TMI Tax Updates - e-Newsletter
February 7, 2023

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. No GST on charges collected from employees for canteen services provided.

   By: Rajeev Jain

2. ECONOMIC SURVEY 2023-24: SALIENT FEATURES

   By: Dr. Sanjiv Agarwal

3. WHETHER MSMED ACT OVERRIDES SARFAESI ACT?

   By: DR.MARIAPPAN GOVINDARAJAN

4. Supply by Project Implementing Agency to the State Govt. Department is required to issue tax invoice on the contract value

   By: Bimal jain

5. Opportunity of hearing to be provided before passing of any order by the GST Authority

   By: Bimal jain

6. No Service Tax on health care services provided by the clinical establishments by engaging consultant doctors

   By: Bimal jain

News

1. Minister of State for Commerce and Industry, Shri Som Parkash reviews progress of PM GatiShakti

2. Crypto Assets are borderless, require international collaboration to prevent regulatory arbitrage

3. Central Bank Digital Currency (CBDC): e₹-R is in the form of a digital token that represents legal tender

4. For individual taxpayers between the age of 18 to 35 years, 2,09,06,829 ITRs filed, and Rs 93,318 crore paid in gross taxes, before claim of refund, during FY 2022-23 till 31st January 2023

5. Government provides a big relief to MSMEs for COVID-19 period; fulfils promise announced in Union Budget 2023-24

Circulars / Instructions / Orders

Central Excise

1. CBIC-6/1/2021-CX-VI Section-CBEC - dated 6-2-2023

Performance Audit Report No. 14 of 2022 “Sabka Vishwas (Legacy Dispute Resolution) Scheme (SVLDRS) 2019” of C&AG of India (Indirect Taxes- GST, Central Excise & Service Tax)

Highlights / Catch Notes

Income Tax

• Income Tax Rate for Firms and Partnerships Unchanged for Fiscal Year 2023-24, Same as 2022-23 Rate.

  Notes : Firms – Rate of Income Tax on Firms / Partnership Firm will continue to be the same as that specified for FY 2022-23
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• Local Authority Income Tax Rate Unchanged for 2023-24, Same as 2022-23 Fiscal Year Rate.

  Notes : Local authorities - Rate of Income Tax will continue to be the same as that specified for the FY 2022-23.
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• Income and corporate tax rates unchanged; no marginal relief for Health & Education Cess. Surcharge varies for online gaming under 115BBJ.

  Notes : Companies – Rate of Income Tax / Corporate Tax & surcharge shall be the same as for FY 2022-23. Amendment has been with regard to marginal relief, where such marginal relief id due to HEC shall not be available. And Surcharge rate on taxpayer u/s 115BBJ in case of online gaming shall be depends on the status of such taxpayer.
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• Section 276A Decriminalized: IBC Takes Charge in Company Liquidation, No New Prosecutions After April 1, 2023.

  Notes : Decriminalisation of section 276A of the Act - In case of liquidation of companies now provisions of IBC are in operation - the liquidator is now working under the oversight of this specific law - it is proposed that no fresh prosecution shall be launched under this section on or after 1st April, 2023. The earlier prosecutions will however continue.
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• SUUTI Exemption Extended; New Mechanism for Administrator's Office Vacation Announced; Tax Exemption Until September 30, 2023.

  Notes : Extension of exemption to Specified Undertaking of Unit Trust of India (SUUTI) and providing for alternative mechanism for vacation of office of the Administrator. - Amendment has been made where administrator, SUUTI shall immediately on redemption of all the schemes of the specified undertaking and the payment of entire amount to investors or from the date as may be notified by the Central Government in the Official Gazette, whichever is earlier, vacate his office. Also, Administrator is not required to pay any tax in relation to specified unit till period ending 30.09.2023.
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• Amendments Remove Redundant Provisions from Act, Streamlining Legal Framework by Eliminating Irrelevant Sections.

  Notes : Omission of certain redundant provisions of the Act - Certain sections which were already become redundant earlier, amendment now has been made to remove those irrelevant sections.
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• Proposed Changes to Income Tax Act: Set-Off Refunds Against Tax Liabilities, No Extra Interest on Withheld Refunds.

  Notes : Set off and withholding of refunds in certain cases - It has been proposed to amend section 245 & 241A by integrating to set off refunds against tax remaining payable. Also, where proceedings of assessment or reassessment are pending additional interest shall not be payable on amount of refund withheld for that purpose during assessment proceeding periods.
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• Section 80G: Three Funds Lose Eligibility for Tax Deductions Starting April 2024, Affecting 50% or 100% Allowances.

  Notes : Removal of certain funds from section 80G - There were 3 funds based on the name of person which has been removed now for allowance of 50%/100% of deduction u/s 50G w.e.f. 01.04.2024.
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• Exemption Denied for Late Income Return Filing by Educational or Medical Institutions u/s 139 Proviso.

  Notes : Denial of exemption where return of income is not furnished within time - The fund or institution or trust or any university or other educational institution or any hospital or other medical institution shall has to furnish in accordance within the time specified in proviso to section 139 for the previous year.
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• Trusts under regimes must file Form 10A or 9A two months before ROI deadline, aligning with tax audit timing.

  Notes : Alignment of the time limit for furnishing the form for accumulation of income and tax audit report - Trust or institution under the first regime or second regime has to furnish Form 10A/9A as the case may be 2 months prior to due date of filing ROI.
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• Trusts Must Re-register u/s 115TD to Avoid Losing Tax Exemptions and Paying Maximum Marginal Rate on Accreted Income.

  Notes : Trusts or institutions not filing the application in certain cases - Trust or institutions under first or second regime shall have to apply for re-registration in case of failure such trust or institutions will become ineligible for any exemption thereunder and therefor they have to pay tax on accreted income on MMR basis u/s 115TD. Provisions of section 115TD has been amended as to provide for certain conditions for application for re-registration.
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• Charitable Trusts Rule: Redeposit of Corpus Funds After 5 Years Won't Qualify as Income Application.

  Notes : Rationalisation of the provisions of Charitable Trust and Institutions - Application of corpus fund or loans or borrowings shall not allowed as application if it is deposited back or invested into corpus fund in more than 5 years
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• Section 153: Extension of Limitation Period in Search Cases Allows AO Extra 12 Months for Assessment Completion.

  Notes : Period of limitation u/s 153 - Assessment in search cases - To allow the AO to conduct proper scrutiny and consider or align all relevant information gathered in case of search u/s 132 - where an assessment or reassessment is pending on the date of initiation of search under section 132 or making of requisition under section 132A, the period available for completion of assessment or reassessment, as the case may be, shall be extended by twelve months
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• Tax Assessment Timeline Revised: Section 153 Now Includes PCCIT/CCIT Orders u/ss 263 or 264 for Limitations.

  Notes : Period of limitations u/s 153 - To include order of PCCIT/ CCIT u/s 263 or 264 for revision order which were not available earlier.
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• Income Tax Assessment Period Extended to 12 Months for Better Coordination and Ample Taxpayer Response Time.

  Notes : Period of limitations u/s 153 - Extend of time period for completion of assessment u/s 143 or 144 from 9 months to 12 month for the alignment & co-ordination with various authorities Assessment Unit, Verification Unit, Technical Unit and Review Unit for revenue as well as proper time for taxpayers to provide evidences.
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• Aggrieved parties can now appeal Adjudicating Authority orders under Benami Act within 45 days; special rules for non-residents.

  Notes : Rationalization of the provisions of the Prohibition of Benami Property Transactions Act, 1988 (the PBPT Act) - Any person including initiating officer aggrieved by the order of Adjudicating Authority(AA) may file appeal against AA order within 45 days - Further any Non-Resident person not having any personal or business place in jurisdiction of any high court shall file appeal in the jurisdiction of initiating officer.
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• Proposal to Amend Section 170A: Successors Must File Modified Returns Within Six Months Post-Reorganization Order.

  Notes : Assessment after re-organization of Business - amalgamation or demerger or merger - To remove the difficulty of filling of return by successor it has been proposed to substitute sec 170A, to provide that notwithstanding anything contained in section 139, in a case of business re-organization, where prior to the date of order of the tribunal or the High Court or Adjudicating Authority as defined in clause (1) of section 5 of the Insolvency and Bankruptcy Code, 2016, Successor shall furnish modified return within 6 months & AO will in case of assessment or reassessment consider the modified return as valid return for that purpose.-
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• Time Limit for Amending Orders u/s 245D(6B) Extended to September 30, 2023, Retroactive from February 2021.

  Notes : Extension of time for disposing pending rectification applications by Interim Board for Settlement - It is proposed to substitute Section 245(9)(iv) so as to provide that where the time-limit for amending any order or filing of rectification application under section 245D(6B) expires on or after the 1st February, 2021, but before the 1st February, 2022, such time-limit shall be extended to 30th September, 2023. This amendment will take effect retrospectively from 1st February, 2021.
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• IBM Philippines Not Liable for TDS on Payroll Services Under Sec. 195; No Permanent Establishment in India.

  Case-Laws - HC : TDS u/s 195 - assessee in default - payroll services rendered by IBM Philippines to the assessee - as per Article 7(1) of Indian Philippines DTAA, the business profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. Admittedly, there is no permanent establishment of IBM Philippines in India. - the payments received by IBM Philippines shall not be liable for TDS under Section 195 of the IT Act. Therefore, assessee cannot be deemed as an 'assessee in default'. - HC
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• Court Rules Reopening Assessment u/s 147 for Pension Policy Surrender Impermissible; Petitioner Wrongly Taxed for Third Party's Gains.

  Case-Laws - HC : Reopening of assessment u/s 147 - Reasons to believe - surrender of the pension policy - The policy in question was assigned to third party and said assignee had received the surrender value. The petitioner was sought to be taxed by way of reopening, the amount, which was as such received by third party. This was clearly not permissible in law - the petition of the petitioner is entitled to succeed. - HC
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• Court Reviews Advance Amount Discrepancy in Property Deal u/s 56(2)(ix); Matter Sent for Verification.

  Case-Laws - AT : Addition u/s 56(2)(ix) - Receipt of advances against the property - In factual matrix, the advance amount was never be forfeited or adjusted in the capital account of the assessee. There is clear contradiction in recorded statement and books of accounts of assessee related adjustment advance amount. But only point is being unanswered by the rival parties whether these two amounts are reflected in the books of accounts of respective parties. - Matter restored back for verification - AT
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• Delay in State Certificate Issuance Quashes Section 263 Revision; Appellate Authority Cannot Extend Limitation Period.

  Case-Laws - AT : Revision u/s 263 - order passed on a deceased assessee - intimation about Death of assessee - There has been delay at the level of State Government in issuing necessary certificate. Fault cannot be placed on the Revenue or the assessee. - An appellate authority does not have the authority to extend the limitation. - Revision order quashed - AT
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• Tax Deducted at Source Dispute Over Co-Location Services as 'Royalty' u/s 9(1)(vi) of Income Tax Act.

  Case-Laws - AT : TDS u/s 195 - Royalty and FTS payment for non deduction of TDS - Co-location services and connectivity services provided for the process of connecting by the assessee with the various customers towards making voice and data connectivity - the consideration being for the use and the right to use of the process, it is 'royalty' within the meaning of Clause (iii) of Explanation 2 to Section 9(1)(vi) of the Income Tax Act - AT
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• Assessee Loses Tax Benefits for Not Submitting Audit Report u/s 63 of Karnataka Co-operative Society Act.

  Case-Laws - AT : Deduction u/s 80P - Failure to file Tax Audit Report - assessee did not submit the audit report as per section 63 of the Karnataka State Co-operative Society Act, 1959 - The omission or wrong statement has not been defined in the Income Tax Act. The assessee was well aware about the business carried on by it and is also aware about the filing of return of income and he has made provision for income tax in its books for preceding assessment years. The assessee will not get the benefit of extended due date for filling return of income as notified - AT
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• Taxpayer Avoids Penalty for Late Tax Audit Filing: Business Halt and Auctioned Properties Accepted as Reasonable Cause.

  Case-Laws - AT : Penalty levied u/s 271B - assessee has filed the tax audit report belatedly - business of the assessee was totally came to a standstill and matters went to a very critical level that her properties were put for auction by the bankers - Since the assessee was prevented by reasonable cause for not getting her books of accounts audited in time as required under the provisions of section 44AB of the Act, but filed the tax audit report before completion of the assessment, No penalty - AT
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• Appellate authority confirms "Limited Scrutiny" cases include verifying both income and expenses for thorough assessment.

  Case-Laws - AT : Scope of the limited Scrutiny assessment - CIT(A) had rightly held that when the case was taken up for scrutiny under “Limited Scrutiny” for the purpose of verification of low income, verification of expenses also falls within its sweep. - AT
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• Unexplained Cash Credits Under Income Tax Act Section 68: Assessee Fails to Prove Source of Share Application Money.

  Case-Laws - AT : Unexplained cash credit u/s 68 - hare capital against the said share application money was allowed in the earlier years - since the alleged sum was received during the year, AO was justified in asking the assessee to explain the source of said sum and since the assessee failed to file any documentary evidences and discharge the primary onus casted upon it and could not explain the source of said sum, provisions of Section 68 of the Act are attracted. - AT
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Customs

• Petitioner's Duty Drawback Claim Rejection Overturned Due to Lack of Justification for Dismissing Late Filing Reasons.

  Case-Laws - HC : Duty drawback - rejection of on the ground of delay in filing the claim - When the petitioner has given detailed reasons as to why they were unable to file the duty drawback claim within the prescribed time, the first respondent ought to have considered the said reasons objectively, but as seen from the impugned orders, no reasons have been given for rejecting the petitioner’s reasons for non filing of the duty drawback claim on time - - HC
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• Customs Broker License Revocation Challenged Due to Vague Evidence in Show Cause Notice Lacking Specific Exporter Details.

  Case-Laws - AT : Revocation of customs Broker License - The evidence available on record in the form of verification reports relied upon in the SCN are vague and in some cases, even the name of the exporter who they were enquiring about is not indicated in them - The reports state either NOC denied which is not required by any Customs Broker or exporter or that the exporters did not exist at the time of verification which does not prove that they did not exist at the time of verification - AT
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• Exemption Notification's Effective Date Set as March 6, 2018, Following Digital Signature and Publication Timing.

  Case-Laws - AT : Effective date of amendment of notification - In the present case the notification dated 01.03.2018 was digitally signed on 06.03.2018 at 17:15 hours and before that it could not have been uploaded for publication. Thus, the exemption notification would come into force only on 06.03.2018. - AT
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Central Excise

• Separating Plastic Scrap Not Manufacturing, No Excise Duty Imposed, Says Court Under Relevant Circular.

  Case-Laws - AT : Process amounting to manufacture or not - plastic scrap - the respondent is neither manufacturing nor is it producing the plastic scrap. The plastic scrap already exists and the respondent is only separating it manually from the rest of the scrap. Therefore, even if this circular is considered, no central excise duty can be charged. - AT
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VAT

• Property Bought at Bank Auction under SARFAESI Act is Free from Seller's Tax Liabilities, Court Rules.

  Case-Laws - HC : Recovery of tax dues - Right of auction purchaser of the property - Since the petitioner had purchased in the auction sale conducted by the bank under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 the property travelled in favor of the petitioner free from any encumbrances, order of sales tax officer registering the charge over the property in relation to the sales tax and Value Added Tax payable by original owner of the property had no efficacy in law. - HC
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Case Laws:

• GST

• 2023 (2) TMI 179
  Seeking direction of the respondent to release the refund of IGST amounting to Rs.14,80,27,927.67/-, which is allegedly withheld illegally - HELD THAT:- The petitioner purchased the goods from Sayan Greemochem Private Limited who had purchased goods from Prince Chemicals, who is placed in the list of L2 risky supplier and therefore the IGST refund of the petitioner was withheld on the ground of availing of wrong ITC by the petitioner. It is, however, found from the record that the petitioner has reversed the Input Tax Credit of Rs.11,55,726/- along with penalty and interest towards the said goods purchased. In this case, the petitioner has filed shipping bills for all the exports and the petitioner is not prosecuted for any offence under the Act or under the existing law and has also reversed the ITC, therefore, there is no point for the respondents herein to withheld the refund. In the case of BHAGYANAGAR COPPER PRIVATE LIMITED VERSUS THE CENTRAL BOARD OF INDIRECT TAX AND CUSTOMS AND 5 OTHERS [ 2021 (11) TMI 152 - TELANGANA HIGH COURT] , it was held that If the suppliers of the petitioner are found to be genuine, the petitioner is entitled to claim credit of the taxes paid on such purchases effected. The respondents-authorities are directed to grant the amount of IGST refund to the petitioner, as claimed by the petitioner as provided under Section 54(6) of the CGST Act r/w Rule 91 of the CGST Rules and credit such amount to the petitioner s account within a period of three weeks from the date of receipt of copy of this order. Petition allowed in part.

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• 2023 (2) TMI 178
  Jurisdiction - power of DGGI to issue SCN - Transition to GST regime - Exemption Notification 25/2012 dated 20.06.2012 - case of petitioner is that the Notifications under which the officials of the DGGI have assumed jurisdiction have not been expressly saved under Section 174(2) of the CGST Act and hence the impugned orders/notice are non-est in law. Whether, the Notifications under which the DGGI/officials of the Intelligence Department have drawn sustenance to issue show cause notices for assessment under the Finance Act 1994, survive the transition from the erstwhile regime of taxation (Service tax) to the new regime of Goods and Service tax (GST), effective from 01.07.2017? - whether the assumption of jurisdiction by the DGGI for issuance of show cause notice under Finance Act 1994 read with Section 174(2) of the CGST Act, is proper in law? HELD THAT:- In the case of Sheen Golden Jewels (I) P. Ltd. [[ 2019 (2) TMI 300 - KERALA HIGH COURT] ] and Prosper Jewel Arcade LLP [[ 2018 (10) TMI 1527 - KARNATAKA HIGH COURT] ], the Kerala and Karnataka High Courts held adverse to those petitioners rejecting their arguments that with the shift to the GST regime, all levies under the erstwhile service law regime had lapsed. The conclusion arrived at was that Section 174 of the respective State GST enactments saved all the rights, obligations or liabilities acquired, accrued or incurred under the repealed enactments which included Service Tax Act as well - To be noted that neither of the aforesaid decisions had dealt with the specific question/issue raised in these matters as to whether the Notifications issued under the Service tax regime, survived the transition to the GST regime. In any event, though a lukewarm ground has been raised to this effect, it is admittedly not the case of the petitioners before me that the levy of service tax in itself erroneous post 01.07.2017, but only that the assumption of jurisdiction by the DGGI in issuing show cause notices, is. Had the notices been issued by the correct officer, the petitioner are unanimous in stating that the present challenge would be a non-starter. Section 174, according to the Bench, thus unequivocally saved all rights, obligations, privileges and liabilities that had enured under the old laws which would continue in the new regime. In Canon India [ [ 2021 (3) TMI 384 - SUPREME COURT] ] , the issue that arose was whether an officer of the Directorate of Revenue Intelligence (DRI) had the authority in law to issue a show cause notice under Section 28(4) of the Customs Act, 1962 when the goods were initially cleared for import by a Deputy Commissioner of Customs who was of the opinion that the said goods were exempted from duty. It was held that the officer of the DRI would not be a proper officer to review the original order of exemption granted by the Deputy Commissioner as the enactment did not provide for identically placed officers of different Departments exercising the powers of re-assessment or review in regard to each other s orders - That apart, they also held that the Additional Director General of the DRI who had issued the recovery notice was not the proper officer, by a combined reading of the definitions of proper officer under Sections 2(34), 6 and 28 of the Customs Act. The ratio of this judgment, although rendered in a different context, may well support the revenue rather than the petitioners. The expansive constitution of Section 88 of the Tamil Nadu Value Added Tax Act that specifically includes subordinate legislation has been cited by the petitioners as a counter to the move restricted construction of Section 174. Notwithstanding this difference, it is reiterated that in interpreting the reach of Section 174, this Court does not wish to loose sight of the necessity to ensure a seamless application of the levy following the consistent procedure followed under the old and new enactments - Section 174(2) states that repeal as per subsection (1) shall not affect any rights, privileges or obligations or liability acquired, accrued or incurred under the old Act and the proviso carves out an exception in regard to tax exemption granted as an investment against investment through Notification . In such cases, such exemptions shall continue until rescinded. What I gather by implication, is that Notifications in other situations continue. The assumption of jurisdiction by the officials of the DGGI is valid. These writ petitions are dismissed.

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• 2023 (2) TMI 177
  Recovery of IGST with interest and penalty - Import of major input (vegetable oils) from overseas involving payment of ocean freight - HELD THAT:- The Hon ble Supreme Court has now rendered the decision in case of UNION OF INDIA AND ANR. VERSUS M/S MOHIT MINERALS PVT. LTD. THROUGH DIRECTOR [ 2021 (1) TMI 647 - SC ORDER] and upheld the judgment of the Gujarat High Court in MOHIT MINERALS PVT LTD VERSUS UNION OF INDIA 1 OTHER [ 2020 (1) TMI 974 - GUJARAT HIGH COURT] where it was held that the legal competency or otherwise, as contended by the Petitioner, for levy of tax on the said subject matter in terms of IGST Notification No 8/2017 dated 28.06.2017 and Notification No.10/2017 as amended has not attained finality. Since the matter is still subjudiced, the Petitioners contention that the demand is unsustainable is pre-emptive and not legally correct. There is no purpose in the case, either for the Petitioner or the Commissioner to invest their time and energy on the issue, if the position on which the show cause notice is founded, already stands concluded in the light of the decision of the Hon ble Supreme Court. Petition allowed.

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• Income Tax

• 2023 (2) TMI 176
  Revision u/s 264 - denial of benefit to the petitioner u/s 89 - HELD THAT:- It is true that the revision application filed by the petitioner against the assessment order was rejected by the 1st respondent both on the point of delay as well as on merit but the fact remains that the core issue raised by the petitioner is now well settled and accepted by the Department itself. Submission of Mr. Prasad that the assessment order has become final cannot be accepted in as much as on filing of the writ petition and admission thereof, the assessment order became subject to outcome of the writ petition. In view of the decision of the CBDT as well as of this Court in M.V. Chinna Rao [ 2006 (10) TMI 519 - TELANGANA HIGH COURT] we have no hesitation in holding that petitioner is also entitled to the benefit of Section 89 - Consequently, the orde passed by the 1st respondent as well as the assessment order passed by the 2nd respondent to the extent of denial of benefit to the petitioner under Section 89 of the Act are hereby set aside and quashed.

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• 2023 (2) TMI 175
  Capital gain - consideration received towards sale of shares - transfer of capital asset - Relevant assessment year - transfer governed by Section 108 of Companies Act, 1956 - HELD THAT:- As settled that transfer of shares shall take place only after registration by the Registrars of the Company - Mannalal Khetan v. Kedar Nath Khetan [ 1976 (11) TMI 135 - SUPREME COURT] and LIC v. Escorts Ltd. [ 1985 (12) TMI 289 - SUPREME COURT] It is not in dispute that assessees have received Rs.35 Crores as advance sale consideration towards sale of their shares. It is also not in dispute that the Company had written to the KIADB and the KIADB had permitted transfer of shares. The principal argument advanced on behalf of the Revenue is, as back as on July 29, 2009, Shri. G. Somashekar Reddy has executed a Lease Deed in favour of M/s. KPIT Cummins and thus, he was functioning as the owner of the Company. Though this argument is attractive, it is relevant to note that transfer of shares shall happen only in accordance with Section 108 of Companies Act. So far as the lease agreement in favour of KPIT Cummins, we may record that the lessor is the Company namely M/s. Shailendra Techno Park Pvt. Ltd., and Shri. G. Somashekara Reddy is only described as a Director of the said Company. In view of the settled position of law and the factual matrix of the case recorded by the ITAT that Share Certificates were not delivered during the previous year of relevant assessment year, no exception can be taken to the ITAT s view. Revenue appeal fail.

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• 2023 (2) TMI 174
  TDS u/s 195 - assessee in default - payroll services rendered by IBM Philippines to the assessee - As held by tribunal it is not Technical Services but constitute business profits and hence Section 195 is not attracted - HELD THAT:- It is not in dispute that under the companion agreement, IBM India Pvt. Ltd., has entered into an agreement with P G India. The said work has been outsourced to IBM Philippines. IBM Philippines is carrying out the work described in the agreement between IBM India and P G India. Hence, IBM Philippines was not rendering any technical service and therefore, the income in the hands of IBM Philippines is a business income. Whether ITAT was right in holding that DTAA does not define FTS? - Revenue has taken a specific contention that FTS was absent under the India-Philippines Treaty. Further, it is also not in dispute that under the agreement, IBM Philippines was rendering service in the field of payroll, data management etc., in connection with the work/assignment described in the agreement between IBM India and P G India. ITAT has, in our considered view rightly recorded that as per Article 7(1) of Indian Philippines DTAA, the business profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. Admittedly, there is no permanent establishment of IBM Philippines in India. As per Article 23 of DTAA, the business profit of IBM Philippines shall be taxable in that State only. Further, the CIT(A) has also held that the transactions between the assessee and IBM Philippines were in the course of its business and the same has not been disputed by the Revenue. Hence, the payments received by IBM Philippines shall not be liable for TDS under Section 195 of the IT Act. Therefore, assessee cannot be deemed as an assessee in default . - Decided in favour of assessee.

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• 2023 (2) TMI 173
  Reopening of assessment u/s 147 - Reasons to believe - amount received upon surrender of the pension policy was taxable as income in the hands of the petitioner in view of the provisions of Section 80CCC(2) - HELD THAT:- A plain reading of sub-section (2) of section 80CCC of the Act shows that in case wherein the assessee has claimed deduction under sub-section (1) in respect of payment or deposit in relation to pension policy and subsequently, the assignee received such sum on account of surrender of such policy, in such case, the surrender value would be taxable. In the facts of the present case however, the petitioner had neither claimed any deduction under sub-section (1) of Section 80CCC, nor it is the case of the respondent authority that the petitioner claimed such deduction, even in any of the earlier years to make the surrender value taxable. Neither on facts nor in eye of law, the respondent authority could establish that there was any escapement of income chargeable to tax in the hands of the petitioner on account of the transaction of surrendering of policy in question. As stated above, the policy in question was assigned to third party and said assignee had received the surrender value. The petitioner was sought to be taxed by way of reopening, the amount, which was as such received by third party. This was clearly not permissible in law and there existed no ground to reopen assessment under section 147 of the Act. The satisfaction of the AO that he had reason to believe that the income in the hands of the petitioner-assessee had escaped assessment, was without any foundation in law. By virtue of provisions of Section 80CCC (1) read with 80CCC(2), the petitioner had never claimed any deduction in respect of amount of pension policy to render the pension policy to attract liability of taxability. Reasons and discussions, the petition of the petitioner is entitled to succeed.

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• 2023 (2) TMI 172
  Addition u/s 69 - unexplained jewellery - declaration by the assessee s husband in the statement recorded at the time of search of offering a sum as undisclosed income on account of investment in jewellery, there was no declaration in the return of income filed in response to the notice issued under section 153C - HELD THAT:- The standard of proof required cannot be equal to proof on preponderance of probability as is required in judicial proceedings. Search was conducted in the case of the assessee s husband. In the statement recorded u/s 132(4) of the Act, the husband of the assessee admitted that the jewellery belonged to him and the assessee and some of the jewellery was received by the assessee during her marriage and the rest was purchased over a period of several years. The admission of the assessee s husband in a statement u/s 132(4) of declaring undisclosed income cannot bind the assessee. Therefore, the case has to be decided on the basis that there was no admission of undisclosed income whatsoever. The evidence with regard to bills in respect of gold and diamond jewellery as on 03.08.2009 of a value of Rs.11,88,206/- was also filed by the assessee. It is also seen that the assessee has given details of the income declared by her over a period of 16 years and the income declared is to the tune of Rs.4.78 Crores. Considering the status of the family and other surrounding circumstances including the statement of evidence given by the assessee, the possession of jewellery worth Rs.28.54 lakhs have to be accepted. Admittedly, the jewellery was purchased in the year 2009 and this evidence has been completely ignored by the Revenue authorities. All the facts cumulatively considered, proves the credit worthiness of the assessee to buy the jewellery out of the taxed incomes. Hence, even by the process of telescoping the income with the source of acquiring jewellery, the explanation of the assessee needs to be accepted. The impugned addition made by the Revenue authorities cannot be sustained. Accordingly, the same is directed to be deleted. - Decided in favour of assessee.

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• 2023 (2) TMI 171
  Revision u/s 263 - Capital gain computation - assessee s share was worked out on the basis of lettable carpet area, while it ought to have been on the basis of total built-up area, valuation ought to have been by the District Valuation Officer (DVO) and not by the Valuation Officer (VO) and assessee s undivided share in land sold was in fact at 23.115 cents out of a total of 30.865 cents - CIT set aside the assessment for consideration of the discrepancies and assessment afresh after referring the valuation to the DVO, and hearing the assessee in the matter/s - HELD THAT:- No overlap between the three areas identified in the impugned order on which the revisionary authority finds the assessment as erroneous and prejudicial to the interests of Revenue, and the grievance/s caused to the assessee thereby, and which is therefore the subject matter of the pending appeal by her before the first appellate authority, and toward which we have perused the Grounds even other than Gd. 4 referred to for the purpose before us. Two, even if there is an overlap, inasmuch as no appellate order stands passed u/s.250 of the Act as on the date the proposal u/s. 263 was communicated to the assessee per email, i.e., 28.6.2001, much less the date of the impugned order (31.3.2022), it is the jurisdiction of the appellate authority that would stand excluded to that extent, and not that of the revisionary authority. This is in view of the words extended to such matters as had not been considered and decided in such appeal occurring in Explanation 1(c), so that, clearly, the jurisdiction u/s. 263 gets excluded on the basis of an event that had occurred as on the date the same is sought to be assumed by the revisionary authority. Further still, the said exclusion is not on a global basis, but issue-wise, i.e., qua the matters on which the appellate jurisdiction of the first appellate authority stands since exercised. And which brings us back to our first point, i.e., of there being in fact no overlap of matters raised per the impugned order and being agitated in appeal. Continuing further, the plea that the assessment may not survive in view of the assessee s Gd. No. 4 contesting also the year for which the capital gains stands to be arise and, thus, assessed, before the first appellate authority, is, again, to no moment. The same relates to the land transferred on 04.8.2008, while the capital gains assessed for the current year is in respect of the rights retained by the assessee on 04.8.2008, and transferred on 15.10.2011. Even if for the sake of argument, the same is regarded as applicable to the assessee s rights in her 9.22% undivided share in land, assessment for the current year would survive no longer, i.e., irrespective of the impugned order, or the assessment made pursuant thereto. The assessee has before us, apart from the general Gd.A, warranting no adjudication, and Gd. B qua Explanation 1(c) to s. 263(1), also raised other Grounds, which are on the merits of the observations made by the ld. Pr. CIT. The same are clearly premature as the revisionary authority has not decided the issue/s raised by him on merits, and it is a case of open set aside by him. In fact, as would be apparent from the foregoing, no arguments qua the same were advanced before us. Assessee s appeal is dismissed.

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• 2023 (2) TMI 170
  Registration u/s 12AB r/w section 80G(5)(iii) - application in Form 10AB was rejected by the learned CIT - HELD THAT:- We find that the CIT in order to verify the genuineness of the activities of the assessee and fulfilment of conditions laid down in section 80G(5) of the Act, issued notice through ITBA portal on 02/08/2022 requesting the assessee to upload certain information/verification. CIT granted another opportunity to the assessee vide notice dated 16/09/2022 to make necessary compliance and furnish the information sought. However, in absence of any submission of the assessee, the learned CIT proceeded to pass the impugned order rejecting the application made by the assessee in Form 10AB. In the interest of natural justice, the assessee should be provided with one more opportunity to present its case before the learned CIT. Accordingly, we set aside the impugned order and direct the learned CIT to de novo consider the application of the assessee trust as per law. As a result, sole ground raised by the assessee is allowed for statistical purposes.

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• 2023 (2) TMI 169
  Registration u/s 12AB r/w section 80G(5)(iii) - application in Form 10AB was rejected by the learned CIT - HELD THAT:- CIT in order to verify the genuineness of the activities of the assessee and fulfilment of conditions laid down in section 80G(5) issued notice through ITBA portal on 30/08/2022 requesting the assessee to upload certain information/verification. CIT granted another opportunity to the assessee vide notice dated 20/10/2022 to make necessary compliance and furnish the information sought. However, in absence of any submission of the assessee, the learned CIT proceeded to pass the impugned order rejecting the application made by the assessee in Form 10AB. In the interest of natural justice, the assessee should be provided with one more opportunity to present its case before the learned CIT. Accordingly, we set aside the impugned order and direct the learned CIT to de novo consider the application of the assessee trust as per law. As a result, sole ground raised by the assessee is allowed for statistical purposes.

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• 2023 (2) TMI 168
  Penalty levied u/s 271C - TDS u/s 194C - non-deduction of TDS on the External Development Charges paid to Haryana Urban Development Authority [HUDA] - HELD THAT:- As decided in SATYA DEVELOPERS PVT. LTD. Case [ 2022 (6) TMI 687 - ITAT DELHI] assessee has not committed any violation of provision of Chapter XVII B of the Act by making payment towards EDC charges to DGTCP Haryana through HUDA without deduction of TDS. Thus we direct the Assessing Officer to delete the penalty levied under section 271C of the Act on the payments made to the authorities of HUDA. Decided in favour of assessee.

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• 2023 (2) TMI 167
  Addition u/s 56(2)(ix) - assessee has taken advance against the procurement of land from party and received advance for sale of property - A statement U/s 132(4) is recorded from the Managing Director of the assessee in which has admitted that both the amounts are forfeited for AY 2018-19 - assessee s plea that both the amounts are never to be realised by assessee and reflected in the balance sheet as non-current liability - HELD THAT:- The managing director of the company had accepted that the advance amount is forfeited by statement before the revenue authorities. The managing director had never retracted the statement made before the revenue authority. AR was unable to show any such documents about the retraction of the managing director before the bench. On other hand, the assessee company is continuing the balance of advance in the balance sheet as liability. Assessee was able to submit these documents as evidence before the bench. In factual matrix, the advance amount was never be forfeited or adjusted in the capital account of the assessee. There is clear contradiction in recorded statement and books of accounts of assessee related adjustment advance amount. But only point is being unanswered by the rival parties whether these two amounts are reflected in the books of accounts of respective parties. The parties, M/s. Sobha Developers Ltd. and M/s. Elyon Developers Pvt. Ltd. are the company. There was no examination of these parties who has paid this amount to the assessee and also there is no verification of the books of accounts of those parties with reference to this amount. In our opinion, it is appropriate to remit the issue in dispute to the file of CIT(A) to carry out necessary enquiry and putting the admission made by assessee Director to the concerned parties to this effect and to reconsider the issue accordingly. The assessee relied on various case laws which are kept on record and those case laws are not applicable to the facts of the present case as there was specific admission by the assessee during the course of recording the statement u/s. 132(4) of the IT Act. Appeal of the assessee is allowed for statistical purposes.

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• 2023 (2) TMI 166
  Estimation of income - Bogus purchases from benami concerns - HELD THAT:- Admittedly assessee in this case has engaged in bogus purchase entries while sales have not been doubted. When sales are not doubted purchases alone cannot be disallowed at 100%. Making purchases through grey market gives the assessee benefits at the expense of exchequer. The assessee is engaged in the business of diamond trading. As per the report of task force of diamond sector constituted by Ministry of Commerce Industry, after considering capital BAP (Benign Assessment Procedure), net profit was prevalent at 1% to 3% in case of trading of diamonds and 1.5% to 4% for those who engaged in manufacturing of diamonds. As per the facts of the present case, it is clear that this is a case of trading in diamonds and sales have not been doubted. AO has made no enquiry whatsoever. The prevalent net profit as noted above was at 1% to 3%. The net profit declared by the assessee as per tax audit report is 1.24% for both the years. Although the net profit declared falls within the range recommended, in our considered opinion, the interest of justice would be served if the rate of net profit is taken at 2% of sales, Hence bringing to tax, difference between 1.24% net profit shown and the 2% net profit recommended by the above Task Force will, in our considered opinion, serve the ends of justice - Appeal of revenue partly allowed.

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• 2023 (2) TMI 165
  Penalty u/s. 271D - failure to comply with the statuary provisions of section 269SS - As argued penalty proceedings has been initiated on wrong person/assessee - HELD THAT:- Property has been purchased in his individual capacity and also sold in his individual capacity. As regards, the claim of the assessee that property was owned by HUF, if you go by date of generating PAN number for HUF, the assessee HUF has generated PAN number on 03.03.2017 much after the date of sale of asset. Further, the appellant has filed return for HUF capacity on 30.03.2018. The documents relied upon by the assessee can only be considered as an afterthought to circumvent penalty proceedings initiated in his individual capacity. Therefore, we reject arguments of assessee that penalty proceedings has been initiated on wrong person/assessee. There is no dispute with regard to the fact that the appellant had received a sum of Rs. 14 lakhs in cash for sale of immovable property. In fact, the relevant data collected from the Registrar Officer clearly reported transactions with specified date and amount and also amount received in cash. In fact, the assessee never disputed fact that sum of Rs. 14 lakhs has been received on sale of immovable property. However, the only argument of the assessee was that out of Rs. 14 lakhs, a sum of Rs. 11,50,000/- has been received on 10.02.2016 and further a sum of Rs. 2,50,000/- has been received on 07.11.2016. We find no merit in arguments of the assessee that a sum of Rs. 11,50,000/- has been received by way of cash on 10.02.2016, because the information collected by the AO clearly indicates that as on the date of sale i.e., 07.11.2016, the assessee has received a sum of Rs. 14 lakhs. Therefore, we are of the considered view that the assessee has received a sum of Rs. 14 lakhs in cash for sale of immovable property in contravention of provisions of section 269SS of the Act, and liable for penalty u/s. 271D of the Act. Thus, levy penalty u/s. 271D for violating provisions of section 269SS of the Act Confirmed - Decided against assessee.

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• 2023 (2) TMI 164
  Revision u/s 263 - order passed on a deceased assessee - intimation about Death of assessee - legal heir did not know the proceedings having been initiated u/s.263 - HELD THAT:- Admittedly, the facts remain that on the death of an individual, Government draws information in respect of death from the cremation spot or on the basis of doctor s death certificate. The State Government then issues the death certificate within 7 to 14 days. It is after this that the legal heir certificate is applied and obtained. Admittedly, the year 2020 2021 was the Covid period. The assessee died on 12.10.2020 due to cancer. The death certificate has been issued after nearly four months being 1.2.2021. Admittedly, there is no provision under which the legal heir could have intimated the revenue regarding the death of the assessee as they had no certificate issued by the statutory authorities to prove the death. Without the statutory authority certificate, the revenue would not accept the factum of the death either. It is only after obtaining the death certificate, the legal heir certificate can be applied for. The legal heir certificate has been issued to the assessee on 28.2.2022. Thus, a perusal of the screen shot of the e-filing of the revenue authorities shows that legal heir certificate has been filed before the revenue authorities on 21.3.2022 and the same has been approved within 3-4 days. Thus, clearly, the revenue has acted fast when it received the legal heir certificate. There has been delay at the level of State Government in issuing necessary certificate. Fault cannot be placed on the Revenue or the assessee. The prayer of the ld CIT DR that the issues should be restored to the file of the Pr. CIT for re-adjudication of the issues in the name of the legal heir of the assessee cannot be acceded to because the proceedings would be a fresh proceedings by issuance of the show cause notice to legal heir of the assessee and the adjudication thereof and this would not be possible as the time limit for the proceedings are time barred. An appellate authority does not have the authority to extend the limitation. These being the facts and considering the fact that the addition in appeal is only of Rs.11 lakhs, and as the order u/s.263 has been passed on a deceased assessee, same stands quashed. Appeal of the assessee stands allowed.

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• 2023 (2) TMI 163
  Delayed deposit of employee s contribution of PF ESI - HELD THAT:- We find that Hon ble Supreme Court in the case of Checkmate Services Pvt. Ltd. [ 2022 (10) TMI 617 - SUPREME COURT] has held that the contribution by the employees to the relevant funds is the employer s income u/s 2(24)(x) of the Act and the deduction for the same can be allowed only if such amount is deposited in the employee s account in the relevant fund before the date stipulated under the respective Acts. Thus the deduction u/s 36(1)(va) of the Act can be allowed only if the employees share in the relevant funds is deposited by the employer before the due date stipulated in respective Acts. In the present case, the fact that the employees contribution has been deposited by the assessee after the due date stipulated for respective months is not in dispute. In such a situation we are of the view that the decision of Hon ble Apex Court in the case of Checkmate Services (Supra) is squarely applicable. Appeal of the assessee is dismissed.

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• 2023 (2) TMI 162
  Revision u/s 263 - whether the assessee is entitled to deduction u/s. 54B - HELD THAT:- Since the provisions of section 54B are almost identical and are in pari materia to the provisions of section 54 and 54F of the Act, therefore, SEEMA SABHARWAL VERSUS THE ITO, WARD-4, PANCHKULA [ 2018 (2) TMI 863 - ITAT CHANDIGARH] case can be safely applied in this case also in relation to the issue of purchase of agricultural land within the stipulated period. Moreover, the facts of the present case are on better footing as otherwise, in this case, the assessee had deposited the proceeds of the sale deed in the capital gains account, though, a little bit belatedly as per the observation of the Ld. CIT(A), whereas, the assessee had claimed that he had deposited the sale deed proceeds within due date. Thus since the assessee had purchased the agricultural land within the stipulated period and also produced the evidence of the same at the time of assessment proceedings and further there was no doubt about the intention of the assessee from very beginning to invest the said amount for purchase of agricultural land, therefore, the view of the Ld. PCIT is not correct in exercising her revision jurisdiction u/s.263 of the Act on this issue. Claim of Depreciation on buses: Exercise of revision Jurisdiction by the PCIT - HELD THAT:- Assessee owned 7 buses and claimed depreciation upon those buses. However, no details regarding acquisition of the said 7 buses were furnished by the assessee before the AO, nor were called for by the AO. AO allowed the claim of depreciation without verifying the value of the buses and their date of acquisition. AR on the other hand has stressed that the issue was examined by the AO. After considering the rival submissions, we are of the view that the Ld. PCIT has rightly directed the AO to examine this factual aspect. The order of the PCIT, therefore, on this issue is upheld and the AO is directed to verify the depreciation claim on buses. Claim of deduction u/s. 54F - rectification order passed by the AO u/s. 154 of the Act stating that the assessee had furnished additional evidence before the Ld. CIT(A) in respect of the aforesaid claim which the Ld. CIT(A) has refused to admit - HELD THAT:- After considering the rival submissions, we restore this issue to the file of the Assessing Officer with a direction to admit the evidence/documents relating to the above claim, examine the said documents and explanations furnished by the assessee and decide the issue a fresh in accordance with the law. Grant of lesser claim u/s. 54B - HELD THAT:- Assessee has brought to our attention to the ground against the order of the CIT(A) in relation to the rectification order passed u/s. 154 of the Act to submit that the AO has again given lesser relief u/s. 54B of the Act at Rs. 80 lacs only, whereas, the claim of the assessee was of Rs. 95,90,000/-. This issue, in our view, is also required to be examined by the assessing officer. So, this issue is restored to the file of the assessing officer for the limited purpose with the direction that the AO will examine the quantum of claim allowable to the assessee u/s. 54B.

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• 2023 (2) TMI 161
  TDS u/s 195 - Royalty and FTS payment for non deduction of TDS - disallowance of connectivity charges paid by the assessee to TATA Communications UK Ltd. (TATA UK) and TATA US treating the same as Royalty and FTS for non deduction of TDS and disallowed by invoking section 40(a)(i) - HELD THAT:- We noted that the assessee-company is incorporated under the Companies Act and is engaged in the business of running a data and call centre for export of services and domestic BPO. A.O noted that the connectivity charges in relation to TATA Communications (UK) Ltd. and TATA Communications (USA) are in the nature of royalty in term of Explanation 2 to s. 9(1)(vii) - CIT(A) also held, after perusing the agreement between the assessee and TATA Communications, noted that it provides for specialized and customized services to be rendered by the supplier to the customers pertaining to plant maintenance on customers equipment. CIT(A) perused Services Schedule to the said agreement that, if requested by the customer, the supplier may at its option install certain customer specified communication equipment and render miscellaneous services to the customer. According to Ld. counsel, connectivity charges are in the nature of Colocation services provided by the TATA Communications, UK and TATA Communications, USA for the purpose of connecting the assessee with the various customers in UK towards making the voice and data connectivity. As in the case of Verizon Communications Singapore Pte Ltd[ 2013 (11) TMI 1058 - MADRAS HIGH COURT] has clearly held that the use of the process was provided by the assessee whereby through assured bandwidth the customer is guaranteed the transmission of the data and voice. In such circumstances, it is held that the bandwidth is shared with others, however, has to be seen in the light of the technology governing the operation of the process and this by itself does not take the assessee out of the scope of the royalty as per Clause (iii) of Explanation 2 to s. 9(1)(vii) of the Act. As Hon ble Jurisdictional High Court [Supra] has clearly held on similar facts as in the present case before us i.e., Co-location services and connectivity services provided for the process of connecting by the assessee with the various customers towards making voice and data connectivity. Hence, respectfully following the decision of Verizon Communications Singapore Pte Ltd. Vs. ITO, supra, we confirm the action of the lower authorities and dismiss this issue of assessee s appeal.

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• 2023 (2) TMI 160
  Capital gain Computation - indexation of cost benefit to compute the cost of accusation - disallowance of indexed cost improvement for want of evidences regarding construction/development claimed to have been done/incurred by the assessee s late mother - HELD THAT:- It is not in dispute that the assessee has not furnished even a single piece of evidence such as receipt/bills to substantiate the claim of cost of improvement which ultimately resulted in disallowing the indexed cost of improvement claimed by the assessee by the Lower Authorities. Though the onus to establish the genuineness of any expenditure incurred by the assessee lies on himself/herself, which has not been established by the assessee. But the facts remains that there will be incurred certain expenditure to maintain/improve the property and reasonable estimation to be made in the absence of proper bills and vouchers produced by the assessee. Here being any evidence in support of the same is not only unreasonable but also exorbitant and excessive. However, in the interest of justice, we deem it fit to be estimated the expenditure at Rs.2,000/- per annum in the year 1982 and 10% increase to be made from year to year up to 2005 to meet the ends of justice. Accordingly, we direct the Ld. A.O. to consider the amount of Rs. 2,000/- in the year 1982 and increased the same by the 10% in each year up to 2005 and grant the indexation of cost benefit to compute the cost of accusation in terms of Section 49 of the IT Act. Accordingly, the grounds of appeal are partly allowed.

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• 2023 (2) TMI 159
  Deduction u/s 80P - CPC did not accept the claim of the assessee and observed that return was filed beyond due date for filing of return - fresh claim of deduction in the revised return of income - AO rejected the rectification application filed by the assessee under section 154 and CIT(A) also dismissed the appeal of the assessee - HELD THAT:- Assessee revised its return of income to withdraw the claim and subsequently claiming the carried forward or set-off of any loss but the ratio decided in respect of revising the return with the objective is squarely applicable in the case on hand. On perusal of the income tax return filed by the assessee in which it has itself accepted that its books of accounts are not required to be audited under section 44AB of the Act and is also not required for audit under any other law as time being force. Even during the course of hearing, the assessee did not submit the audit report as per section 63 of the Karnataka State Co-operative Society Act, 1959. The Trading, Proft Loss Account and Balance Sheet submitted by the assessee has been certified signed by a Chartered Account Shri. S. G. Kulkarni but not Tax Audit Report. As found substance on the submission of the learned DR. and relying on the judgment of Hon ble Supreme Court of India Wipro Ltd [ 2022 (7) TMI 560 - SUPREME COURT] cited by the learned DR, the assessee cannot make fresh claim in the revised return which was not claimed in the original return of income, only the omission or wrong statement may be revised as stated in section 139(5) The omission or wrong statement has not been defined in the Income Tax Act. The assessee was well aware about the business carried on by it and is also aware about the filing of return of income and he has made provision for income tax in its books for preceding assessment years. The assessee will not get the benefit of extended due date for filling return of income as notified by the Ministry of Finance, thus observed that it was applicable to those assessees whose books of accounts are required to be audited and filed Tax Audit Report in the specified Form but in the assessee s case he did not submit audit report as required by the relevant law for the time being in force. On perusal of the Income Tax Return filed observed that the assessee has not given any information about the Audit in the appropriate coloumn. CIT (A) has rightly dismissed the appeal of the assessee.

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• 2023 (2) TMI 158
  Deduction u/s 80P - return has been filed belatedly - adjustment made as per section 143(1)(a) - HELD THAT:- Prima facie adjustments can be made while processing the return of income if there were an incorrect claim and if such incorrect claim is apparent from any information in the return. The provision of section 80AC of the Act has to be complied strictly. Appellant raised a legal question upon claim for the benefit conferred under Section 80-IB of the Act being declined on the ground that the appellant did not file its return for the relevant assessment year within the period prescribed u/s 139 (1) of the Act and the deduction was denied for not following the mandatory requirement of section 80AC of the Act. In the case on hand, the assessee was required to file return within the due date i.e. on 31.08.2018 but he filed return belatedly and following the judgment, the assessee is not eligible to claim of deduction u/s 80P of the Act. Accordingly, the adjustment made by the CPC while processing the return is correct. CPC has rightly not accepted the deduction claimed u/s 80P of the Act. The reference made by the ld. AR for amendments made in section 143(1)(a) by the Finance Act 2020 2021 will not comply. Assessee has relied the judgments of coordinate bench of Tribunals and in any of the judgments, the judgment of Hon ble Kolkata High Court SUOLIFICIO LINEA ITALIA (INDIA) (P) LTD. [ 2018 (5) TMI 638 - CALCUTTA HIGH COURT] has not been considered in regard to mandatory requirement for filling return of income within due date, therefore, these judgments are not applicable in the present case on hand. Dismiss the appeal of the assessee.

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• 2023 (2) TMI 157
  Penalty levied u/s 271B - assessee has filed the tax audit report belatedly - HELD THAT:- By filing detailed year-wise sales turnover of assessee s jewellery business and heavy loss incurred in the fish net business, the assessee has submitted before the ld. CIT(A) that her business was totally came to a standstill and matters went to a very critical level that her properties were put for auction by the bankers (M/s. Karur Vysya Bank), due to her inability to repay the loan or the mounting interest liability and also filed notice for sale of immovable properties published by the bankers in the leading news papers for recovery of Rs..29.60 crores as on 31.01.2022 plus interest till the date of settlement. Considering the pathetic condition of the assessee as well as by following various case law, the ld. CIT(A) has observed that the books of accounts audited, though belatedly, but the audit report was produced before the Assessing Officer before completion of the assessment. Since the assessee was prevented by reasonable cause for not getting her books of accounts audited in time as required under the provisions of section 44AB of the Act, but filed the tax audit report before completion of the assessment, the ld. CIT(A) has held that it is not a fit case for the levy of penalty under section 271B of the Act and accordingly, the penalty levied was deleted - Decided against revenue.

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• 2023 (2) TMI 156
  Scope of the limited Scrutiny assessment - Allowability of provision for expenditure - assessee who is a builder following the percentage of completion method for the purpose of recognition of income for the purpose of tax - HELD THAT:- When an assessee following the percentage of completion method, it means that the revenue expenses of the contracts are recognized, as the percentage of work completed during the period. The method recognise revenue expenses in proportionate to the completion of the contracted project, which means the question of providing for expenses to be incurred in future does not arise. It is neither the case of the appellant that the corresponding entire income has been offered to tax. The ratio of the decisions of Rotork Controls India (P.) Ltd. [ 2009 (5) TMI 16 - SUPREME COURT] and Bharat Earth Movers Ltd. [ 2000 (8) TMI 4 - SUPREME COURT] laid down by the ld. AR have no application to the facts of the present case. CIT(A) had rightly held that when the case was taken up for scrutiny under Limited Scrutiny for the purpose of verification of low income, verification of expenses also falls within its sweep. Thus, we are of the considered opinion that the provision for expenses as claimed by the assessee was rightly disallowed by the Assessing Officer. Accordingly, the order of the ld. CIT(A) is based on proper appreciation of facts of the case and just and proper and does not warrant any inference by this Tribunal. Appeal filed by the assessee stands dismissed.

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• 2023 (2) TMI 155
  Validity of Reopening of assessment u/s 147 - denial of principles of natural justice - addition u/s 68 - Necessity for statement of third party if relied upon by the Department to be confronted to the assessee for its comments and cross-examination - HELD THAT:- Revenue has committed infringement of principles of natural justice by not confronting the copy of statement adverse to the assessee while placing reliance on such statement as printed out by the assessee. Thus, owing to similarities on facts, the findings rendered in M/s. Priya Diamonds [ 2022 (1) TMI 1154 - ITAT DELHI] shall apply mutatis mutandis to the case of the assessee. In conclusion, objection towards lack of jurisdiction conferred under Section 147 of the Act is adjudicated against the assessee while the objection towards adjudication of merit is referred back to the Assessing Officer for de novo determination. The order of the CIT(A) is thus set aside on merits for fresh determination by the Assessing Officer. The Assessing Officer shall determine the issue on merits afresh in accordance with law keeping in mind the sacrosanct principles of natural justice. The statement of third party if relied upon by the Department, shall be necessarily confronted to the assessee for its comments and cross-examination, if demanded. The observations made in M/s. Priya Diamonds shall be adhered too. In conclusion, the matter is remitted and restored to the file of the Assessing Officer for determination of issue on merits afresh in accordance with law. Appeal of the assessee is partly allowed.

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• 2023 (2) TMI 154
  Exemption u/s 54 - Proportionate deduction towards amount invested for purchase of new house property u/s. 54 - HELD THAT:- In this case, facts with regard to non-compliance of provisions of Sec. 54(2) of the Act, are not in dispute. Assessee neither utilized full amount of capital gains for purchase or construction of house property before filing return of income u/s. 139(1) nor deposited unutilized amount in Capital Gain Account Scheme . Therefore, we are of the considered view that the AO has rightly allowed proportionate deduction towards amount invested for purchase of new house property u/s. 54 of the Act. In this case, the assessee could not furnish any evidences with regard to completion of construction of house within three years from the date of sale of original asset and also any other evidences to prove that amount has been spent for construction of house property, except filing a statement referring certain payments to M/s. Keshthana Infrastructure Pvt. Ltd., and claimed that said payments are for construction of house property. Therefore, we are of the considered view that the assessee has failed to satisfy conditions prescribed u/s. 54 of the Act, for claiming benefit of exemption u/s. 54 for remaining amount and thus, we are of the considered view that there is no error in the reasons given by the AO and the CIT(A) to reject the benefit of exemption for balance amount and thus, we are inclined to uphold the findings of the CIT(A) and dismiss the appeal filed by the assessee.

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• 2023 (2) TMI 153
  Disallowance of business expenditure - disallowance of loss incurred made by the Ld. AO, on account of illegal siphoning of funds by the Finance Director by holding that there was no nexus between the loss incurred vis- -vis the business operations carried on by the Appellant - HELD THAT:- We note in this case, the said embezzlement by the Director has been attributed to inflation of the expenditure by the said director over a period of few years. The assessee has clearly said that he has not made any debit of expenditure as embezzlement loss. It was only note in the account explaining loss from which the Revenue authorities have come to the conclusion that the assessee has debited embezzlement loss. Assessee has submitted that the Ld. CIT(A) has erred in stating that the assessee has recovered the embezzlement loss for the current year from the dues of such employees/director. As submitted a sheet of ledger account by reference to which he claimed that a very meagre amount has been collected and hence, the Ld. CIT(A) is wrong in holding that has been recovered. In our considered opinion, on the facts and circumstances of the case, this issue needs to be remitted back to the file of the AO. The AO is directed to factually verify the recovery and allow the balance of loss. As regards of the Ld. CIT(A) direction to the AO to take necessary remedial action for AY 2012-13 to 2013-14, we note that the assessee has submitted two case laws from ITAT , wherein it has been expounded that the Ld. CIT(A) cannot go beyond the assessment year which is under consideration before him. In this regard, the case laws referred are in [ 2017 (11) TMI 1934 - ITAT KOLKATA] and[ 2019 (6) TMI 351 - ITAT INDORE] . No contrary decision was shown to us by the Ld. DR. Hence, following these case laws, we hold that the Ld. CIT(A) has erred in passing the direction to take remedial action to AO for other years. Appeal of the assessee is allowed for statistical purpose.

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• 2023 (2) TMI 152
  Reopening of assessment u/s 147 - reassessment after expiry of four years from the end of the relevant assessment year - cash payment in violation of section 40A(3) - HELD THAT:- Assessing Officer had no fresh tangible material in his possession while reopening the assessment under Section 147 of the Act. Apparently, revisiting the material available on record at the time of completion of original assessment, the Assessing Officer has initiated proceedings under Section 147 of the Act. Though, in the reasons recorded, the Assessing Officer has made a bald allegation regarding failure of the assessee in disclosing truly and correctly all material facts, however, there is no substance in such allegation. In course of original assessment proceedings, the Assessing Officer had specifically enquired into the details of payments made to Monad University and rent. In reply to the query raised, the assessee had furnished its reply vide letter dated 30.01.2017. Thus, it is evident, in course of the original assessment proceedings the Assessing Officer did make inquiry regarding the cash payment and took a conscious decision that no violation to section 40A(3) of the Act was made. That being the factual position emerging on record, in my view, the proceeding initiated under Section 147 of the Act is on a mere change of opinion, hence, amounts to review of the earlier assessment order. Conditions enshrined in proviso to section 147 of the Act, applicable to the impugned assessment year, are not satisfied. - Decided in favour of assessee.

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• 2023 (2) TMI 151
  Exemption u/s 11 - charitable purpose was shown under the category of advancement of any other object of general public utility and the entire receipts were shown from such activity - Before us, as pleaded that the assessee has wrongly filled the column A(i) pertaining to Other details the ITR7 and since CPC is a automated process, the adjustment has also been wrongly made - HELD THAT:- Having gone through the entire factum of the case, we hold that a right tax has to be collected from the right person and though the CPC has processed the return based on the information given by the assessee, and when the information given by the assessee itself is incorrect in filling of the relevant column, the same needs to be allowed to be rectified in the interest of justice. Hence, the matter is remanded back to the file of the JAO to consider the earlier return and subsequent return filed by the assessee and the mistake in filling the column no. A(i) be rectified. Appeal of the assessee is allowed.

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• 2023 (2) TMI 150
  TDS u/s 195 - Royalty - cost incurred in connection with off the shelf software products - HELD THAT:-Assessee stated that this issue is covered in favour of assessee by Tribunal decision in [ 2022 (8) TMI 1341 - ITAT CHENNAI] wherein the Tribunal considered the decision of Hon ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Ltd., [ 2021 (3) TMI 138 - SUPREME COURT] and allowed the claim of assessee. We delete the disallowance and allow the appeal of assessee on this issue. Addition made on account of amount pertaining to provision of loss contracts and AO concluding that the provision for anticipated loss is a uncertain liability and not allowable as deduction u/s.37 - HELD THAT:- We noted that this issue needs verification at the level of AO, who will verify whether the assessee has declared this income and are accepted by Revenue in assessment year 2015-16 2016-17 by reversing the entry of provision for loss contract created by assessee - But in any eventuality, the issue on principle is covered by the decision of Hon ble Supreme Court in the case of Excel Industries Ltd. [ 2013 (10) TMI 324 - SUPREME COURT] and hence respectfully following the same, we accept the arguments of the ld.AR on principle but remit the matter back to the file of the AO for verification purposes. This issue of assessee s appeal is allowed for statistical purposes. Disallowing charges paid in respect of Employees Stock Option Plan (ESOP) - HELD THAT:- We noted that the expenses incurred by assessee by way of payment to its parent company, which has in turn issued shares to the employees of the assessee, the expenditure seems towards disbursing compensation to the employees for their services and hence, the same is to be treated as revenue in nature as held by the Tribunal in the case of Caterpillar India Pvt. Ltd. [ 2017 (4) TMI 1138 - ITAT CHENNAI] as well as TE Connectivity Services India Pvt. Ltd. [ 2022 (9) TMI 1413 - ITAT BANGALORE] - Respectfully following the decision of Co-ordinate Bench of Chennai and Bangalore, we allow the claim of assessee.

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• 2023 (2) TMI 149
  Reopening of assessment u/s 147 - non service of the notice under section 148 of the act and 142 (1) of the act - HELD THAT:- The statutory notice under section 148 of the act has never been served upon the appellant assesse. The revenue authorities, the AO, the CIT(A) and the Ld. DR has failed to brought on record any material evidence to controvert the contention of the appellant. In our considered view, the impugned order suffered legal infirmities and perversities to the peculiar facts on record which cannot be approved. Accordingly, we hold that the assumption of jurisdiction u/s 147 of the act, in absence of service of notice under section 148 in invalid and therefore, the consequent assessment order is held to be illegal and bad in law. Thus, the ground no. 3 on legal issue, challenging the validity of assessment on account of non-service of notice u/s 148 of the act is allowed. Appeal of the assessee is allowed.

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• 2023 (2) TMI 148
  Unexplained cash credit u/s 68 - CIT(A) confirmed this addition observing that the assessee is unable to explain the source of the said sum - HELD THAT:- Undisputed fact is that the alleged sum received during the year and to explain the source thereof neither during the course of assessment proceedings nor during the appellate proceedings before CIT(A) and even during the proceedings before us, no details whatsoever has been filed by the assessee to explain the alleged sum of share application money. The assessee miserably failed to discharge the primary onus casted upon it as per the provisions of Section 68 of the Act. Identity and creditworthiness of the share applicant and genuineness of the transaction has not been proved. Assessee is trying to take shelter on the ground that share capital against the said share application money was allowed in AY 2014-15 and the same was assessed u/s 143(3) of the Act, therefore, addition could not be made for AY 2012-13 in which the said sum is received. We, however, fail to find any merit in this plea taken by the assessee in the grounds of appeal and are of the considered view that since the alleged sum was received during the year, AO was justified in asking the assessee to explain the source of said sum and since the assessee failed to file any documentary evidences and discharge the primary onus casted upon it and could not explain the source of said sum, provisions of Section 68 of the Act are attracted. - Decided against assessee.

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• 2023 (2) TMI 147
  Addition of the custom duty benefit against the advance license which was not offered for taxation - HELD THAT:- Assessee/Respondent has filed the relevant accounting entries and monthly statement of advance licenses. From these entries /details, it is noticed that the entire amount of accrued Advance Licenses Benefit has been credited to purchase of raw material account. The purchases thus reduced have obviously increased the profit. Therefore, a further addition of the unutilized amount will tantamount to double addition. The Assessing Officer is therefore not justified in making the said addition. Non grant of benefit of provisions of Sec. 80HHC in respect of advance import license by holding the same was covered under clause (iiib) of Sec. 28 - HELD THAT:- As decided in own case [ 2007 (2) TMI 357 - ITAT MUMBAI] valve of Advance Import License is an export incentive within the meaning of clause 28(iiib) of section 28 of the Act. This is owing to the reason that Duty Entitlement Passbook Scheme ( DEPB ) is a cash assistance covered under clause (iiib) of section 28 of the Act and both Advance Import License and DEPB License have common features as both provide the benefit of duty drawback. The only difference between the two is that the Advance Import License is not transferrable whereas DEPB License is transferrable. Export incentive is not a part of the profits of the business u/s 80HHC (1), but it is entitled for the benefit of the proviso to section 80HHC(3) - AO is directed to grant the benefit of the proviso to sec 80HHC(3) in respect of export benefit. Disallowance of expenditure incurred under voluntary retirement scheme - HELD THAT:- As issues concerning the benefit of enduring nature and income-yielding asset have been adequately dealt with by the Supreme Court and by the jurisdictional High Court in its judgment in the case of Bhor Industries. Respectfully following the decision of the Bombay High Court in the case of CIT v. Bhor Industries Ltd [ 2003 (2) TMI 20 - BOMBAY HIGH COURT] and in view of a favourable decision in appellant s own case by the ITAT, Mumbai for A.Ys 1984-85 and 1985-86 direct the Assessing Officer to delete the disallowance of VRS payment. Adhoc deduction being 20% of the expenditure incurred on advertisement - HELD THAT:- From the records find that this ground has since, assessment year 2000-01, been allowed in favour of the appellant by relying on the decision in the case of DCIT v. Metro Shoes [ 2002 (8) TMI 800 - ITAT MUMBAI] and the decision of Honorable ITAT Mumbai Bench F, Mumbai in the case of M/s Geoffrey Manners and Co. Mumbai [ 1978 (7) TMI 240 - ITAT MUMBAI] . Similarly, following the ratio of these decisions and the reasons of my Id. predecessors, disallowance for the year under appeal is also deleted. This ground of appeal is thus decided in favour of the appellant.

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• 2023 (2) TMI 134
  Deduction u/s 80P(2)(a)(i)/80P(2)(d) - interest income earned from banks - HELD THAT:- Hon ble Karnataka High Court in Souharda Credit Cooperative Ltd. [ 2015 (2) TMI 995 - KARNATAKA HIGH COURT] allowing deduction u/s. 80P on interest income and that in Mantola Cooperative Thrift Credit Society Ltd [ 2014 (9) TMI 833 - DELHI HIGH COURT] not allowing deduction u/s.80P on interest income earned from banks. Both the Hon ble High Courts took into consideration the ratio laid down in the case of Totgar s Cooperative Sale Society Ltd. [ 2010 (2) TMI 3 - SUPREME COURT] - No direct judgment from the Hon ble jurisdictional High Court on the point having been pointed out, the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit [ 2015 (8) TMI 1085 - ITAT PUNE] preferred to go with the view in favour of the assessee by the Hon ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. [ 2015 (2) TMI 995 - KARNATAKA HIGH COURT] The position continues to remain the same before this Tribunal also. Eligibility of deduction u/s.80P(2)(d) and after considering the language of the section, it is observed that though co-operative banks, other than primary agricultural credit society or a primary co-operative agricultural and rural development bank, are not eligible for deduction pursuant to insertion of section 80P(4) w.e.f. 1.4.2007, but this provision does not dent the otherwise eligibility u/s 80P(2)(d) of the Act of a co-operative society on interest income on investments/deposits parked with a co-operative bank, which is a registered co-operative society as per section 2(19) of the Act, defining co-operative society to mean a co-operative society registered under the Co-operative Societies Act, 1912 or under any law for the time being in force. The assessees are also Co-operative societies registered under the Act, thereby making them eligible for claim of the deduction. Similar view has been taken in several cases including Sesa Goa Employees Coop. Credit Society Ltd. Vs. ACIT [ 2022 (12) TMI 959 - ITAT PUNE] . In series of decisions have held that the co-operative societies are entitled to deduction u/s.80P(2)(a)(i)/80P(2)(d) in respect of interest income, we hold that the impugned orders do not require any interference. - Appeal of revenue dismissed.

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• Customs

• 2023 (2) TMI 146
  Duty drawback as per the provisions of Section 74 of the Customs Act, 1962 - rejection on the ground that the petitioner has not satisfactorily established the reasons for delay in filing the duty drawback claim - non-speaking order - violation or principles of natural justice - HELD THAT:- Learned Standing Counsel for the respondents cannot rely upon the documents filed along with these writ petitions, that too, when the first respondent has not considered the same on merits in the impugned orders, which is a cryptic and non-speaking order. Any improvement of the impugned order cannot be made by the learned Standing Counsel for the respondents. Therefore, the contentions of the learned Standing Counsel for the respondents before this Court is rejected. It is also not in dispute that the petitioner has satisfied all the statutory requirements for claiming duty drawback as per the provisions under Section 74 of the Customs Act, 1962. When the petitioner has given detailed reasons as to why they were unable to file the duty drawback claim within the prescribed time, the first respondent ought to have considered the said reasons objectively, but as seen from the impugned orders, no reasons have been given for rejecting the petitioner s reasons for non filing of the duty drawback claim on time - Being a cryptic and non-speaking order, the impugned orders will have to be necessarily quashed and the matter has to be remanded back to the first respondent for fresh consideration on merits and in accordance with law. The matter is remanded back to the first respondent for fresh consideration on merits and in accordance with law - Petition disposed off.

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• 2023 (2) TMI 145
  Revocation of customs Broker License - forfeiture of security deposit - penalty - risky exporters involved in execution of frauds and got verification done by the jurisdictional GST officers and identified exporters who could not be found at all physically at their registered premises - violation of Regulation 10(n) of the CBLR as well - HELD THAT:- Regulation 10(n) requires the Customs Broker to verify correctness of Importer Exporter Code (IEC) number, Goods and Services Tax Identification Number (GSTIN),identity of his client and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information - verification of certificates part of the obligation under Regulation 10(n) on the Customs Broker is fully satisfied as long as it satisfies itself that the IEC and the GSTIN were, indeed issued by the concerned officers. This can be done through online verification, comparing with the original documents, etc. and does not require an investigation into the documents by the Customs Broker. The presumption is that a certificate or registration issued by an officer or purported to have been issued by an officer was correctly issued. Section 79 of the Evidence Act, 1872 requires even Courts to presume that every certificate which is purported to be issued by the Government officer to be genuine. Any of the three methods can be employed by the Customs Broker to verify the identity of its client. It is not necessary that it has to only conduct a physical verification or launch an investigation. So long as it can find some documents which are independent, reliable and authentic to establish the identity of his client, this obligation is fulfilled. If a document is issued by any other person not interested in the relationship of the client and the Customs Broker, it would be independent. But it should also be reliable and authentic and not one issued by any Tom, Dick and Harry - While obtaining documents is probably the easiest way of fulfilling this obligation, the Customs broker can also, as an alternative, fulfil this obligation by obtaining data or information. If there are documents issued by the Government officers which show that the client is functioning at the address, it would be reasonable for the Customs Broker to presume that the officer is not wrong and that the client is indeed, functioning at that address. In this case, we find that the GSTIN issued by the officers of CBIC itself shows the address of the client and the authenticity of the GSTIN is not in doubt. In fact, the entire verification report is based on the GSTIN. Further, IECs issued by the DGFT also show the address. There is nothing on record to show that either of these documents were fake or forged. Therefore, they are authentic and reliable and we have no reason to believe that the officers who issued them were not independent and neither has the Customs Broker any reason to believe that they were not independent. It appears from the verification reports that the officers enquired not giving the names of the exporters but enquired if an exporter with a particular GSTIN existed in that address. People and businesses are remembered by their names and not by their GSTIN or PAN or Voter ID Card number. If anyone goes to an area and enquires, for instance, if a person with a particular PAN lives hardly anyone will be able to confirm - the conclusion in the verification reports are Non-existent exporter , NOC denied and No such firm was found existing at the said premises and therefore, IGST Refund claims made by the exporter are bogus and may be rejected. None of them state that the exporter never operated from that premises and the officer has issued GSTIN to a non-existent firm or at the time of verification, the firm was not operating from the premises but it may or may not have existed at the time of export. If the former is the case, it is also not clear why and how the officer who conducted the verification or his predecessor issued the GSTIN to a non-existent exporter. None of three RUDs make out any case to show that the Customs Broker had not fulfilled its obligation under Regulation 10(n) of CBLR 2018. The evidence available on record in the form of verification reports relied upon in the SCN are vague and in some cases, even the name of the exporter who they were enquiring about is not indicated in them - The reports state either NOC denied which is not required by any Customs Broker or exporter or that the exporters did not exist at the time of verification which does not prove that they did not exist at the time of verification or that IGST refund may be denied which is irrelevant to the present proceedings. None of the reports establish that the appellant had violated Regulation 10(n). The impugned order revoking the Customs Brokers licence of the appellant, forfeiting their security deposit and further imposing penalty on the appellants cannot be sustained and needs to be set aside. Appeal allowed.

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• 2023 (2) TMI 144
  Effective date of amendment of notification No.29/2018-Cus dated 01.03.2018 - rate of Customs duty - levy of BCD at the enhanced rate of 54% in respect of imported goods 1.e., RBD Palmolein of Edible Grade falling under Customs Tariff Heading 151190 and covered under Sl. No. 65 of original notification No. 50/2017-Cus dated 30.06.2017 - whether the notification to come into effect from the date of its issue on 01st March 2018? - contention of the appellant is that in terms of section 15(1)(a) of the Customs Act, 1962, the rate of duty applicable to the imported goods is the rate in force when the Entry Inwards to the vessel carrying the imported goods was granted on 05.03.2018. Whether the exemption notification will be effective from 01.03.2018 or from 06.03.2018? HELD THAT:- In the present case the notification dated 01.03.2018 was digitally signed on 06.03.2018 at 17:15 hours and before that it could not have been uploaded for publication. Thus, the exemption notification would come into force only on 06.03.2018. This issue was also examined by the Gujarat High Court in the case of the appellant in ADANI WILMAR LIMITED VERSUS UNION OF INDIA [ 2022 (11) TMI 764 - GUJARAT HIGH COURT] where the issue arose before the Gujarat High Court was whether the exemption notification dated 01.03.2018 will be effective from 01.03.2018 or 06.03.2018, on which date it was digitally signed. In this connection the Gujarat High Court, after placing reliance upon the decision of the Supreme Court in UNION OF INDIA OTHERS VERSUS M/S GS CHATHA RICE MILLS ANOTHER [ 2020 (9) TMI 903 - SUPREME COURT] and also upon the decisions of the Gujarat High Court in RUCHI SOYA INDUSTRIES LTD THROUGH AUTHORIZED REPRESENTATIVE VERSUS UNION OF INDIA 2 OTHERS [ 2020 (9) TMI 422 - GUJARAT HIGH COURT] and the Andhra Pradesh High Court in M/S RUCHI SOYA INDUSTRIES LTD. VERSUS UNION OF INDIA [ 2019 (9) TMI 1374 - ANDHRA PRADESH HIGH COURT] , observed that the effective date of Notification in terms of Section 25 (4) of the Act is the date of its publication in Official Gazette in e-mode on 06.03.2018 and the Notification, therefore, cannot be said to have come into force on 01.03.2018 and enhanced rate of duty by way of Notification No. 29/2018-CUS dated 01.03.2018 surely would not be, therefore, applicable. The petitioner would be entitled to pay only 40% of the duty which was applicable at the time of presenting the bills of entry for home consumption and not 54% under section 17(4) of the Act. In the present case, it is not in dispute that the entry inwards was granted to the vessel on 05.03.2018 at 11:45 hours. At that time the notification dated 30.06.2017, as amended on 17.11.2017, imposing duty at the rate of 40% was applicable. The exemption notification increasing the duty from 40% to 54% came into effect only on 06.03.2018. The Bills of Entry, therefore, could not have been reassessed at the higher rate of duty @54% under the notification dated 01.03.2018. Thus, in view of the aforesaid decisions of the High Courts, the Commissioner (Appeals) was not justified in holding that the duty would be payable on the imported goods at the rates specified in the exemption notification dated 01.03.2018, even though the entry inwards was granted to the vessel on 05.03.2018 and the said exemption notification dated 01.03.2018 was published in the Official Gazette only on 06.03.2018, after it was digitally signed. The exemption notification came into effect only on 06.03.2018, on which date it was published in the Official Gazette after it was digitally signed for e-publication - The Commissioner (Appeals), was also not justified in distinguishing the cases cited by the appellant only for the reason that an amendment had been made in section 25(4) of the Customs Act in 2016. The order dated 31.01.2020 passed by the Commissioner (Appeals) is, accordingly, set aside - appeal allowed.

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• 2023 (2) TMI 143
  Refund of SAD (Special Addition Duty) - rejection on the ground of time limitation - N/N. 102/2007-Cus - Vide Notification No. 93/2008-Cus, Clause 2(C) of the Notification No. 102/2007-Cus was substituted, the effect of substitution on was that one year period was insisted upon for filing of refund application from the date of payment on SAD. HELD THAT:- The rejection of refund on the ground of limitation by the court below is bad and is in the teeth of the ruling of the Hon ble Delhi High Court in the case of SONY INDIA PVT. LTD. VERSUS THE COMMISSIONER OF CUSTOMS [ 2014 (4) TMI 870 - DELHI HIGH COURT] where it was held that This Court holds that the amending notification must be read down to the extent that it imposes a limitation period. Thus, court below have erred in rejection of refund claim on the ground of limitation - The Adjudicating Authority is directed to grant the refund of SAD within a period of 45 days from receipt/service of copy of this order with interest as per rules, after verifying the bar of unjust enrichment. - Accordingly, the impugned order is set aside and the appeal is allowed.

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• Corporate Laws

• 2023 (2) TMI 142
  Validity of request for issuance of a Look Out Circular (in short LOC) made by the respondent No.2 - en-mass cancellation of coal block allocations - account declared as a Non-Performing Asset (NPA) by the lenders - HELD THAT:- The general objective for issuance of LOC is to control the arrival/departure of persons against whom criminal cases are pending or who are either avoiding judicial proceedings or evading arrest or not co14 operating with the investigating agencies and there are specific inputs that such person(s), would flee the country - The first comprehensive policy was framed and found its release in the office memorandum dated October 27, 2010. The authorities who could issue LOC, the ingredients necessary for issuance of LOCs, the agencies who could make a request for issuance of LOCs and the various parameters required to be fulfilled before such request could be made, was provided therein. BOB requested the Bureau of Immigration to issue LOC. It is not on record whether such LOC has been issued or not. The Bureau of Immigration, Ministry of Home Affairs (Foreigners Division) and all the other members of the consortium of banks, apart from PNB were impleaded as respondents in this proceeding. None of these respondents have come up before the Court in support of the request of BOB - There is no evidence that on account of the default committed by the Visa Power Limited, the economy of India had been shaken. The bank has not provided any contemporaneous material against the petitioner which would satisfy the exceptions clause. The bank is also silent as to whether any input had been received from any agency that the petitioner was likely to flee the country and his departure would disrupt the economy. Admittedly, in the facts of this case, no investigation is pending before any authority. It is also not a case where the bank had come to a conclusion on the basis of inputs received from an intelligence agency or any other agency that the petitioner was trying to leave India in order to evade the consequences of the legal actions that may be taken against him, both under the civil and the criminal laws. In the case of SRI SOUMEN SARKAR, SON OF SRI GOPAL CHANDRA SARKAR, VERSUS , THE STATE OF TRIPURA, THE DIRECTOR GENERAL OF POLICE, , THE SUPERINTENDENT OF POLICE, , THE UNION OF INDIA,, THE COMMISSIONER (IMMIGRATION) , 6. THE REGIONAL PASSPORT OFFICER [ 2021 (3) TMI 1405 - TRIPURA HIGH COURT] , the High Court of Tripura on perusal of MHA s Office memorandum dated 31.08.2010, stated that the reasons for opening LOC must be given categorically. It was held that LOCs could not be issued as a matter of course, but only when reasons existed and the accused deliberately evaded arrest or did not appear in the trial court. The Delhi High Court in the case of Vikas Chaudhary V. Union of India, [ 2022 (1) TMI 553 - DELHI HIGH COURT ] quashed the LOC inter alia stating that mere suspicion of opening bank accounts in a foreign country, when such suspicion was based on some unsigned agreements and WhatsApp chats could not be a ground to restrain someone s fundamental right to travel abroad. In the case of Brij Bhushan Kathuria vs. Union of India Ors., [ 2021 (4) TMI 750 - DELHI HIGH COURT ] the Delhi High Court while setting aside the LOC issued against the Petitioner held that the phrases such as economic interest or larger public interest could not be expanded in a manner so as to restrict an independent director who was in the past associated with the company being investigated, from travelling abroad, without any specific role being attributed to him. The personal liberty and the fundamental right of movement guaranteed by the Constitution cannot be curtailed at the behest of BOB when the conditions precedent for making such request for opening an LOC, did not exist in this case - The freedom of movement of a citizen of India is a valuable right and cannot be infringed except by imposing reasonable restrictions. The court does not find any reasonableness in the action of BOB. The lead bank, PNB failed in its attempt to restrict the movement of the petitioner. No subsequent development has taken place which would justify a further request by BOB, on the self-same set of facts. Once the action of the lead bank was set aside by this court, BOB took a chance to restrain the freedom of movement of the petitioner by placing reliance upon the liquidation proceedings, the Forensic Audit Report and the complaint lodged by PNB. Such complaint was returned by the CBI - There is no allegation that the activity of the petitioner led to upheavals in the stock market, business activities, investments, trade, growth and development etc. There is no evidence that the petitioner had tried to escape to a foreign jurisdiction to avoid legal consequences of such action. The proceedings before NCLT were initiated in 2016. Since then no evidence could be submitted to implicate the petitioner in any criminal case. The petitioner contested the liquidation proceedings. A bald assertion that the petitioner s departure would be detrimental to the economic interest of the country and the LOC must be issued in larger public interest, cannot be due satisfaction of the existing preconditions required to be fulfilled before the originator can make such a request. The existence of such pre-conditions and the manner in which the action of the petitioner fell within the exceptions or had affected the country s economic interest had to be demonstrated from the records. The apprehension should be well-founded, backed by reasons and also supported by evidence - The bank acted in arbitrary exercise of the power vested in it by making a request for opening LOC which was an attempt to curtail the personal liberty and fundamental right of movement of a citizen guaranteed by the Constitution of India. Petition allowed.

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• Insolvency & Bankruptcy

• 2023 (2) TMI 141
  Seeking to excuse the Delay of 15 days, in preferring the instant Appeal - time limitation - case of petitioner is that it was unable to file the instant Appeal, within the Statutorily Mandated Period, as it was facing some financial issues, due to the sudden turn of Economic Events, caused by the Russian Ukraine War - HELD THAT:- The Equity, underlying Section 14 of the Limitation Act, 1963, that it should apply to its full extent and the time taken for diligently prosecuting a remedy in a wrong Forum, should be excluded, as per the decision of the Hon ble Supreme Court of India, in Consolidated Engineering Enterprises v. Principal Secretary, Irrigation Department, [ 2008 (4) TMI 668 - SUPREME COURT ]. In view of the fact that the Petitioner / Appellant had approached the Adjudicating Authority (NCLT) / High Court, for one reason or the other, indulging in Bona fide Litigious Activity, it can seek / avail, the aid of Section 14 of the Limitation Act, 1963, as opined by this Tribunal. Section 424 of the Companies Act, 2013, provides that in disposing of any Proceeding, the Tribunal (Adjudicating Authority / NCLT) and the Appellate Tribunal (NCLAT), shall be guided by the Principles of Natural Justice, and subject to the other provisions of this act (or of Insolvency and Bankruptcy Code, 2016 (31 of 2016) and of any Rules, made thereunder. Further, the Tribunal (NCLT) and the Appellate Tribunal (NCLAT) do have Power, to regulate to their own procedure. This Tribunal, on a consideration of the entire conspectus of the attendant facts and circumstances of the instant case, keeping in mind that the Petitioner / Appellant, had initiated Legal Proceedings, in an Inappropriate Forum, the ingredients of Section 14 of the Limitation Act, 1963, gets attracted, applying the same, and taking note of the instant Comp. Appeal, was filed by the Petitioner / Appellant, on 13.08.2022, well within the Limitation Period, accordingly, disposes of the instant IA No. 89 of 2023. Application disposed off.

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• Service Tax

• 2023 (2) TMI 140
  Maintainability of appeal - appeal dismissed on the ground of non-deposit of mandatory pre-deposit, after having heard the Appeal on merits - petitioner is a non-registered dealer under the Service Tax Act - HELD THAT:- Admittedly, petitioner is an unregistered dealer. His appeal has been dismissed on the ground of non-payment of mandatory pre-deposit. It does not appear that there was intent on the part of the petitioner to avoid payment of pre-deposit @7.5% as provided under the amended section 35F of Central Excise Act, 1944. Respondents have also adverted to the facility provided under the RBI Instruction for making such pre-deposit by unregistered dealer / registered non-assessees. In those circumstances, interest of justice would be met if the matter is remanded to the Appellate Authority. Petitioner is required to make pre-deposit within a period of four weeks from today. The impugned order is set aside - petition allowed.

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• 2023 (2) TMI 139
  Recovery of irregularly availed CENVAT Credit along with interest and to impose penalty - input service or not - Service Tax paid on Commission paid to different commission agents - HELD THAT:- It has been observed that during 01.04.11 to 31.03.2015, the appellant had taken CENVAT Credit of input service on sales commission paid to different agents. Rule 2(l) of the CENVAT Credit Rules, 2004 defines input service. With effect from 01.04.2011, the definition of input service got narrowed and the expression activities related to business was omitted. Department referred to Cadila judgement to confirm the demand, as sales commission is not covered in the inclusive part of the definition of Input Service. The Appellant rightly referred to Circular No. 943/4/2011-CX, dated 29.04.2011 wherein department unambiguously accepted the legality of availment of credit on sales commission - it was held that The definition of input services allows all credit on services used for clearance of final products upto the place of removal. Moreover activity of sale promotion is specifically allowed and on many occasions the remuneration for same is linked to actual sale. Reading the provisions harmoniously it is clarified that credit is admissible on the services of sale of dutiable goods on commission basis. The sales commission has a direct nexus with the sales, which in turn is related to the manufacture of the products. If there is no sale, there would not be any need to manufacture the products. Be that so as it may, to increase the manufacturing activity an encouragement is being given by way of sales commission for achieving increased sales - Hon ble High Court of Punjab Haryana in the case of COMMISSIONER OF CENTRAL EXCISE, LUDHIANA VERSUS AMBIKA OVERSEAS [ 2011 (7) TMI 980 - PUNJAB HARYANA HIGH COURT] , had clearly held that the sale and manufacture are directed inter-related and the commission paid on sales needs to be accounted for as services related to sales promotion. The impugned order cannot be sustained and is, therefore, set aside - Appeal allowed.

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• Central Excise

• 2023 (2) TMI 138
  Process amounting to manufacture or not - plastic scrap - One of the raw materials used by the respondent is the lead scrap which is not duty paid and no CENVAT credit was availed on it, this scrap needs cleaning to separate non-lead elements such as plastics before it can be molten to manufacture lead ingots/lead rods - Revenue felt that duty should be paid on the plastic scrap so separated and sold by the respondent because it had arisen during the process of manufacture of the final products, viz., lead ingots or lead rods. HELD THAT:- According to the respondent, manufacture begins after the scrap is segregated manually. This manual segregation of scrap is neither manufacture by itself nor can it be called a process ancillary to manufacture. Since there is no process of manufacture, no central excise duty can be charged. The submission of the respondent deserves to be accepted - We do not agree with the revenue that segregation of scrap to remove the unwanted components from the lead scrap is a process of manufacture. It is only a process of segregation of raw materials; manufacture begins thereafter. Therefore, no duty can be charged on the plastic and other scrap segregated from the input scrap. CBEC s circular dated 10.05.2016 does not carry the case of Revenue any further. This circular dealt with two questions. First, where a mixed scrap is fed into the foundry and some components of the scrap with higher melting points such as iron, steel, slag, etc. get separated as foundry waste it has been clarified to be a process waste as it arises out of the process. Second, where CENVAT credit availed scrap is segregated before feeding into the plant, the circular clarified that the removed unwanted scrap cannot be treated as removal of inputs as such under Rule 3(5) of the CENVAT Credit Rules, 2004 and therefore, there is no need to reverse the credit - In the present case, no CENVAT credit was availed at all on the input scrap. If duty has to be determined on merits, it needs to be first of all examined if the charging section of the Act applies. Section 3 levies duties of excise on excisable goods produced or manufactured in India. In the factual matrix of this case, the respondent is neither manufacturing nor is it producing the plastic scrap. The plastic scrap already exists and the respondent is only separating it manually from the rest of the scrap. Therefore, even if this circular is considered, no central excise duty can be charged. Appeal of Revenue dismissed.

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• 2023 (2) TMI 137
  CENVAT Credit - allegation of passing cenvat credit fraudulently without accompanying the goods to various manufacturing units as well as other registered dealers - HELD THAT:- The appellant has produced sufficient records in the form of invoices alongwith transport documents and other records showing the receipt of raw-material/input register, RG23A Part-I and also the proof of payment through the banking channel. It is also found in the statement dated 11.08.2016 of Shri Brij Bhusan jain, Accountant of M/s AI and dt. 17.08.2016 of Shri Raj Kumar, Excise in-charge of M/s M/A (copies of which are on record) clearly support the fact that they have actually supplied the goods to the appellant which was used by him in or in relation to the manufacture of the goods. Both the authorities below have not considered the documentary evidence produced by the appellant to prove his case. In LUXMI METAL INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE, DELHI-II [ 2013 (3) TMI 143 - CESTAT NEW DELHI] , it was held that once goods are supplied against proper cenvatable invoice, buyer cannot go beyond that and verify whether registered dealer had purchased the goods legally. Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2023 (2) TMI 136
  Inter-state sale or local sale? - C Forms and other details like Form 402, not produced - demand of pre-deposit - HELD THAT:- The petitioner was not in a position to pay the amount of pre-deposits and had also closed its business and shifted to Rajasthan owing to the fact that, its registration had been cancelled. Our attention is drawn to the order of the Appellate Authority for the year 2010-11 and 2011-12 as also the order dated 29.06.2019 under Section 73 of the VAT Act, whereby the authority concerned had permitted the payment of predeposit of 15% of the tax amount. The First Appellate Authority also had adjudicated the matter and as a substantial reduction from the total demand which had been raised the concerned years. There had been no challenge to the direction of 15% of the tax amount during the pendency of the adjudication. There is no reason as to why in the case of the very assessee when for the assessment years 2010-11 and 2011-12 the authority concerned had permitted the payment of pre-deposit of 15% of the tax amount. Without entering into merit of the matters and also the sheer reflects of time also would necessiate for us to intervene and direct the pre-deposit amount to be quantified at the rate of 15% of the tax demand raised by the respondent rather than 15% of the total amount fixed by the Assessing Officer. The impugned order passed by the Tribunal is set aside and matter relegated to the First Appellate Authority for the deposit of 15% of the tax amount within a period of four weeks from the date of receipt of a copy of this order - petition allowed.

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• 2023 (2) TMI 135
  Recovery of tax dues - Right of auction purchaser of the property - Auction of property by the Secured Creditor (Bank) - Seeking lifting of attachment over the property - existence of encumbrance in the nature of government dues of unpaid sales tax - Section 45 of the Gujarat Value Added Tax Act - HELD THAT:- The settled position of law is that the VAT and sales tax dues has no precedence over the dues of the bank for recovery of which the bank exercise powers under the SARFAESI Act. The bank was secured creditor. Section 26 E of the SARFAESI Act provides for priority of secured creditor, stating that notwithstanding anything contained in any other law, after the registration of security interest, the debts due to unsecured creditor shall be paid in priority of all other debts and all revenues, taxes, cesses and other rates payable to the Central Government or State Government or local authority - The charge sought to be created by the sales tax authorities in no way could discount the a priori rights of the bank to recover its dues as the bank was secured creditor. The dues in the nature of sales tax or VAT payable by the original owner cannot claim priority over the dues of the secured creditor. The principle that the state debt or crown debt has no prior claim or the dues payable to the secured creditor is no longer res integra. In BANK OF BIHAR VERSUS STATE OF BIHAR [ 1971 (4) TMI 96 - SUPREME COURT] , the supreme court laid down certain well known principles which were followed by the supreme court in its own judgment in DENA BANK VERSUS BHIKHABHAI PRABHUDAS PAREKH AND CO. AND OTHERS [ 2000 (4) TMI 36 - SUPREME COURT] . The law laid down is that the preferential right of the Crown to recover the debt over the creditors is limited to the class of unsecured creditors. The charge in respect of the property in question created for sales tax dues is of no avail and has no efficacy in law. The property in question was sold by the bank which was a secured creditor, to enforce its secured debt under the SARFAESI Act, of which the petitioners were successful auction purchaser. They were issued sale certificate which was registered to finally become absolute owner of the property. In exercising their capacity as owners, they executed further sale deed dated 15.2.2021 which was registered with the office of Sub-Registrar at No.1169 on 16.2.2021, however the Sub-Registrar refused to return the sale registered sale deed in view of the order of the respondent No.5 Sales Tax Authority on the ground that it had created charge over the properties for the sales tax dues. The respondent No.3 Sub Registrar was wholly unjustified in passing order dated 6.3.2021 to keep the document No.1169 dated 16.2.2021 which was sale deed executed by the petitioners, keeping the same pending and not returning the same to the petitioners - Since the petitioner had purchased in the auction sale conducted by the bank under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 the property travelled in favor of the petitioner free from any encumbrances, order of sales tax officer registering the charge over the property in relation to the sales tax and Value Added Tax payable by original owner of the property had no efficacy in law. Petition allowed.

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