules, 2004. Reliance placed in the case of PIRAMAL GLASS LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE ST, VADODARA [ 2019 (10) TMI 1032 - CESTAT AHMEDABAD] where it was held that There is no dispute that the appellant have an existing manufacturing factory wherein many other plants and machinery and two furnace were already setup and with the said existing facility, the appellant are manufacturing excisable goods for last many years. For enhancing their production, the appellant set up a new furnace, it cannot be said that they have setup a new factory. It is merely an expansion of the existing factory and therefore, even if the term setting up of factory is removed from the inclusion clause of definition of input service, it does not adversely affect the appellant to avail Cenvat credit on various services. Thus, a consistent view was taken by this Tribunal that even though setting up of a new factory, construction of building of service provider is not excluded from the definition of Input service. In this case the construction of Jetty is clearly in the nature of expansion of existing Jetty therefore, credit is clearly admissible. Appeal allowed.

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• 2023 (2) TMI 827
  Recovery of Service tax alongwith interest and penalty - telecommunication service - demand dropped on the ground that telecommunication service is taxable only if it is provided to any person who has been granted a Licence under first proviso to section 4(1) of the Indian Telegraph Act, 1885 - HELD THAT:- In the present case the service involved is telecom service, this service is chargeable to service tax only when service is provided by a person who has been granted a Licence under first proviso to section 4(1) of the Indian Telegraph Act, 1885. In the present case admittedly the appellant do not possess the Licence under first proviso to section 4(1) of the Indian Telegraph Act, 1885. Therefore, even though the service is a telecom service but not as per the statutory definition of the telecom service hence the same is not taxable. From the circular under F.No. 137/21/2011 -ST dated 15.07.2011, it is clear that the appellant being not holding Licence under Telegraph Act, 1885 is not liable to pay service tax. The judgments cited by the learned Chartered Accountant also directly on the issue and support the case of the appellant - reliance placed in the case of IDEA CELLULAR LTD. VERSUS COMMISSIONER OF SERVICE TAX MUMBAI IV [ 2021 (9) TMI 452 - CESTAT MUMBAI] where it was held that The appellant, as a licencee of the domestic telecommunication regulatory regime, is not conferred with empowerment to operate in a foreign territory and can neither, conceivably, offer such service independent of the overseas entity nor avail of the equipment of overseas operator for rendering telecommunication service to its subscribers. The activity, therefore, lies outside the ambit of support service of business or commerce which is the taxable service sought to be fastened on the appellant as deemed provider under section 66A of Finance Act, 1944. Consequently, the demand of tax on roaming charges and call termination charges in the impugned order fails. Appeal allowed.

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• 2023 (2) TMI 826
  CENVAT Credit - inputs/input services/capital goods - Cenvat credit availed on goods and services used for setting up of the appellants premises - denial on the ground that the said goods and services were used for construction of immoveable property and not for rendition of the taxable output service - extended period of limitation - HELD THAT:- Rule 3 of the Cenvat Credit Rules, 2004 is the enabling provision, which entitles a service provider to take Cenvat credit of Central Excise duty paid on inputs and capital goods and service tax paid on the input services, used for providing the output service. Insofar as the credit availed on services in relation to setting up of the premises from where the output service are to be rendered is concerned, the adjudicating authority has rightly taken cognizance of the definition of input services in Rule 2(l), prior to its amendment when services inrelation to setting up were specifically covered in the inclusive part of the definition of input service. There cannot be any doubt that services, used in relation to setting up of the premises are also services used for providing output service, as without the premises being set up, the service provider cannot effectively render any taxable output service. Hon ble Bombay High Court in the case of M/S. COCA COLA INDIA PVT. LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE, PUNE-III [ 2009 (8) TMI 50 - BOMBAY HIGH COURT ], has held that credit would be admissible, if the services are covered by any of the limb of the definition of input service. It is an undisputed position that prior to 01.04.2011 services in relation to setting up of the premises were clearly covered in the inclusive part of the definition of input service squarely,which position has been accepted by the adjudicating authority and has not been disputed by the Revenue in their appeal. Cenvat credit disallowed by the adjudicating authority on the ground that services in respect to setting up had been received after 01.04.2011 - HELD THAT:- The assessee-appellant has demonstrated by producing copies of invoices, that none of the services pertaining to setting up were received after 01.04.2011 and that it was merely a case of invoice having been raised after such effective date, in respect of services rendered prior thereto. The assessee-appellant have also demonstrated that some of the services, credit in respect of which have been disallowed on the premise that they were relating to setting up were in fact relating to repairs and maintenance, or activities such as commercial training or coaching, banking andother financial services, etc, credit in respect of which was admissible both under the pre and post amended definition of input service w.e.f. 01.04.2011. The Learned Authorized Representative for Revenue has urged a new contention, which is beyond the scope of the allegation in the notice and the finding in the impugned order, to the effect that even if the services were rendered prior to 01.04.2011, the invoices having been issued post 01.04.2011, applying the provisions contained under the Point of Taxation Rules, the disputed services deemed to be provided after that date - In any case, what is relevant is the completion of the services prior to 01.04.2011, as per the Board Circular No. 943/4/2011-CX dated 29.4.2011, and not the date of deemed provision in terms of the Point of Taxation Rules as has been argued by the Learned AR for the Revenue. CENVAT Credit - inputs/input services - house-keeping - man-power supply - General Insurance - furniture - chemicals for purifying water - electrical items - denial on the ground of nexus - HELD THAT:- All that is required is that the goods and services should be used for providing the output services. On the aspect of nexus, the Hon ble Punjab and Haryana High Court in the case of COMMISSIONER OF SERVICE TAX VERSUS CONVERGYS INDIA PVT. LTD. [ 2010 (8) TMI 47 - PUNJAB AND HARYANA HIGH COURT ] have held that credit would be admissible even if there is peripheral connection between the input/input service and the service being rendered. To the same effect is the clarification issued by the Board under Circular No. 120/01/2010-ST dated 19.01.2010. There being no dispute that the goods and services on which Cenvat Credit has been availed have actually been used for providing the output service, we are of the view that Cenvat credit cannot be denied to the assesse-appellants. Credit availed goods such as concrete block, tiles, glass, furniture, pre-fabricated building under the head of capital goods, prior to 01.04.2011 - HELD THAT:- The Hon ble Gujarat High Court in the case of Mundra Ports SEZ Ltd., [ 2015 (5) TMI 663 - GUJARAT HIGH COURT ] have clearly recorded that credit on such items would be admissible as inputs to a service provider prior to 01.04.2011, as the same are required for setting up of the premises from where the services are being rendered. The High Court has clearly recorded that the bar which was introduced in the definition of inputs by explanation (2) w.e.f. 07.07.2009, would apply only to a manufacturer and not to a service provider. Applying the ratio laid down by the Gujarat High Court, the assessee-appellant is entitled to credit on goods used for setting up their premises prior to 01.04.2011 - As has been fairly admitted by the assessee-appellant, that an amount of Rs.38,39,364/- out of the total amount of credit in dispute of Rs.3,25,73,700/- on capital goods pertaining to goods which have been removed as such. The said amount has rightly been reversed as provided for in Rule 3(5) of the Cenvat Credit Rules and that even though credit of such goods could have been admissible, the goods having been cleared as such, reversal in respect of the same was warranted. Insofar as the balance credit which has been reversed during investigation, appropriate relief in accordance with law would be admissible. Denial of credit for failure to produce original of the duty paying document - HELD THAT:- There being no dispute regarding receipt, consumption and utilization of the goods covered by the said invoices as also there being no dispute on the fact that at the time of receipt credit had been availed only on the strength of the original of the duty paying documents, we are unable to persuade ourselves to uphold the disallowance of Cenvat credit on this count. Extended period of limitation - HELD THAT:- The extended period of limitation is not invokable in the facts and in the circumstances of the present case, as the issue relating to credit on goods and services used for setting up the premises, even if assumed to be contentious, is a issue on interpretation where the courts have ultimately held in favour of the assessee. Insofar as the other credits are concerned, also the aspect of direct nexus or even a peripheral nexus is an issue of interpretation and consequently the extended period cannot be invoked. The appeal filed by the assessee-appellant is allowed, except in respect of the amount of Rs.38,39,364/- which has been rightly reversed on clearance of the goods as such. The appeal filed by the Revenue is dismissed.

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• Central Excise

• 2023 (2) TMI 825
  100% EOU - power of review own order - Power of Development Commissioner - grant of DTA sale permission - grant on the basis of clubbed value of physical exports and deemed exports - availment of concessional rate of excise duty under Section 3(1) of the Central Excise Act, 1944 as prescribed under Notification Nos. 8/97-C.E. and 2/95-C.E. - HELD THAT:- The term FOB value of exports has also been used in the application format whereby deemed exports had been considered at par with physical exports. As a consequence, the respondent submitted deemed export data at the time of applying for DTA sale. Although the appellants have contended that this requirement was only for the purpose of calculation of NFEP achievement, it appears that there was no explicit distinction between deemed exports and physical exports during the application process. In view of the above position of law emanating from Para 9.9(b) of the EXIM Policy as stood at the relevant time and the decision of this Court in Virlon Textile [ 2007 (4) TMI 6 - SUPREME COURT] , the very basis of the show cause notice issued in this matter to the respondent seeking to question the permission granted after about 10 years when it had already been operated and executed, cannot be countenanced. For this reason alone, this appeal is required to be dismissed. Power to Review - HELD THAT:- The High Court has, of course, essentially set aside the order impugned as passed by the Development Commissioner for want of power of review while relying on its own decision in the case of Hanil Era [ 2011 (2) TMI 1467 - BOMBAY HIGH COURT ], wherein it was held that without the statute having conferred any such power, the order earlier passed could not have been reviewed. However, it is noticed that the said decision of the High Court was examined by this Court in the judgment [ 2013 (10) TMI 1467 - SUPREME COURT ], wherein, while leaving aside the question of power of review, this Court permitted the Ministry of Commerce and Industry to issue appropriate show cause notice. In the present case, when the orders impugned are not being sustained on merits, we would leave this question open to be examined in an appropriate case. Appeal dismissed.

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• Indian Laws

• 2023 (2) TMI 824
  Dishonour of Cheque - complaint not filed in the name of the power of attorney holder (but filed in the name of the company through its authorised representative) - entitlement to power of attorney holder to depose further delegate / appoint special counsel - HELD THAT:- A bare perusal of the complaint filed by the appellant-company reveals that it has been filed in the name of the company through its authorised representative, Ripanjit Singh Kohli. Therefore, the complaint is by the appellant company in its own name. It has not been filed in the name of the power of attorney holder. The complainant, that is the appellant company is entitled to file the complaint in its own name through its power of attorney holder. There is a general power of attorney of the appellant company in favour of one of its directors, Kavindersingh Anand. The said power of attorney was executed after it was duly approved by the board of directors in its meeting dated 01.05.2010. Therefore, one of the directors of the appellant-company, i.e. Kavindersingh Anand is holding power of attorney of the appellant-company and is the true and lawful attorney of the same - the said power of attorney explicitly authorises him to appoint counsel or special attorneys for conducting all cases or otherwise to do all other acts and things for due prosecution or defence of legal or quasi legal proceedings anywhere in the world. The law is settled that though the general power of attorney holder cannot delegate his powers to another person but the same can be delegated when there is a specific clause permitting sub-delegation. A careful reading of the general power of attorney would reveal that the appellant-company in its meeting of the board of directors held on 1st May, 2010 has resolved to appoint one of its directors Kavindersingh Anand as its attorney of the company who was specifically authorised vide paragraph 2 to appoint counsels or special attorney(s) - a combined reading of paragraph 2 and paragraph 16 of the power of attorney would bring home the fact that the power of attorney holder was authorised to appoint special attorney other than the counsel for the purposes for conducting and prosecution of cases on behalf of the appellant-company. This apart, the power of attorney holder was appointed under the resolution of the board of directors of the appellant company and the draft of the power of attorney was duly approved by the board. The said power of attorney as discussed above do provide for the sub-delegation of the functions of the general power of attorney holder and thus the filing of the complaint on behalf of the appellant company through its authorised representative Ripanjit Singh Kohli is not at all illegal or bad in law. Whether Kavindersingh Anand could depose on behalf of the appellant company, it has to be noted that he was one of the directors of the company who has been specifically authorised to lodge the complaint and to pursue it? - HELD THAT:- It has come on record that he has filed his personal affidavit dated 26.03.2018 stating that he is general power of attorney holder of the appellant company and that since he is also a director, he is fully conversant with the facts of the case and hence is competent to pursue the litigation on behalf of the appellant company. The High Court has very conveniently ignored the said affidavit and for the reason that as such an averment is not contained in the complaint, held that he was not authorised to depose on behalf of the appellant company. The High Court manifestly erred in recording the above opinion when the affidavit of the power of attorney holder was on record containing that he has personal knowledge of the transactions - as the power of attorney holder is said to be having due knowledge about the transactions, he has the capacity to depose and the trial court or the Revisional Court committed no error of law in rejecting the applications of the respondent. The High Court erred in interfering with the orders of the trial court in passing the impugned order dated 04.04.2019 - Appeal allowed.

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• 2023 (2) TMI 823
  Dishonour of Cheque - direction to pay interim compensation under Section 143-A of Negotiable Instruments Act - petitioner has not been given any opportunity before passing the impugned order - principles of natural justice - HELD THAT:- The Hon ble Supreme Court in SURINDER SINGH DESWAL @ COL. S.S. DESWAL AND OTHERS VERSUS VIRENDER GANDHI [ 2019 (5) TMI 1626 - SUPREME COURT ] has settled the proposition of law that the provisions of Section 143-A of Negotiable Instruments Act are prospective in nature. So far as Section 148 of Negotiable Instruments Act, the same are retrospective in nature. There is no dispute that the complaint in question has been filed after the amendment which came into effect w.e.f. 1.9.2018. Accordingly, the provisions of Section 143-A of Negotiable Instruments Act are very much applicable in the present case. A perusal of the impugned order would show that the learned Trial Court after filing of complaint issued notice to the accused petitioner and heard both the sides. The contents of notice were also read over to the accused-petitioner in simple Punjabi language to which he pleaded not guilty and claimed trial. The provisions of Section 143-A of Negotiable Instruments Act provide discretion to the Trial Court for granting interim compensation to the complainant in order to meet the objects and reasons behind the amendment. The Trial Court is to exercise its discretion keeping in view the facts and circumstances of every case. From the reading of the case in hand, the Trial Court found the case appropriate wherein cheque of Rs.10 lakh was issued by the accused petitioner to the complainant, however, the same was dishonored on its presentation. The Act provides the discretion to the court for granting interim compensation not exceeding 20% of the cheque amount. In the present case, learned Trial Court has not exceeded the upper limit of 20%. In all its humility there is no dispute regarding the judgements relied upon by learned counsel for the petitioners, however, the same are distinguishable on the facts of the present case. Petition dismissed.

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• 2023 (2) TMI 822
  Dishonour of cheque - absence of any documents of the postal authorities, showing service of demand notice upon the petitioner - principles of natural justice - HELD THAT:- There is sufficient evidence to show that the cheque was duly issued and after completion of all formalities the proceedings under section 138 NI act was initiated. The learned Magistrate on considering the evidence before the court and materials on record, convicted the petitioner/accused. The session Judge after considering the materials on record, modified the judgment and order of the Magistrate and set aside the substantive part of imprisonment keeping the order to pay compensation intact. Sec 138 N.I Act provides for punishment of imprisonment for a term which may be extended to two years or with fine which may extend to twice the amounts of the cheque or with both. The cheque dated 31.10.2009 amount was for an amount Rupees 8,50,000/- and the compensation imposed is RS 12,50,000/- - Fourteen long years have passed - The learned Sessions Judge has also set aside the substantive sentence of imprisonment. In spite of the said circumstances the petitioner has still not paid the balance amount of Rs. 4 lakhs (compensation). The petitioner is to pay the balance amount (compensation) within two months from the date this order, failing which the petitioner will undergo the sentence in default of payment of compensation - Application dismissed.

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