TMI Tax Updates - e-Newsletter
February 8, 2023

Case Laws in this Newsletter:

GST Income Tax Benami Property Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise

Articles

1. MAJOR BUDGET UPDATES ON DIRECT AND INDIRECT TAXES: AT A GLANCE

   By: Dr. Sanjiv Agarwal

2. Detention of goods along with vehicle: Mistake in entering details of the transporter in the e-way bill is human error, No penalty under Section 129 

   By: Rajeev Jain

3. Partnership Firms –ignored entity in matter of Income tax. Attention is desired for incentives and lower rate in a balanced manner taking into provisions for Individuals, AOP , BOI and companies

   By: DEVKUMAR KOTHARI

4. EXTENSION OF CORPORATE INSOLVENCY RESOLUTION PROCESS

   By: DR.MARIAPPAN GOVINDARAJAN

5. Borrower cannot escape from prosecution and criminal liability for the dishonour of cheque

   By: Bimal jain

6. Security/ bank guarantee is necessary for the provisional release of the confiscated goods before adjudication

   By: Bimal jain

News

1. India received highest ever foreign inward remittances in a single year of $89,127 million in FY 2021-22

2. ED seized ₹859.15 crore under PMLA and Rs 189.28 crore under FEMA Act

3. Blockchain Technology (BCT) is one of many promising technologies: RBI

4. Directorate General of GST Intelligence (DGGI) and the National Forensic Sciences University (NFSU) signed a Memorandum of Understanding (MoU) for setting up of digital forensic laboratories

5. Prime Minister, Shri Narendra Modi lays foundation stone to South India’s 1st Industrial Corridor Project, the Tumakuru Industrial Township, as part of National Industrial Corridor programme

6. IBBI Chairperson launches 5th Graduate Insolvency Programme (GIP) Common Entrance Test Process

7. DRI seizes 114MTs of Areca Nuts worth Rs. 8.61 crore smuggled into the country through Tuticorin and Chennai Ports

8. Auction for Sale (re-issue) of (i) ‘6.89% GS 2025’, (ii) ‘7.10% GS 2029’, (iii) ‘7.41% GS 2036’, (iv) ‘7.40% GS 2062’

9. RBI framework for invoicing and payments for international trade in Indian Rupee

10. Pradhan Mantri Mudra Yojana generated 1.12 crore net additional employment from 2015 to 2018

11. Sovereign Green Bonds of Rs.16,000 crore proposed to be issued in the current FY for mobilising resources for green infrastructure projects

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2023/24 - dated 6-2-2023

Enhanced obligations and responsibilities on Qualified Stock Brokers (QSBs)

2. SEBI/HO/DDHS/DDHS-RACPOD1/P/CIR/2023/023 - dated 6-2-2023

Review of Chapter IX – Green Debt Securities of the Operational Circular for issue and listing of Non-Convertible Securities (NCS), Securitised Debt Instruments (SDI), Security Receipts (SR), Municipal Debt Securities and Commercial Paper (CP) dated August 10, 2021 (hereinafter referred to as the ‘NCS Operational Circular’), as amended from time to time

Income Tax

3. 02/2023 - dated 6-2-2023

CORRIGENDUM TO CIRCULAR NO. 23 OF 2022 DATED 03.11.2022 EXPLANATORY NOTES TO FINANCE ACT 2022

Customs

4. 03/2023 - dated 7-2-2023

Amendment in Circular No. 29/2020-Customs dated 22.06.2020 for allowing transhipment of Bangladesh export cargo to third countries through Delhi Air Cargo

Highlights / Catch Notes

GST

• Form GST DRC-01 summary cannot replace formal notice u/s 74(1); violates natural justice, court challenge allowed.

  Case-Laws - HC : Validity of summary of the show cause notice in Form GST DRC-01 - Summary of SCN in Form DRC-01 is not a substitute of SCN u/s 74(1) - The impugned show cause notice in both the cases does not fulfill the ingredients of a proper show- cause notice and thus amounts to violation of principles of natural justice, the challenge is maintainable in exercise of writ jurisdiction of this Court - HC
  Visit to Get Source

  ---

• Petitioner's request to de-freeze account unopposed; Magistrate finds it maintainable, sends case back to Session Judge for review.

  Case-Laws - HC : Rejection of Application for de-freezing the account of the company - The application filed by the petitioner-company for de-freezing the account was not opposed at any time by the prosecution on this ground. Similarly, the application was not rejected by the Magistrate on this ground. Learned Magistrate found the application otherwise maintainable. - Matter restored back to Session Judge for fresh decision - HC
  Visit to Get Source

  ---

Income Tax

• CBDT Ordered to Reassess TDS Refunds After AO Rejects Due to Jurisdiction Issues; New Legal Order Pending.

  Case-Laws - HC : Refund of TDS - applications for condonation of delay in filing returns claiming refund - Looking to the pecuniary jurisdiction, it clearly transpires that the Assessing Officer who was ACIT (TDS); who passed the impugned order of rejection was not having any pecuniary jurisdiction. - CBDT directed to pass a fresh order of refund in accordance with law. - HC
  Visit to Get Source

  ---

• High Court Rules TDS on Directors' Commission u/s 192 Only at Payment, Disallowances Deleted.

  Case-Laws - AT : TDS u/s 194H OR 192 - Disallowance u/s 40(a)(i) - Payment of commission to the Directors - TDS is liable to be deducted u/s 192 only at the time of making payment and this view has since been upheld by the High Court. Accordingly, the disallowance made u/s 40(a)(ia) of the Act in all the three years in respect of commission expenses is liable to be deleted. - AT
  Visit to Get Source

  ---

• Assessing Officer's 20% Disallowance of Employee Expenses Deemed Unlawful Due to Lack of Justification.

  Case-Laws - AT : Employee benefit expenses and other expenses - AO without giving any reason disallowed the expenditure to the tune of 20% on account of employee benefit expenses and other expenses. Therefore, such disallowance made on estimated basis without any cogent reason for the same shall be unlawful and prejudicial to the interest of assessee - AT
  Visit to Get Source

  ---

• Reassessment Allowed u/s 147 Even if AO Previously Addressed Auditor Queries, Audit Objection Still Valid Basis.

  Case-Laws - HC : Reopening of assessment u/s 147 - Merely because at one stage the AO had answered to the queries raised by the Auditor regarding the assessment being in accordance with the provisions of the Act and there being no illegality therein, will not mean that the information in the form of audit objection could not be relied upon to opine that the income chargeable to tax had escaped assessment - HC
  Visit to Get Source

  ---

• Court: Unreasonable to Demand 24-Hour Response After Adjournment Request Silence in Section 147 Assessment Reopening Process.

  Case-Laws - HC : Reopening of assessment u/s 147 - filing of objections to the issuance of notice u/s 148A - The day on which the request is made for adjournment either needs approval or rejection, however, once having kept silence and many days to have passed, it cannot suddenly choose to insist on answering within 24 hours as the other-side would also not be wrong in presuming that such a request is already acceded to - HC
  Visit to Get Source

  ---

• Interest on Outbound Loans to Use LIBOR, Not PLR, for Arm's Length Price, Says Transfer Pricing Officer.

  Case-Laws - AT : TP Adjustment - ALP determination - interest received on outbound loans - LIBOR v/s PLR - the prevailing LIBOR rate should be adopted for the interest received on outbound loans. We therefore direct the Ld. TPO to calculate the interest as per the prevailing LIBOR rates. - AT
  Visit to Get Source

  ---

• Taxpayer's Land Improvement Costs Approved for Capital Gains Calculation; Evidence Requirements Unclear in Assessment Order.

  Case-Laws - AT : Capital gain computation - cost of the improvement of the land - What is the nature of the evidence that the AO desires is not coming out of the assessment order but in any case as it is noticed that the assessee has provided the details of the expenditure, we are of the view that the expenditure is allowable expenditure. - AT
  Visit to Get Source

  ---

• Exemption u/s 11 for lease rent to a family trust analyzed; only excess rent to be taxed per Section 13.

  Case-Laws - AT : Exemption u/s 11 - lease rent paid for land taken on lease for the family trust - Application of section 13(1)(c) r/w 13(3) - only excess rent may be brought to tax in the hands of the assessee and whole of the surplus cannot be brought to tax. - AT
  Visit to Get Source

  ---

• NRI Assessee's Cash Deposits Not Unexplained u/s 69A; No Business Evidence Found in India.

  Case-Laws - AT : Addition u/s 69A - unexplained money - since the assessee is a non-resident Indian and except earning income from fixed deposits, there is no iota of evidence which could indicate that the assessee is carrying out any activity in the nature of business or otherwise to earn income from any other sources in India. Simply suspicion and behavioural pattern of frequent withdrawal by the assessee cannot be the basis of treating cash deposits as unexplained money u/s 69A - AT
  Visit to Get Source

  ---

• Employer Pension Contributions Not Subject to Section 43B Provisions; Managed by State's WBPDCL, Deemed Paid.

  Case-Laws - AT : Delayed employer’s contributions to pension fund - provisions of section 43B of the Act would not be applicable to the assessee and even in the worse case scenario, the provisions of section 43B of the Act were to be applied, then the contribution would be considered as paid as the account was maintained by WBPDCL which is extended arm or instrumentality of the State Govt only. - AT
  Visit to Get Source

  ---

• Interest Cost Imputed for Delayed Payments by Associated Enterprise, Resulting in Financial Advantage and Assessee's Expense.

  Case-Laws - AT : TP Adjustment - interest on receivables - by permitting the AE to hold on to the payments, the assessee has allowed the AE to reap financial benefit at the cost of assessee, as, the assessee is incurring interest cost. Therefore, interest cost has to be imputed on delay in receiving outstanding invoice amounts. - AT
  Visit to Get Source

  ---

• Court Rules Unexplained Cash Deposit Not Agricultural Income; Revenue's Additions Deleted Due to Lack of Summons.

  Case-Laws - AT : Unexplained cash deposit - agricultural income or not - genuineness of receipt of cash on sale of Popular tree - Where the Revenue authorities disbelief the contents of the affidavit/confirmation, merely stating so and expressing such disbelief is not sufficient. The PAN number cannot be held to be proof of identity of the buyer. What was stopping the Revenue authorities in calling these persons whose name, address and Aadhar number are on record and recording their statement. - Additions deleted - AT
  Visit to Get Source

  ---

• Section 194A TDS not required on delayed payment charges for trade liabilities under Income Tax Act.

  Case-Laws - AT : TDS u/s 194A - disallowance of delayed payment charges - to be treated as interest for the purpose of TDS or not - Provisions of section 194A has no application to delayed payment charges on trade liability and thus, the assessee does not require to deduct TDS u/s. 194A of the Act. - AT
  Visit to Get Source

  ---

• Loans Converted to Trust Donations Qualify for Deduction u/s 80G of Income Tax Act.

  Case-Laws - AT : Deduction u/s 80G - assessee converted loans given to Trust in earlier financial year as donations - donations paid by the assessee by conversion of loans into donations comes under the nature of donations paid in cash and thus, the assessee is entitled for deduction u/s.80G of the Act - AT
  Visit to Get Source

  ---

• Court Rules Publisher Payments for Student Referrals as 'Commission' u/s 194H; TDS Deduction Required.

  Case-Laws - AT : TDS u/s 194H - commission or brokerage - referring the students to the booksellers to purchase the textbooks published by the assessee - The substance of the transaction is to be given more importance than its form. The Character of payment is to be analysed. On analyzing the same, the only logical conclusion that could be drawn is that the payments made by the assessee squarely falls under the ambit of ‘commission or brokerage’ in terms of section 194H of the Act. - AT
  Visit to Get Source

  ---

Customs

• Imported Animal Feed Supplements Must Be Classified Under Specific Entries, Not Residuary Ones, Per Rule 3A of Customs Tariff.

  Case-Laws - AAR : Classification of imported goods - products used in the preparation of animal feed supplements - when confronted with a specific classification entry vis-a-vis a residuary classification entry, one must favour the specific entry. In fact, that the mandate of Rule 3A of the General Rules of Interpretation of Customs Tariff. - The product would merit classification under Heading 2936 of the First Schedule to the Customs Tariff Act, 1975. - AAR
  Visit to Get Source

  ---

Corporate Law

• Applicant Challenges Liquidator's Role in Asset Possession and Sale Without Court Permission; Submissions Dismissed.

  Case-Laws - HC : Liquidation proceedings - Right of secured creditors - Both the submissions on behalf of the applicant that the Official Liquidator ought to have taken physical possession of the subject assets, despite the secured creditor having initiated steps to enforce the security interest therein, and before sale respondent No. 3 must have obtained the permission of the Company Court, fell through. - HC
  Visit to Get Source

  ---

IBC

• Secured creditors must file claims by liquidation start date; late claims and extra interest not allowed.

  Case-Laws - AT : Right of secured creditor to recover his dues (during liquidation proceedings) - When a statute provides for liquidation commencement date as a date up to which claims can be filed and proved, no claim thereafter can be entertained by the Liquidator. The amount of interest which was retained by the Appellant claiming to be interest in addition to the claim as filed by it in Form D till the date of realization of receipt of the sale, cannot be permitted to be retained by the Appellant - AT
  Visit to Get Source

  ---

• NCLT Rejects CIRP Application Due to Creditor Negligence; Section 7 Focuses on Debtor's Inability to Pay.

  Case-Laws - AT : Initiation of CIRP - NCLT rejected the application - Financial Creditors - non-disbursement of part of financial assistance sanctioned by the Financial Creditors - contributory negligence on the part of Financial Creditors, which was beyond the scope of inquiry of Section 7 or not - there are ample material that Corporate Debtor is unable to pay its debt and has committed default, the Adjudicating Authority is not required to go into the reasons of default and ignore the real status of the Corporate Debtor and close its eyes to the fact that the Corporate Debtor needs insolvency resolution - AT
  Visit to Get Source

  ---

Service Tax

• Petitioner Eligible Under SVLDRS Scheme: No Final Hearing by June 30, 2019, Per Section 125(1)(c) Instructions for Relief Given.

  Case-Laws - HC : Rejection of SVLDRS - Petitioner could not be called not eligible or excluded to make declaration under the said scheme in view of Section 125(1)(c) of the aforesaid scheme since no final hearing had been taken place on or before the 30th June, 2019, after setting aside of the order-in-original and remanding the matter back by the CESTAT to adjudicating authority concerned for de novo adjudication - respondents authority concerned are directed to grant appropriate relief to the petitioner - HC
  Visit to Get Source

  ---

• Interest Demand Valid Post-CENVAT Reversal; Issued Within Four Months, Not Time-Barred per Section Guidelines.

  Case-Laws - AT : Recovery of interest on reversal of cenvat credit - If a demand has to be issued only for amount of interest, it has to be quantified. And such quantification is possible only after the date of availment of CENVAT credit and the date of reversal are known. Therefore until 6.12.2011 when the appellant has reversed the CENVAT credit, no notice could have been issued demanding any amount as interest. Because it has to be counted from this date. A letter seeking payment of interest was issued within four months. - it cannot be said to be time barred. - AT
  Visit to Get Source

  ---

Central Excise

• High Court Mistakenly Directs Revenue Appeals to Supreme Court on Stator Manufacturer Liability for Excise Duty.

  Case-Laws - SC : Maintainability of appeal - appropriate forum - High Court or Supreme Court - question is/was whether the respondents can be said to be manufacture of stators or not and therefore liable to pay central excise duty or not. - In the instant case, the dispute has no relation to the rate of duty or the value of the goods - the High Court has committed a very serious error in not entertaining the appeals and relegating the Revenue to prefer the appeals before this Court. - SC
  Visit to Get Source

  ---

• Interest on Differential Duty: Pay from Provisional Duty Date to Final Assessment Completion Date for Goods Removal.

  Case-Laws - SC : Interest on differential duty - payment of duty assessed provisionally - interest would be payable from the due date of payment of provisional duty for the purpose of removal of the goods in question till the date of payment of the balance/differential duty upon final assessment. - SC
  Visit to Get Source

  ---

Case Laws:

• GST

• 2023 (2) TMI 226
  Validity of summary of the show cause notice in Form GST DRC-01 and the summary of the order in GST DRC-07 - summaries in line with the provisions of Section 74 of the JGST Act, 2017 and Rule 142 (1)(a) of the JGST Act, 2017 or not - irregular availment of Input Tax Credit - several consignment pertaining to inward supply as well as outward supply, were either shown to have been transported through vehicle bearing no registration number, or registration number bearing to car and 2 wheeler - HELD THAT:- It appears that pursuant to the search conducted by the respondents in the premises of the petitioner-company under Section 67 of the JGST Act two summary of show cause notice in Form DRC-01 were issued, one for the period from 01.07.2017 to 13.8.2018 and another for the period from April, 2018 to June, 2018 under Section 74(1) of the JGST Act. It further transpires that the petitioner submitted a concise reply for both the DRC-01 vide its letter dated 03.10.2018 and finally two separate orders, both dated 14.05.2019, were passed. Subsequently, the petitioner also filed rectification application for both the period and fresh rectified orders were passed in respect of both these tax periods. Now the law is no more res-integra, inasmuch as, Rule 142(1)(a) of the JGST Rules provides that the summary of show cause notice in Form DRC-01 should be issued along with the show cause notice under Section 74(1). The word along with clearly indicates that in a given case show cause notice as well as summary thereof both have to be issued. As per Rule 142(1)(a) of the JGST Rules, the summary of show cause notice has to be issued electronically to keep track of the proceeding initiated against the registered persona whereas a show cause notice need not necessarily be issued electronically. This Court in the case of M/S NKAS Services Pvt. Ltd. vs. State of Jharkhand Ors., [ 2021 (10) TMI 880 - JHARKHAND HIGH COURT] , has taken note of the said position of law and has categorically held that Summary of Show Cause Notice in Form DRC-01 is not a substitute of show cause notice under Section 74(1). Thus, the foundation of the proceeding in both the cases suffers from material irregularity and hence not sustainable being contrary to Section 74(1) of the JGST Act; thus, the subsequent proceedings/impugned Orders cannot sanctify the same. Though, the petitioner submitted their concise reply vide letter dated 03-10-2018; the respondent State cannot take benefit of the said action as summary of show cause notice cannot be considered as a show cause notice as mandated under Section 74(1) of the Act. The impugned show cause notice in both the cases does not fulfill the ingredients of a proper show- cause notice and thus amounts to violation of principles of natural justice, the challenge is maintainable in exercise of writ jurisdiction of this Court - the summary of show-cause notices dated 12.09.2018 issued in Form GST DRC-01 at Annexure-4 (in both cases), the orders dated 14.05.2019 issued under section 74(9) of JGST Act (in both cases) and also the final orders dated 18.10.2021 passed after rectification at Annexure-09 (in both cases), are hereby quashed and set aside. The matter is remanded to the adjudicating authority to pass a fresh order in accordance with law from the stage of issuance of proper show cause notice under Section 74 (1) of the JGST Act.

  ---

• 2023 (2) TMI 225
  Application for de-freezing the account of the company, rejected - rejection of revision application solely on the ground that the petitioner-company could have applied for de-freezing of the account in an appeal filed by the company before the GST Appellate Authority - merits of the case not gone through - non-application of mind - violation of principles of natural justice - HELD THAT:- Perusal of the order would show that the revision was rejected on the ground that the petitioner ought to have moved the application before the Appellate Authority for de-freezing the account. It is further observed in the order that the petitioner ought to have moved separate application before the GST Appellate Authority and not before the trial Court. In my view, this observation is out of the context. The application filed by the petitioner-company for de-freezing the account was not opposed at any time by the prosecution on this ground. Similarly, the application was not rejected by the Magistrate on this ground. Learned Magistrate found the application otherwise maintainable. The order passed by the learned Additional Sessions Judge, Kahamgaon suffers from non application of the provisions of law and ultimately the non-application of mind to the issue involved in the matter. Therefore, this order is required to be set aside. Petition allowed.

  ---

• Income Tax

• 2023 (2) TMI 224
  Refund of TDS - applications for condonation of delay in filing returns claiming refund - ACIT (TDS) Jurisdiction to pass the order - Deduction of TDS in the name of their contractors/sub-contractors - Whether the contractors/ sub-contractors have availed of its credit in their tax returns? - HELD THAT:- Circular No.9/2015 dated 9.6.2015 issued by the Income Tax Department itself, it clearly transpires that it was in supersession of all earlier Instructions /Circulars/Guidelines issued by the Central Board of Direct Taxes (the Board) from time to time dealing with the applications for condonation of delay in filing returns claiming refund. Thus, the reliance of Circular No. 2 of 2011 dated 27.04.2011 by the counsel for the revenue had lost its force on issuance of the Circular No. 9/2015 on the subject. Further, in the Circular No.9/2015, pecuniary limit is specifically indicated in clause No.2 wherein it is specifically stated that the application/claims for amount exceeding Rs.50 lakhs shall be considered by the Board. Principal Commissioners of Income Tax/Commissioners of Income-tax shall be vested with the powers of acceptance/rejection of such applications/claims if the amount of such claims is not more than Rs.10 lakhs for any one assessment year and the Principal Chief Commissioners of Income- tax/Chief Commissioners of Income-tax shall be vested with the powers of acceptance/rejection of such application/claims if the amount of such claims exceeds of Rs.10 lakhs but is not more than Rs.50 lakhs for any one assessment year. Looking to the pecuniary jurisdiction, it clearly transpires that the Assessing Officer who was ACIT (TDS); who passed the impugned order of rejection was not having any pecuniary jurisdiction. Further, the letter dated 10.12.2020 by which the Principal Chief Commissioner of Income Tax, New Delhi has referred the matter to the Principal Chief Commissioner of Income Tax, Bihar Jharkhand, Patna cannot be ignored, inasmuch as, the competent authority to pass the refund order was CBDT and it is only due to this reason the Principal Chief Commissioner of Income Tax, New Delhi has referred the matter to the Principal Chief Commissioner of Income Tax, Bihar Jharkhand, Patna; as it fell within territorial jurisdiction to process the application. It is but obvious that to pass any order by the Board, they will require the documents. Thereafter, this Court is of the firm opinion that in order to pass a final order as per Circular No.9/2015, the Board was the Competent Authority. In any view of the matter, the ACIT (TDS) who passed the impugned order was having no jurisdiction in view of the pecuniary limit fixed vide Circular No.9/2015. At the cost of repetition, it is stated that the Circular No.9/2015 was in supersession of all earlier Instructions/Circulars/Guidelines issued by the Central Board of Direct Taxes from time-to-time to deal with the applications for condonation of delay in filing returns claiming refund. The reasons recorded the impugned order is quashed on the point of lack of jurisdiction and the case of the petitioner is remitted to the Board to pass a fresh order of refund in accordance with law. Consequently, the order / communication dated 09.12.2020, passed by Respondent No.2, is hereby, quashed and set aside. The matter is remitted to Central Board of Direct Taxes (CBDT), to pass an order on the claim of Refund after going through the relevant documents of the Case also taking in consideration the show-cause Notice dated 15.04.2009 issued by the Revenue which according to the petitioner remained unadjudicated.

  ---

• 2023 (2) TMI 223
  Unexplained credit entries in capital account u/s 68 - assessee failed to establish the genuineness of transaction and creditworthiness of the lender parties from whom partners of the firm have received unsecured loan - HELD THAT:- Creditworthiness or financial strength of the creditor can be proved by producing the bank statement of the creditor showing that it had sufficient balance in its accounts to enable it to advance money to the assessee. Genuineness of the transaction is to be demonstrated by showing that the assessee had, in fact, received money from the said creditor and it came from the coffers of that very creditor. The Division Bench of Delhi High Court in the case of CIT vs. Kamdhenu Steels and Alloys Ltd. [ 2011 (12) TMI 394 - DELHI HIGH COURT ] held that when the money is received by cheque and is transmitted through banking or other indisputable channels, genuineness of transaction would be proved. Once these documents are produced, the onus cast on the assessee can be said to have been satisfactorily discharged. Thereafter, it is for the AO to scrutinize the same and in case he nurtures any doubt about the veracity of these documents, to probe the matter further. However, to discredit the documents produced by the assessee on the aforesaid aspects, there has to be some cogent reasons and materials for the assessing officer and he cannot go into the realm of suspicion. AO cannot burden the assessee with tax liability merely on the ground that summons issued to the creditors were returned back with the endorsement not traceable. CIT(A) noted that in the assessee`s case, once the assessee had produced all documents establishing the identity and capacity of creditors of creditors and genuineness of transactions, the initial onus cast upon the assessee was discharged and the onus shifted to the assessing officer to bring material on record to the effect that in spite of identity and creditworthiness of the creditor being proved, the transaction was still not genuine. However, the assessing officer has not made any further inquiries and has not brought only material on record to controvert the documentary evidence submitted by the assessee. CIT(A) noted that AO was not justified in treating as unexplained cash credit. Assessee has satisfactory explained the source of the introduction of capital - Hence, the addition made by the assessing officer was deleted by ld CIT(A). That being so, we decline to interfere with the order of CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue are dismissed.

  ---

• 2023 (2) TMI 222
  TDS u/s 194H OR 192 - Disallowance u/s 40(a)(i) - commission expenses - assessee contended that the commission expenses are in the nature of Salary paid to the directors and hence TDS provisions of sec. 194H of the Act will not apply to these payments - HELD THAT:- As relying INDOFIL INDUSTRIES LIMITED [ 2021 (12) TMI 830 - BOMBAY HIGH COURT] we hold that the assessee is liable to deduct tax at source in respect of commission expenses payable to the whole time directors u/s 192 only, as the same shall form part of their salary payment only. CIT(A) has given a finding that the assessee has deducted tax at source on the commission expenses at the time of making payment in the succeeding year. Tribunal in the earlier years has specifically held that the TDS is liable to be deducted u/s 192 only at the time of making payment and this view has since been upheld by the High Court. Accordingly, the disallowance made u/s 40(a)(ia) of the Act in all the three years in respect of commission expenses is liable to be deleted. We order accordingly.

  ---

• 2023 (2) TMI 221
  Addition u/s 68 - unexplained cash credit for non fulfilling the conditions thereof - CIT-A deleted the addition - HELD THAT:- The assesse has furnished all the evidences proving identity and creditworthiness of the investors and genuineness of the transactions but AO has not commented on these evidences filed by the assessee. AO simply harped on the non production of managing directors of the share subscribing companies to make the addition which is not correct. CIT(A) has passed a very reasoned and speaking order discussing all facts and satisfaction of all the ingredients of section 68 of the Act while allowing the relief as stated above - we are inclined to uphold the order of Ld. CIT(A) by dismissing ground no. 1 of the revenue. Employee benefit expenses and other expenses - Disallowance of expenditure to the tune of 20% - CIT(A) restricted such expenditure to the tune of 10% - HELD THAT:- We have noticed that the assessee company has submitted its copy of audited profit loss account before the ld. AO and the ld. AO without giving any reason disallowed the expenditure to the tune of 20% on account of employee benefit expenses and other expenses. Therefore, such disallowance made on estimated basis without any cogent reason for the same shall be unlawful and prejudicial to the interest of assessee and while considering this aspect, the ld. CIT(A) has rightly decided the issue by disallowing the expenditure to the tune of 10% in the hands of assessee. As such we do not find any infirmity in the order passed by the ld. CIT(A) - Decided against revenue.

  ---

• 2023 (2) TMI 220
  TP Adjustment - adjustment with respect to the arm s length price for technical assistance received by the appellant from Colgate Palmolive Company, USA ( CP US ) - as argued assessee is not an associated enterprise of the Colgate Palmolive USA, and as such the question of ALP adjustment does not arrive - CIT(A) held that the assessee and the Colgate Palmolive are associated enterprise by virtue of section 92B(2) and ALP was warranted - HELD THAT:- As learned counsel rightly points out once its factual aspect which permeates from through different assessment years has been found one way on the other and the parties have allowed that position to be sustained by not challenging the order it would not at all be appropriate to allow that position to be changed in the subsequent year, as was held Hon ble Supreme Court in its landmark judgment in the case of Radhasoami Satsang ( 1991 (11) TMI 2 - SUPREME COURT] . As when on a factual aspect there is an unchallenged and undisputed finding holding a particular position it would not normally be appropriate for the same to be disturbed. We find that is no reason to dispute the assessee contention that no ALP adjustment in respect of the similar payments made for the assessment years 2001-02, 2002-03 2003-04 and that the relief granted by the learned CIT(A) on this point when the adjustments were made in the assessment year 2004-05 has not been challenged. In these circumstances and for the short reason alone in our considered view the impugned ALP adjustment must be deleted. As for the DR apprehension about the factual basis of the relief being so granted being incorrect, there are appropriate remedial measures prescribed by the law. What we have decided is this is based on the material before us and we have no reason to dispute the correctness of validity of the statements being made before us and the documents being filed before us unless specific cogent reasons are pointed out for the same.

  ---

• 2023 (2) TMI 212
  Rectification of mistake u/s 254 - Period of limitation - whether miscellaneous application under section 254 (2) of the I.T. Act was filed within a period of four years from the date of communication? - Scope of amendment - HELD THAT:- The effect of amendment as amended w.e.f. 01.06.2016 by Finance Act, 2016 is that prior to amendment of Section 254(2), the assessee could bring to the notice of the appellate tribunal within 4 years from the date of the order for rectifying any mistake apparent from the record but after the amendment of the said section w.e.f. 01.06.2016, the same could be brought to the notice of the appellate tribunal within 6 months from the end of the month in which the order was passed. Appellant had filed the miscellaneous application much prior to amendment made in section 254 (2) of the Act w.e.f. 01.06.2016, but the Tribunal, in the impugned order, for the purpose of dismissing the said miscellaneous application filed by the appellant has wrongly relied upon an order passed by Mumbai Bench of Tribunal in the case of DCIT Vs. Hita Land Private Ltd. Ors, [ 2017 (4) TMI 1256 - ITAT MUMBAI] . As in the instant case the appellant had filed miscellaneous application on 03.06.2014 i.e., much before said amendment dated 01.06.2016, therefore, in the impugned order the learned tribunal has wrongly mentioned that facts of the instant case and facts of the case of Hita Land Private Ltd. [ 2017 (4) TMI 1256 - ITAT MUMBAI] are similar. The said order passed in Hita Land Private Ltd. [ 2017 (4) TMI 1256 - ITAT MUMBAI] by the Mumbai Bench of I.T.A.T. is in the teeth of a judgment of the Gujarat High Court in the case of Peterplast Synthetics (P.) Ltd. [ 2015 (2) TMI 864 - GUJARAT HIGH COURT] wherein the High Court has held that once it is found that the rectification application u/s 254(2) of the I. T. Act, 1961 has been submitted within a period of four years from the date of actual receipt of the judgment and order passed by the tribunal, which is sought to be reviewed, petitioner is entitled to relief. In the case of Sree Ayyanar Spinning Weaving Mills Ltd. [ 2008 (5) TMI 22 - SUPREME COURT] has an occasion to interpret section 254(2) of the I.T. Act, 1961, wherein the fact in short was that miscellaneous application u/s 254 (2) of the Act was filed well within four years for rectification of the order and it was the Tribunal which took its own time to dispose of the said application and the High Court held that application could not have been entertained by the tribunal beyond four years and the Hon ble Supreme Court set aside the said judgment of High Court. We hold that the order of the tribunal requires interference in view of the fact that the learned tribunal has committed gross error in complying the law prevalent on the date of hearing and not the law prevalent at the date of filing of the miscellaneous application. At the cost of repetition, the judgment relied upon by the learned tribunal has already been distinguished in the preceding paragraphs. Hence, both the substantial questions of law are decided in favour of the assessed. The matter is remitted back to the learned tribunal with a direction to entertain the miscellaneous application filed by the appellant- assessee and decide the same on its own merit in accordance with law after hearing both the parties.

  ---

• 2023 (2) TMI 211
  Reopening of assessment u/s 147 - rejecting the objections raised by the petitioner against issuance of notice u/s 148A(b) - addition u/s 68 - sham sale and purchase of penny stocks - HELD THAT:- As in terms of Section 148A(c) of the Act, order was passed u/s 148A(d) and a notice under Section 148 of the Act was issued calling upon the petitioner to file his return on the prescribed form for the assessment year 2015-16. It is the aforesaid show cause notice which is under challenge in the present petition. The order under Section 148(d) of the Act as annexed with the aforesaid notice specifically refers to the audit objection as the information on the basis of which proceedings were initiated. The information is specific. From the information it was evident that the petitioner was indulging in Hawala activities/transactions. As specifically mentioned that the material as referred to in the audit objection was not considered at the time of initial assessment. The petitioner had not explained the entries as put to him in the show cause notice issued u/s 148(b) of the Act. His reply was based only on technicalities. The unverified and unexplained transactions are to the tune of Rs.156,45,19,154/-. Assessment framed u/s 153A - Second proviso to Section 153A of the Act will not come to the rescue of the petitioner for the reason that in terms thereof assessment or re-assessment pending for the assessment years in question on the date of initiation of search u/s 132 or making requisition u/s 132A of the Act shall abate. Admittedly, in the case in hand present re-assessment proceedings were not pending on the date when search was carried out at the premises of the petitioner. Notice in the case in hand for initiating re-assessment proceeding was issued on April 24, 2022 whereas search was carried out on August 31, 2015. As to whether an audit objection can constitute information on the basis of which re-assessment proceeding can be initiated, reference can be made to Explanation 1, Clause (ii) to second proviso of Section 148 of the Act. The aforesaid provision clearly provides that any audit objection to the effect that assessment in case of assessee for the relevant assessment year has not been made in accordance with the provisions of the Act is included in the term information regarding escaped assessment . In the case in hand, it is not a matter of dispute that there is an audit objection raised that the assessment of assessee has not been framed properly in accordance with the provisions of the Act. It is a case where petitioner was indulging in providing accommodation entries. The text messages recovered from his mobile phone clearly corroborated the modus operandi adopted by the petitioner. Merely because at one stage the AO had answered to the queries raised by the Auditor regarding the assessment being in accordance with the provisions of the Act and there being no illegality therein, will not mean that the information in the form of audit objection could not be relied upon to opine that the income chargeable to tax had escaped assessment. Existence or non-existence of information can be subject matter of litigation but not the sufficiency thereof. Similar issue came up for consideration before Gujarat High Court in Krishna Developers and Company [ 2017 (8) TMI 241 - GUJARAT HIGH COURT ] wherein the Court considered a case where original assessment of the assessee was set aside on technical ground that notice under Section 143(2) of the Act was not served. The argument raised by assessee was that original assessment having failed on the ground of nonissuance of mandatory notice for scrutiny, initiation of proceedings under Section 147/148 was illegal as object was only to cure the defect. The said contention was rejected and the petition was dismissed by the Division Bench of the Gujarat High Court observing that merely on the ground that the reasons recorded by the Assessing Officer were same on the basis of which Assessing Officer has initially decided to make addition but failed as the order was set aside on technical ground would not preclude him from carrying out the exercise of reopening of assessment. It is the settled position of law that prima facie availability of material is sufficient for reopening of the reassessment proceedings and the sufficiency and correctness of the material is not to be considered at that stage. In the case of Raymond Woollen Mills Ltd. [ 1997 (12) TMI 12 - SUPREME COURT ] even though it was a case where reasons were required to be recorded in writing, Hon ble the Supreme Court opined that only prima facie material has to be seen on the basis of which the Department could reopen the case. Sufficiency or correctness of the material is not to be considered. The present case cannot be said to be a case of change of opinion for the reason that there is no finding recorded in the earlier assessment order passed under Section 153A of the Act, which was set aside on technical ground of non approval of the competent authority in terms of Section 153D of the Act.

  ---

• 2023 (2) TMI 210
  Reopening of assessment u/s 147 - Petitioner sought adjournment of atleast 15 days to file objections to the issuance of notice u/s 148A - specific request made of 15 days on the ground that the tax consultant was busy in time barring assessment proceedings - HELD THAT:-This Court in case of Gandhi Reality [ 2021 (12) TMI 313 - GUJARAT HIGH COURT] has in detail dealt with this issue to hold that there has to be sufficient amount of opportunity to be given to the assessee. To choose not to reply and respond to the request and to then bring a surprise any time in between is something which this Court totally and completely disapproves. While acting as quasi judicial authority, it is expected to follow the principles, which are very well established and one of them is giving opportunity to the parties and to follow the procedure in accordance with law. The day on which the request is made either needs approval or rejection, however, once having kept silence and many days to have passed, it cannot suddenly choose to insist on answering within 24 hours as the other-side would also not be wrong in presuming that such a request is already acceded to and therefore, by 11.04.2022 it was required to file the reply. Had this been a case where he could have asked for a time beyond 11.04.2022 or it would not have been ready by 11.04.2022, the revenue could always contend that the time as per the request of the petitioner was available and yet it was not ready with the answer and in such an eventuality, the Court could have noted the circumstances differently, which is not the case here. Therefore, this needs to be construed and held to be the process which is in violation of the principles natural justice and hence, the order of assessment deserves to be quashed by warranting interference at the hands of the Court. Needless to say that the process is to be initiated from the stage where it has been left. Let the opportunity of personal hearing be granted or intimated to the petitioner. The matter be disposed of in accordance with law.

  ---

• 2023 (2) TMI 209
  Addition u/s 68 - unexplained cash credit - HELD THAT:- AR has produced several documents to prove the genuineness of the transaction such as ledger of Array Export and Investment Pvt. Ltd. and MMB Steel India Pvt. Ltd. which reflects that the amount has been paid in installments in stage by stage depending upon the construction of the building. Further assessee has also produced flat buyers agreement in respect of Array Export and Investment Pvt. Ltd. and MMB Steel India Pvt. Ltd. Thus the amount has been paid by the two parties i.e. Array Export and Investment Pvt. Ltd. and MMB Steel India Pvt. Ltd. as advanced sale consideration for purchase of Flat which has been conclusively proved by the assessee. Therefore, in our opinion, the addition made by the Ld. A.O. u/s 68 is not called for. Accordingly, the addition made by the A.O. which was sustained by the Ld.CIT(A) u/s 68 of the Act is hereby deleted, the Ground No. 1 of the assessee is allowed. Disallowing the deduction of dividend income - A.O. on perusal of the assessee s computation of income found that the assessee had decreased the dividend on unit of mutual fund/shares (offered for tax earlier) as cost of sales - A.O. was of the opinion that the tax exempt income even if not inventorised earlier would not had yielded any tax. Therefore, made addition - HELD THAT:- During the assessment proceedings the Ld. A.O. found that the assessee company had decreased the dividend on unit of mutual funds/shares (offered for tax earlier) as cost of sale. The assessee was also confronted by the A.O. that the benefit of the amount which is taxed exempt cannot be taken again. In this regard, the A.O. has observed that tax exempt income even if not inventorised earlier would not have yielded any tax. Therefore, made the addition which was sustained by the Ld. CIT(A). Considering the facts of the case Ground No. 2 of the Assessee is dismissed.

  ---

• 2023 (2) TMI 208
  Short term capital gain - sum received by it as partner on retirement from partnership firm - As contended alleged capital gain arose as sum received by the assessee as partner on retirement from partnership firm and, therefore, the same is exempt u/s 10(2a) - HELD THAT:- This Tribunal, in [ 2019 (6) TMI 845 - ITAT DELHI ] held that the assessee is not liable to any capital gain tax on account of sum received by it as partner on retirement from partnership firm, there remains nothing form computation of capital gain tax and, accordingly, the Assessing Officer is directed to delete the impugned addition. - Decided against revenue.

  ---

• 2023 (2) TMI 207
  TP Adjustment - ALP determination - interest received on outbound loans - LIBOR v/s PLR - HELD THAT:- These loans were given solely for the business expediency and business convenience but not with the aim of earning interest from the subsidiary companies. Various Hon ble Courts have held that the foreign currency loans to foreign subsidiary companies, the ALP should be computed based on the market determined interest applicable to the currency in which the loan has to be repaid ie., on LIBOR and not on PLR. The Hon ble Delhi High Court in the case of CIT vs. Cotton Naturals India (P) Ltd [ 2015 (3) TMI 1031 - DELHI HIGH COURT ] held that for outbound loans the LIBOR rate should adopted but not PLR of Indian Banks. It was also established by the assessee that the loans were given for the purpose of carrying on the business and not with an intention of earning interest. Therefore, we are of the considered view that in the instant case, the prevailing LIBOR rate should be adopted for the interest received on outbound loans. We therefore direct the Ld. TPO to calculate the interest as per the prevailing LIBOR rates. Thus, this ground raised by the assessee is allowed.

  ---

• 2023 (2) TMI 206
  Disallowance u/s 80IA - Disallowance of claim by treating the assessee is a work contractor and not a developer by Revenue - whether the assessee is a developer or works contractor as the assessee merely executed the contract for the various sites awarded by the various entities as of the ultimate view of the Revenue and the claim made by the assessee u/s 80IA(4) has, therefore, been rejected? - HELD THAT:- As perusal of various clauses of Tender documents and case laws relied upon by both the parties, it reveals that the tender work under consideration are not for a specific work, rather they are for development facility as a whole. The responsibility is fully assigned to the developer for execution and completion of the work. Various stipulations contained in the Tender documents demonstrate various risks undertaken by the assessee for execution of the project work awarded by the competent authority in terms of financial resources, manpower deployment, both technical and administrative expertise, drawing and designing of the project specifications and getting approval from the competent authority, safety and security of project and human resources, compliances of various statutory rules and laws. Therefore, merely because in the agreement for development of infrastructure facility, assessee is referred to as contractor or because if some basic specifications are laid down, it does not detract the assessee from the position of being a developer, nor will deprive the assessee from claiming deduction u/s.80IA(4) - As such, looking to the overall aspects of work undertaken by the assessee we can safely come to the conclusion that the assessee is engaged in development of the infrastructure facility and therefore, a developer, which entails the assessee to claim benefits u/s 80IA(4) - Thus, the issue of claim of deduction u/s 80IA(4) of the Act is allowed in favour of the assessee and against the Revenue. This common ground raised in all the appeals are accordingly disposed of. Additions made in the respective year are deleted Interest income claimed to be eligible for deduction u/s 80IA(4) - particular interest is on the mandatory fixed deposits as security and bank guarantee - HELD THAT:- We find that while granting relief on the identical issue of bank interest on bank guarantee in favour of the assessee holding said interest income eligible for deduction u/s 80IA(4). We do not find any reason to deviate from the stand taken by the Co-ordinate Bench which has been finally decided by relying on the judgment passed in the case of CIT vs. Shah Alloys Ltd. [ 2016 (8) TMI 1191 - GUJARAT HIGH COURT] whereby the profits of business of the undertaking includes other incidental incomes derived from the business of the undertaking has been accepted as the business income and holding the income earned from deposits as business income eligible for deduction u/s 80IA - We, therefore, respectfully relying upon the same allow this bank interest on bank guarantee as eligible for deduction under Section 80IA(4) of the Act as claimed by the assessee. The addition is, therefore, deleted. This ground of appeal is, therefore, allowed. Disallowance u/s 40(a)(ia) - TDS not paid in due time is the subject matter before us - HELD THAT:- Finance Act, 2010 further rigors of Section 40(a)(ia) of the Act to provide all TDS made during the previous year can be deposited with the Government by the due date of filing of return of income. Further that, the amendment has been made effect from 01.04.2010 and therefore will apply in relation to A.Y. 2010-11 and subsequent year. In that view of the matter, the submission made by the assessee that the TDS since paid before filing of return under Section 139(1) of the Act, the disallowance made by the Revenue is not permissible is found to be acceptable, particularly, in view of the ratio laid down by the Hon ble apex Court [ 2018 (5) TMI 356 - SUPREME COURT] . Therefore, respectfully relying upon the same, we allow this ground of appeal preferred by the assessee by deleting the addition made by the Revenue.

  ---

• 2023 (2) TMI 205
  Deduction of 80P on account depreciation (Protective) - HELD THAT:- After a careful consideration, we are unable to verify certain facts relevant to the issue being agitated, viz. (i) whether and to what extent the buildings/godowns are being used for the activities eligible for 80P deduction or other activities as being claimed before us; and (ii) the treatment given by assessee and accepted by revenue-authorities in the preceding and subsequent assessment-years on this issue. Hence, we think it appropriate to remand this issue back to the file of Ld. AO who shall first verify these aspectsand thereafter take a call on the issue in the light of legal provisions of Income-tax Act, 1961 and the judicial rulings, if any, thereon. That would enable to resolve the assessee s grievance aptly. Needless to mention that the Ld. AO shall give adequate opportunities to the assessee to explain his case. This appeal of assessee is allowed for statistical purpose.

  ---

• 2023 (2) TMI 204
  Deduction u/s 80-ID - income from subletting is shown as income derived from the business of hotel located in the specified area - mere approval is not sufficient as the conditions precedent laid down in sub-section (2) of section 80-ID are not satisfied. Accordingly, he treated the income as income from other sources - CIT-A allowed deduction - HELD THAT:- AO did not consider the fact that as per clause no.6 of the said agreement the business is to be run by the two parties in a coordinate manner and receive their respective share of income from the gross revenue of the hotel and allied services provided. CIT(A) has considered that the Revenue Sharing Agreement has some clauses of inclusion and exclusion of some of the revenues as contractually agreed between the parties for sharing of the income from the hotel which cannot be interpreted to mean that it is letting of property when it is based on the total revenue from the hotel and services. We agree with the finding of the CIT(A). Assessee has submitted report of Chartered Accountant in Form-10CCBBA certifying that the assessee satisfied all the conditions for claiming deduction under section 80-ID of the Act. No adverse comment in this regard has been made by the Ld. AO. We, therefore, uphold the finding of the Ld. CIT(A) that the income shown by the assessee is assessable as income from business and that the expenses claimed by the assessee thereagainst is an allowable deduction. It is also to be noted that the Revenue itself has accepted the claim of the assessee in AYs 2012-13 and 2014-15 - The facts remaining the same for the AY under consideration a different view is not tenable. Finding no substance in the appeal of the Revenue and no infirmity in the order of the Ld. CIT(A), we reject the Revenue s appeal.

  ---

• 2023 (2) TMI 203
  Capital gain computation - Allowability of expenditure in relation to the cost of the improvement of the land - AO had denied the expenditure on the ground that the assessee could not produce any concrete evidence in this regard - HELD THAT:- The expenses are mainly the cost of the sand transported through Hywa and labour charges and dozer charges and roller charges. The assessee having produced the details of the expenditure, the same could not be blindly rejected without examining the said claim. It is noticed that the ld. AO has rejected the assessee s claim demanding more concrete evidence. What is the nature of the evidence that the AO desires is not coming out of the assessment order but in any case as it is noticed that the assessee has provided the details of the expenditure, we are of the view that the expenditure is allowable expenditure. Consequently, the AO is directed to allow the expenditure claimed onwards cost of improvement of the land sold by the assessee. Deduction u/s.54F in respect of the four-storied house building including basement purchased by the assessee - AO has denied the assessee the benefit of the deduction u/s.54F of the Act on the ground that the assessee has purchased a commercial property - HELD THAT:- Clearly the property is being used for residential purpose and the remand report is providing the present scenario in respect of the property also shows that one floor is being used by the assessee as his residential house. This being so, we are of the view that the assessee is entitled to claim u/s 54F in respect of the portion being used by the assessee as his residential house i.e. the area in relation to the first floor of the said building with the portion of the land apportioned thereto. The total area of the building as per the sale deed is 6704 sq.ft. The area of the first floor is 1626 sq.ft., therefore, the assessee would be entitled the benefit of deduction u/s.54F of the Act in respect of (Rs.1,05,00,000 + 7,60,000 + 3,04,542) = Rs.1,15,64,542/- / 6074 x 1626 = Rs.30,95,809/-. This represents about 26.75% of the total investment. Consequently, the AO is directed to grant the assessee the benefit of deduction u/s.54F of the Act in respect of the first floor of the said commercial-cum-residential building purchased by the assessee during the assessment year 2015-2016. Applying the same criteria, the AO is directed to grant the assessee the benefit of deduction u/s.54F of the Act to the extent of 26.75% of the expenditure towards development of house property claimed u/s.54F of the Act for the assessment year 2015-2016 2016-2017. However, this expenditure has not been verified by the AO. For the purpose of verification of the nature of the expenditure for the assessment year 2015-2016 2016-2017, the issue is hereby restored to the file of AO.

  ---

• 2023 (2) TMI 202
  Deduction u/s 80P - interest income derived from cooperative/nationalized banks - lower authorities held assessee as a cooperative bank and not a cooperative credit society eligible for the impugned deduction - HELD THAT:- We find no merit in Revenue s arguments. It is made clear that hon ble apex court s recent landmark decision in Mavilayi Service Co-operative Bank Ltd. [ 2021 (1) TMI 488 - SUPREME COURT] has settled the law in assessee s favour and against the department so far as its status as a credit cooperative society as well as distinction between nominal and regular members is concerned. Revenue s arguments on both these twin aspects are rejected therefore outcome is no different regarding the assessee s interest income derived from cooperative/other banks wherein the tribunal s recent coordinate bench s order in Bhimashankar Sahakari Sakhar Karkhana Ltd. Pune[ 2023 (2) TMI 134 - ITAT PUNE] Revenue is fair enough in not pinpointing any distinction on facts or law so far as the instant issue of sec.80P deduction is concerned. The assessee s instant sole substantive ground hereinabove succeeds.

  ---

• 2023 (2) TMI 201
  Revision u/s 263 - deduction claimed u/s 54B and 54F - HELD THAT:- We observe that the assessee purchased an agricultural land in respect of which deduction was claimed u/s 54B of the Act. We also observe that the assessee made investment towards construction of residential house in respect of which deduction was claimed u/s 54F of the Act. We find that the case of the assessee was selected for Limited Scrutiny for examination of the issue related to Deduction/ Exemption from Capital Gains . We further find that the Ld. AO raised specific queries during the course of assessment proceedings itself requiring the assessee to justify the deduction claimed u/s 54B and 54F of the Act. The queries raised by the Ld. AO were duly replied to by the assessee and ample corroborative documentary evidences were also filed to substantiate the veracity of deductions claimed by the assessee in her income-tax return. The aforesaid facts are duly verifiable on perusal of the notices issued and submissions filed during the course of assessment proceedings. We find that when the original assessment order has been passed under Section 143(3) of the Act by the Ld.AO after due verification of the same issue as raised in the order impugned passed under Section 263 of the Act and that too upon causing exhaustive enquiry and finalising the same after taking a possible view, the invocation of provision of Section 263 on the basis of change of opinion is, thus, not found to be sustainable. We have also found substance in the arguments advanced by AR that the original order needs not to give detailed reason. Further that, when one possible view has been taken by the Ld.AO the said cannot be treated as erroneous and prejudicial to the interest of the Revenue - See NIRMA CHEMICALS WORKS P. LTD. (AND VICE VERSA) [ 2008 (2) TMI 373 - GUJARAT HIGH COURT] and KAMAL GALANI [ 2018 (6) TMI 1052 - GUJARAT HIGH COURT] - Decided in favour of assessee.

  ---

• 2023 (2) TMI 200
  Exemption u/s 11 - invoking the provisions of section 13(1)(d) was that the interest free security deposit was given to the family trust along-with lease rent paid for land taken on lease for the family trust - HELD THAT:- In A.Y. 2014-15[ 2019 (10) TMI 1545 - ITAT CHANDIGARH] .and A.Y. 2015-16 2016-17 [ 2021 (9) TMI 1472 - ITAT CHANDIGARH] we find that under identical facts and circumstances of the case, the AO has determined the impugned transaction of payment of rent to M/s. Lala Daswandi Ram Family Trust as covered under section 13(1)(c) r/w 13(3) of the Act and has worked out excess rent and the same has only been brought to tax. During the course of hearing, AR has also raised alternate contention that the aforesaid findings of the AO for A.Y. 2014-15 and A.Y. 2015-16, which are not under challenge by either of the parties, may be followed for the impugned assessment year and only excess rent may be brought to tax in the hands of the assessee and whole of the surplus cannot be brought to tax. As submitted by the Ld. AR that the same is acceptable to the assessee and the assessee has no objection where the same is directed to be followed for the impugned assessment year.DR has also not raised any objection where the said findings are followed in the instant case. Therefore, AO is directed to tax the excess rent so computed and bring the same to tax as per provisions of section 13(1)(c) r/w 13(3) of the Act and the remaining addition is hereby directed to be deleted. Appeal of the assessee is partly allowed.

  ---

• 2023 (2) TMI 199
  Revisionary proceedings u/s 263 - Whether CIT(A) has erred in allowing assessee s appeal on account of the hon ble ITAT setting aside PCIT s order u/s. 263 whereas the matter being subjudice as the hon ble ITAT decision has not attained finality? - HELD THAT:- The original assessment proceedings were carried out u/s 143(3) of the Act and the same was subject matter of the proceedings carried out u/s 263 of the Act wherein ld. Pr. CIT set aside the assessment order u/s 143(3) of the Act and directed ld. AO to reframe it in light of the directions given in this order u/s 263 of the Act. In compliance thereto, ld. AO carried out the assessment proceedings u/s 143(3) r.w.s. 263 of the Act making addition in the hands of the assessee. These additions were challenged before ld. CIT(A). As far as revisionary proceedings u/s 263 of the Act are concerned, the same were challenged by the assessees before this Tribunal and vide order [ 2020 (2) TMI 1686 - ITAT KOLKATA] the revisionary proceedings were quashed and the assessment order u/s 143(3) of the Act has been restored. Under these given circumstances of the case since revisionary proceedings u/s 263 of the Act being quashed, the order u/s 143(3) r.w.s. 263 of the Act has become infructuous. Since, all the proceedings carried out in pursuance to the revisionary proceedings u/s 263 of the Act have become infructuous, therefore, ld. CIT(A) has rightly allowed the assessee s appeal. Appeals filed by the Revenue are dismissed.

  ---

• 2023 (2) TMI 198
  Addition u/s 69A - unexplained money and disallowance of interest expenditure - AO submitted that the assessee did not file the return of income even though he had taxable income during the year - As submitted that the assessee is a non-resident Indian and therefore, what is the source of such huge amount of cash deposit made during the year - CIT(A), sustained the addition estimating net profit @ 8% on the alleged cash deposit - HELD THAT:- We notice that the assessee is a non-resident Indian and he holds bank accounts in India in which funds are transferred from outside India and also there are transactions carried out during the year in these bank accounts by way of withdrawal of cash, deposit of cash and also issuing cheques and receiving cheques from local parties. On going through the bank statement as well as the cash book, we find that there are regular credits in this bank account through clearing and the assessee has withdrawn the cash on multiple occasions and has deposited also on multiple occasions. Now, why the assessee or the person authorised on its behalf withdrew and deposited the cash cannot be questioned because the assessee was having sufficient balance in the bank as well as cash in hand to explain the said sum. Further, since the assessee is a non-resident Indian and except earning income from fixed deposits, there is no iota of evidence which could indicate that the assessee is carrying out any activity in the nature of business or otherwise to earn income from any other sources in India. Simply suspicion and behavioural pattern of frequent withdrawal by the assessee cannot be the basis of treating cash deposits as unexplained money u/s 69A of the Act and for this proposition we find support from the decision of the coordinate Bench of Lucknow in the case of DCIT vs Smt. Veena Awasthi [ 2018 (12) TMI 206 - ITAT LUCKNOW ] On the overall analysis of the facts and circumstances of the case, examination of the bank statement for FY 2011-12 2012-13 and availability of cash in hand on various dates during the year as well as the availability of cash in the preceding FY 2011-12, we come to a conclusion that firstly, the assessee has successfully explained the source of alleged cash deposits and secondly, ld. CIT(A) erred in treating the frequent transactions in the bank account as those carried out in the course of business and further, ld. CIT(A) erred in estimating the profit @ 8% of the alleged cash deposit without finding any evidence which could show that the assessee is carrying out the business activity. We, therefore, set aside the finding of ld. CIT(A) and delete the addition of unexplained money made by ld. AO u/s 69A and accordingly dismissed the Revenue s ground nos. 1 to 5 and allow the assessee s ground nos. 1 2 raised in the Cross Objection. Disallowance of interest paid on cash credit limits availed by the assessee and claimed against the interest earned on fixed deposits - In this case the assessee has not incurred any expenditure to earn the income on fixed deposits. In case, the assessee had first taken loan and then utilised such amount for earning interest then the interest paid on such loan could have been claimed against the interest income but in the instant case the situation is reverse. For the purpose of Section 57(3) of the Act the assessee can claim an expenditure against the income provided u/s 56 of the Act if it is laid out or expanded wholly and exclusively for the purpose of making or earning such income. Since in the instant case the alleged interest expenditure is not laid out or expanded wholly and exclusively for the purpose of earning interest income on fixed deposits, the same deserves to be disallowed and to this extent finding of ld. AO is confirmed and so far as the grounds raised by the Revenue in ground nos. 6 to 8 are concerned, the same are allowed and the ground no. 3 raised by the assessee in the Cross Objection is dismissed. Taxing net interest income at the beneficial tax rate prescribed in Double Taxation Avoidance Agreement (DTAA) - As from perusal of the above Article we notice that the interest may be taxed in the Contracting State (i.e. in India) in which it arises and according to the law of that State and if the recipient is the beneficial owner of the interest, the tax so charged shall not exceed 5% of the gross amount of the interest if such interest is paid on a loan granted by a bank carrying on a bona fide banking business or by a similar financial institution and @ 12.5% of the gross amount of the interest in all other cases. Now perusal of the above Article 11 of the DTAA between India and UAE, we note that the same is applicable in the case of the assessee and the alleged interest earned on fixed deposit of Rs. 46,36,912/- is liable to be taxed at the beneficial rate i.e. @ 12.5%. Accordingly ground no. 4 raised in the Cross Objection is partly allowed.

  ---

• 2023 (2) TMI 197
  Characterization of receipt - Claim of sales tax incentive - revenue or capital receipt - CIT(A) in deleting an amount which was claimed by the assessee as capital receipt but held the Assessing Officer as revenue receipt - HELD THAT:- CIT(A) after comparing the Maharashtra Incentive Scheme, 1979 with Maharashtra Incentive Scheme, 1993, followed the decision of the Tribunal for AY 2003-04 [ 2009 (12) TMI 945 - ITAT MUMBAI] and his predecessor and held that the sale tax incentive received by the assessee under the new package scheme 1993 is capital in nature. Since, the Tribunal (supra) has allowed the sales tax incentive received under the same scheme under which the assessee has received sales tax incentive in the year under consideration and therefore, issue-in-dispute being squarely covered by the order of the Tribunal (supra), the grounds raised by the Revenue are dismissed. Revision u/s 263 - Revenue seeks to agitate the dismissal of assessment order u/s. 143 consequent to order u/s. 263, of the Act as the order u/s. 263 has been quashed by the ITAT - HELD THAT:- In our opinion, the foundation u/s. 143(3) r.w.s. 263 was order u/s. 263 of the Act, which has already been demolished, then the consequent order passed cannot survive. No infirmity in the finding of the Ld. CIT(A) on the issue-in-dispute. Accordingly, the grounds raised by the Revenue are dismissed.

  ---

• 2023 (2) TMI 196
  Unastertained liability - Difference between the liabilities as on 31.03.2006 and as on 31.03.2007 payable to the financial institution as shown under the head current liabilities and provisions by holding that interest accrued became payable and had not been paid by the assessee - HELD THAT:- As evident from the details as given above that the amount of interest was duly paid in the month of April,2007 and the remaining amount of interest which has been capitalized under the capital work in progress account and was not charged to the profit and loss account at all. Considering the above facts, we are of the view that both the authorities below have failed to appreciate the facts correctly as the said amount of interest accrued which according to both the authorities below became payable was in fact capitalized to the capital work-inprogress and was never charged to the profit and loss account and, therefore, the provisions of section 43B of the Act are not applicable. We accordingly set aside the order of the ld. CIT(Appeals) and direct the ld. Assessing Officer to delete the disallowance - Consequently ground no. 1 is allowed. Delayed employer s contributions to pension fund - assessee maintains two types of funds namely Contributory Provident Fund(CPF) and General Provident fund(GPF) - whether the provisions of section 43B, 36(1)(va) and 40A(7) of the Act are applicable in the case of any contributions/provisions credited in GPF Account of the assesse company? - HELD THAT:- Gratuity as per Gratuity Act is funded with LIC (Gratuity CPF), through creation of trust. Similarly GPF is a separate Fund maintained by the assesse company as per The West Bengal Power Development Corporation Ltd. Employees (Death Cum Retirement) Benefit Regulation, 1992 hereinafter referred to as WBPDCL Employees (Death Cum Retirement) Benefit Regulation, 1992. This fund is maintained for only those employees who opt for defined benefit plans under the WBPDCL regulation In the case of WBPDCL, as discussed, GPF was created by notification in official Gazette under PF Act, 1925 and since, the GPF is a fund under PF Act, 1925 , it is excluded from the ambit of provisions of Recognized Provident Fund by virtue of PART A of Fourth Schedule of Income Tax Act, 1961. So considered these provisions , we find merit in the arguments of AR that provisions of Income Tax Act are not applicable in case of GPF as established by the assessee under PF Act. As perused Rule 22 of the WBPDCL GPF Rules a copy of which is placed at page 95 of the paper book which provides that that all sums paid into the Fund under these Rules shall be credited in the Books of Corporation to an account named The GPF . Further in terms of section 8(2) of the Provident Fund Act, the GPF account is maintained with the Government i.e.(WBPDCL) and hence, the GPF account is maintained with the appellant only and all contributions either by employer or by employee, both are to be considered as paid in the GPF Account with the credit of these contributions. We also note that all the funds as collected under the GPF are invested in the securities strictly in terms of Provident Fund Act. When the ld DR confronted with the query why a corporation which is wholly owned by State Govt and after fulfilling all the conditions has maintained the GPF account under the Provident Fund Act, 1925 after bringing out the necessary notification, no cogent and convincing counter could be made - provisions of section 43B of the Act would not be applicable to the assessee and even in the worse case scenario, the provisions of section 43B of the Act were to be applied, then the contribution would be considered as paid as the account was maintained by WBPDCL which is extended arm or instrumentality of the State Govt only. Accordingly Grounds No. 1 2 are allowed. Disallowance of prior period expenses - whether these expenses crystalized during the year? - HELD THAT:- we find merit in the arguments of the ld. A.R. that these expenses were in fact crystallized in the year as liability on these expenses only crystallized during the year as bills were received in the current year and therefore has to be allowed. The case of the assessee finds force from the decision of Coordinate Bench of this Tribunal in the case of Kellogg India Pvt. Limited [ 2012 (12) TMI 664 - ITAT MUMBAI] wherein it has been held that the prior period expenses was not occurred due to mistake and or omission but arose for expenses booked after cut off date for finalization of accounts due to receipt of bills after the end of financial year and allowable under section 145(1) of the Act. As decided in M/S MAHANAGAR GAS LTD. [ 2013 (7) TMI 118 - BOMBAY HIGH COURT] AO disallowed the expenditure relating to prior period on the ground that as the respondent followed mercantile system of accounting expenditure relatable to an earlier year cannot be allowed as deduction in the assessment year under consideration. Thus an amount was added to the income of the Respondent-assessee. Thus we direct the ld. Assessing Officer to delete the disallowance. Disallowance for fuel and fixed cost by holding the same as unascertained liability and contingent in nature - HELD THAT:- We note that fuel and fixed cost adjustments are unbilled revenue as firmly set out by WBERC. We have perused the audited financial statements and are of the view that the assessee has unbilled income because of fuel cost adjustment and fixed cost adjustment as set out by WBERC. Therefore, the same could not be denied on the ground that the assessee has made provision for unbilled fuel cost and fixed cost adjustment under the revenue from operation and including the same to be taxable under section 115JB of the Act. Further we note that WBERC has passed the order dated 05.09.2013 directing to make adjustment for the same in financial year 2013-14, which is evident from chapter III of the Report which is filed at page no. 246 of the paper book no. 3. Considering the above facts, we are of the view that the ld. CIT(Appeals) has not appreciated the facts correctly and therefore we set aside the order of ld. CIT(Appeals) on this issue and direct the ld. Assessing Officer to delete the addition. Addition of provision for expenses not paid during the year - whether the same liability accrued during the previous year but was paid after the year end and hence allowable? HELD THAT:- We find that undisputedly the provisions for expenses are in respect of expenditure which were relating to the month of March, for which bills were received in the month od April. Subsequently the assessee has accounted for these expenses following the mercantile system of accounting which provides for accounting of income and expenses relating to particular period irrespective of the income is actually received or not or expenses are actually discharged or not. Accordingly we do not find any infirmity in the accounting system followed by the assessee. In our opinion, where the liability has arisen in the accounting year, the deduction has to be allowed, nonetheless the liability may have to be quantitative or discharged at a future date but what should be definite is incurring of liability. The case of the assessee finds force from the decision of Hon ble Apex Court in the case of Bharat Earth Movers[ 2000 (8) TMI 4 - SUPREME COURT] - we set aside the order of ld. CIT(Appeals) and direct the ld. Assessing Officer to delete the disallowance.

  ---

• 2023 (2) TMI 195
  TP Adjustment - addition being interest imputed by TPO on outstanding receivables from the Associated Enterprises (AE) - whether delay in receivable would fall within definition of international transaction ? - assessee is a non resident corporate entity engaged in the business of providing consultancy and advisory services (including project construction and execution thereof) in the field of water management industry and in the year under dispute, the assessee entered into various international transactions with its overseas Associated Enterprises (AE s) - HELD THAT:- In the facts of the present appeal, on perusal of material available on record it is evident, in a number of instances the delay in receiving outstanding amounts against the invoices raised varied between minimum of 17 days to maximum 334 days. Thus, in our view, by permitting the AE to hold on to the payments, the assessee has allowed the AE to reap financial benefit at the cost of assessee, as, the assessee is incurring interest cost. Therefore, interest cost has to be imputed on delay in receiving outstanding invoice amounts. We find merit in the alternative submissions made by the assessee as regards non charging of interest beyond 31.03.2013 and charging interest after allowing normal credit period of 60 days. This is so because, the assessee has demonstrated before us that it has allowed credit period of 60 days to non AE s and other customers. Before us, the assessee has furnished the computation of interest charged for delays relating to the period 01.04.2010 to 31.03.2013 considering normal credit period of 60 days. As per the said computation, the total interest chargeable on six months LIBOR + 400 basis points works out to Rs.2,25,276/. We direct the Assessing Officer to factually verify the aforesaid computation furnished by the assessee and restrict the addition to Rs.2,25,276/-. The ground is partly allowed. Addition to the contract revenue - adopting accounting policy as per accounting standard (AS)-7 the assessee recognized contract revenue from construction contract on percentage of completion basis - HELD THAT:- Assessing officer estimated the budgeted contract cost in an indirect manner by adopting gross margin of 6.9% with regard to all activities of the assessee including all contracts. While deciding the objections on the issue Ld. DRP directed the Assessing Officer to adopt the budgeted contract costs by reducing from the contract the gross profit based on the gross margin of 6.9% alongwith other operating expenses. Before us, it is a common point between the parties that the issue is squarely covered by the decision of the Tribunal in assessee s own case in assessment year 2011-12. [ 2019 (10) TMI 1261 - ITAT DELHI ] wherein as held Assessing Officer has been consistent in accepting the methodology of the assessee adopted consistently following AS-7. Considering the facts of the case in totality in the light of the orders mentioned hereinabove, we do not find any merit in the appeal filed by the Revenue. We also do not find any merit in the methodology adopted by the DRP while dismissing the appeal of the revenue. We direct the Assessing Officer to delete the addition. Disallowance u/s 43B - leave encashment benefit paid to employees during the previous year relevant to assessment year under dispute - deduction was not claimed by the assessee in the return of income - HELD THAT:- Departmental authorities have refused to entertain assessee s claim simply on the ground that the assessee had not claimed the deduction by way of a revised return of income. Now, it is fairly well settled that a claim not made by the assessee in the return of income due to inadvertence can be claimed at appellate stage. In view of the aforesaid, we are inclined to restore the issue to the AO for examining the claim on merits and decide it in accordance with law. We make it clear, we have not expressed any opinion in so far as the merit of the issue is concerned. Assessing Officer must afford a reasonable opportunity of being heard to the assessee while deciding the issue. This ground is allowed for statistical purpose.

  ---

• 2023 (2) TMI 194
  Unexplained cash deposit - agricultural income or not - genuineness of receipt of cash on sale of Popular tree - as submitted that the necessary confirmations of the persons who have purchased the popular trees from the assessee have been submitted during the course of assessment proceedings and which have not been disputed by the Revenue - HELD THAT:- We have gone through the submissions filed by the assessee before the ld. CIT(A) wherein the assessee has submitted the joint affidavit/confirmation from Shri Harchand Khan and Gurinder wherein they have categorically stated that they have purchased popular trees from the assessee for further sale and have made payment in cash totaling to Rs. 9,00,000/- besides photocopies of popular trees grown and sold by the assessee, cash flow statement of his agricultural activities have also been submitted. Nothing has been stated as to what further explanation or documentation is required from the assessee especially given the fact that he is not mandated under law to maintain any regular books of accounts. In my view, the assessee has discharged the initial onus cast on him explaining the nature and source of cash deposit being proceeds of sale of popular trees. Where the Revenue authorities disbelief the contents of the affidavit/confirmation, merely stating so and expressing such disbelief is not sufficient. The PAN number cannot be held to be proof of identity of the buyer. What was stopping the Revenue authorities in calling these persons whose name, address and Aadhar number are on record and recording their statement. There is nothing on record in respect of any steps taken in this regard including any direction to the assessee to produce these persons. There is nothing on record that the assessee was involved in any other activities other than agriculture activities. Revenue has to bring some positive evidence rebutting the explanation so furnished and the contents of the affidavit from the buyers so placed on record. In absence thereof, the explanation of the assessee which is duly corroborated cannot be negated and the onus cannot be shifted back on the assessee. Similar findings have been recorded by the Co-ordinate Chandigarh Benches in the case of Shri Mahavir Singh [ 2019 (8) TMI 1854 - ITAT CHANDIGARH] which supports the case of the assessee. Addition so confirmed by the ld. CIT(A) amounting to Rs. 9 lacs is hereby directed to be deleted. Appeal of the assessee is allowed.

  ---

• 2023 (2) TMI 193
  TDS u/s 194A - disallowance of delayed payment charges u/s. 40(a)(ia) for failure to deduct TDS - AO has disallowed a sum towards late payment charges paid to broker on the ground that said payment is in the nature of interest as defined u/s. 2(28A) of the Act and thus, the assessee ought to have deducted TDS u/s. 194A - HELD THAT:- From the definition of interest as per section 2(28A) of the Act, it is very clear that in order to bring any payment within the ambit of the term interest, there should be lender and borrower relationship. In this case, the assessee has paid some charges for delayed payment of amount towards purchase and sale of shares to a broker, without there being any contractual obligation or other terms and conditions applicable to borrowing - said payment cannot be considered as interest for the purpose of section 194A of the Act and consequently, the question of deduction of TDS does not arise. This view is fortified by various judicial precedence, including case of PCIT vs West Bengal Housing Infrastructure Development Corporation Ltd. [ 2018 (9) TMI 114 - CALCUTTA HIGH COURT] where it has been clearly held that since, there is neither any borrowing of money nor incurring of debts on the part of the assessee, interest as defined u/s. 2(28A) of the Act can have no application to said payment. Also in the case of ITO vs T. Rajendran [ 2016 (1) TMI 635 - ITAT CHENNAI] had considered an identical issue and held that, when the impugned payment had a direct link with the trade liability, then same cannot fall within the category of interest as defined u/s. 2(28A) of the Act for the purpose of deduction of tax at source u/s. 194A of the Act. Provisions of section 194A has no application to delayed payment charges on trade liability and thus, the assessee does not require to deduct TDS u/s. 194A of the Act. Consequently, impugned payment cannot be disallowed u/s. 40(a)(ia) - we direct the AO to delete additions made towards disallowance of late payment charges u/s. 40(a)(ia) of the Act. - Decided in favour of assessee. Assessment of profit/loss derived from share trading activity under the head speculative income - HELD THAT:- In order to decide whether transactions of the assessee are come under derivatives or speculative, necessary details needs to be analyzed. In this case, the assessee could not furnish any evidences except summary of statement issued by the stock broker to verify the claim of the assessee to ascertain whether said transactions are derivatives or speculative - broker, ICICI Securities Ltd., also could not furnish any details when the AO has called for certain details from them. In absence of necessary details, the nature of transactions of the assessee cannot be ascertained. In fact, the AO never held that these transactions are speculative in nature, however arrived at a reasonable conclusion on the basis of ITR information and non-availability of information to verify the claim of the assessee. Therefore, we are of the considered view that, the issue needs to go back to the file of the AO for further verification to ascertain the nature of transactions. As regards, the arguments of assessee in light of various judicial precedence, we find that the ratios laid down by courts and tribunals cannot be read in isolation with context under which said ratio has been rendered. We are of the considered view that the issue needs to go back to the file of the AO and thus, we set aside the issue to the file of the AO and direct the AO to verify the issue in light of various evidences, including obtaining necessary evidence from broker, ICICI Securities Ltd. The assessee is also directed to furnish necessary evidence to justify her claim. Appeal filed by the assessee is treated as allowed for statistical purposes.

  ---

• 2023 (2) TMI 192
  Deduction u/s 80G - Trust, is registered u/s.12AA of the Act u/s.80G - assessee has paid donation partly through bank for the relevant assessment year and partly converted loans given to Trust in earlier financial year as donations for the impugned assessment years - AO treated donations converted out of loans given in earlier financial years as donations in kind and denied deduction - HELD THAT:- We ourselves do not subscribe to the reasons given by the AO to treat donations given out of conversion of loan given in earlier financial years as donations in kind to deny the benefit of deduction u/s.80G of the Act, for simple reason that donations paid in cash and donations paid in kind are entirely different. Donations paid in kind is something which is paid in the form of some goods and articles, whereas, donations paid in cash means any payment by cash or by cheque or by any electronic mode of transfer of funds. In this case, there is no dispute with regard to the fact that the assessee had given loans to Trust in earlier financial years through proper banking channel and further, said loans have been converted into donations during the impugned assessment years. Therefore,donations paid by the assessee by conversion of loans into donations comes under the nature of donations paid in cash and thus, the assessee is entitled for deduction u/s.80G of the Act. This view is fortified by the decision of the ITAT Allahabad Bench in the case of M/s.General Capital and Holding Co. Pvt. Ltd [ 2018 (2) TMI 1091 - ITAT AHMEDABAD] where the Tribunal after considering relevant facts held that conversion of loans given in earlier financial years into donations are eligible for the benefit of deduction u/s.80G. In this view of the matter and considering the facts and circumstances of the cases, we are of the considered view that the assessee is entitled for deduction u/s.80G of the Act, towards donations paid to Trust, including amount paid during the previous year and also amount paid out of loans given in earlier financial years. Therefore, we direct the AO to allow deduction u/s.80G of the Act, as claimed by the assessee for all assessment years.

  ---

• 2023 (2) TMI 191
  Deduction u/s 10B - directors of STPI as competent authority for granting approval or not? - HELD THAT:- As following the decision of in the case of Indus Teqsite (P) Ltd vs DCIT [ 2021 (9) TMI 473 - MADRAS HIGH COURT] we are of the considered view that, the assessee is entitled for deduction u/s. 10B towards profit derived from STPI unit. CIT(A) after considering the relevant facts has rightly allowed deduction as claimed by the assessee and thus, we are inclined to uphold the findings of the CIT(A) and reject ground taken by the Revenue. Method of computation of deduction u/s. 10B of the Act, although the Revenue is not disputing the ratio laid in the case of CIT vs Yokogawa India Ltd [ 2016 (12) TMI 881 - SUPREME COURT] with regard to the computation of eligible profit before allowing set off of losses of other units, but disputed the present case in light of different sections under which said deduction has been claimed. According to the Revenue, the Hon ble Supreme Court has considered the provisions of section 10A, whereas in the present case, the assessee has claimed deduction u/s. 10B - In our considered view, the arguments of the Revenue is fallacious for the simple reason that provisions of section 10A 10B of the Act both are deduction provisions which operates under same set of terms and conditions and thus, the ratio laid down in the case of CIT vs Yokogawa India Ltd [ 2016 (12) TMI 881 - SUPREME COURT] squarely applies for computation of eligible profit in terms of provisions of section 10B of the Act also - there is no error in the reasons given by the ld. CIT(A) to direct the AO to compute eligible profit of unit claiming deduction u/s. 10B of the Act, without allowing set off of losses of other unit or brought forward losses of earlier years, and thus, we reject ground taken by the revenue on this issue also. Decided against revenue.

  ---

• 2023 (2) TMI 190
  TDS u/s 194H - commission or brokerage - referring the students to the booksellers to purchase the textbooks published by the assessee - support services - Whether recipients had disclosed the receipts from the assessee in their returns of income? - HELD THAT:- The assessee had made payment of School support services to various schools / societies for the services rendered by them to the assessee by way of referring the students to the booksellers to purchase the textbooks published by the assessee. For the reference made by the schools to the students, it would not be possible for the booksellers to sell the textbooks published by the assessee. Hence but for this reference from the schools, the assessee s profitability could not have been enhanced. Hence we hold that the payment of school support services is an expenditure wholly and exclusively incurred for the purpose of business of the assessee. The substance of the transaction is to be given more importance than its form. The Character of payment is to be analysed. On analyzing the same, the only logical conclusion that could be drawn is that the payments made by the assessee squarely falls under the ambit of commission or brokerage in terms of section 194H of the Act. The case law relied upon by the ld. AR of CIT vs Intas Pharmaceuticals Ltd [ 2021 (8) TMI 1005 - GUJARAT HIGH COURT] is factually distinguishable and does not advance the case of the assessee herein. Hence it could be safely concluded that the assessee is bound to deduct tax at source, failure of which , would be invited with disallowance u/s 40(a)(ia) of the Act. We find lot of force in the alternative argument advanced by the ld.AR before us that in view of second proviso to section 40(a)(ia) of the Act, since the payees / recipients had disclosed the said receipts in their returns of income, no disallowance should be made in the hands of the assessee payer. In view of this second proviso, we direct the ld. AO to make factual verification as to whether the recipients had duly disclosed the subject mentioned receipts in their returns of income. The assessee is directed to furnish the necessary details in this regard in the prescribed form. If on verification, it is found that the recipients had disclosed the receipts from the assessee in their returns of income, even if the entire income of the recipients is exempt under the provisions of the Act in their hands, still the assessee cannot be treated as an assessee in default and consequentially the disallowance u/s 40(a)(ia) of the Act made in the hands of the assessee payer would have to be deleted. Accordingly, the revised grounds raised by the assessee are disposed off in the abovementioned manner. Appeal of the assessee is partly allowed for statistical purposes.

  ---

• 2023 (2) TMI 189
  TP Adjustment on account of technical consultancy fees - HELD THAT:- A.Y. 2009-10 and 2010-11 the order of the co-ordinate bench [ 2016 (3) TMI 1105 - ITAT MUMBAI ] wherein the Hon ble Bombay High Court in its order [ 2019 (9) TMI 1506 - BOMBAY HIGH COURT ] in Question No. 2(b) the deletion of the adjustment on account of payment of technical fees aggregated with other international transaction and applying TNMM was upheld. We also find that for A.Y. 2003-04 this issue is decided in favor of the assessee. In view of the above, no infirmity in the direction of the ld. Dispute Resolution Panel in deleting the adjustment of Rs.3,03,90,000/- on account of technical consultancy fees. Thus, Ground No. 1 of appeal of AO is dismissed. Disallowance u/s. 2(24)(x) r.w.s. 36(1)(va) - late payment of employees contribution to the credit of respective authorities - HELD THAT:- We find that now this issued is squarely covered against the assessee by decision of the Hon ble Supreme Court in case of Checkmate Services Private Limited [ 2022 (10) TMI 617 - SUPREME COURT ] Therefore, now the direction of the ld. Dispute Resolution Panel is not correct. The ld. AO is correct in disallowing the above sum. Addition in respect of purchase of raw material bisoprolol - assessee has adopted Transactional Net Margin Method but the ld. TPO applied CUP Method and obtained data from Unichem Laboratory and worked out the external CUP price Rs.33,086 Per.Kg. - HELD THAT:- We find that identical issue arose in the case of the assessee for A.Y. 2009-10, 2010-11 and [ 2016 (3) TMI 1105 - ITAT MUMBAI ] wherein for order dated 31.03.2016 has upheld the applicability of CUP Method, confirming the rejecting of TNMM as the most appropriate method. The co-ordinate Bench also considered the reasonable quantity of 20kg only. In view of this, principally Co-ordinate Bench decision in respect of the assessee is required to be followed. The Co-ordinate Bench also agreed with the simple average of the prices. The Coordinate bench [ 2016 (3) TMI 1105 - ITAT MUMBAI ] in case of assessee deserves to be followed. We direct the AO/TPO to restrict the adjustment following the order of the co-ordinate bench for A.Y. 2009-10. Accordingly, Ground No. 2 of the appeal is partly allowed. Allowability of sample distributed expenses - AO restricted the disallowance of 50% and with respect to the sales promotion, conference expenses the disallowance was made accordingly - HELD THAT:- For free samples we do not find that same is covered against the assessee by the decision of Honourable SC or it is prohibited by MCI Guidelines. Free sample of medicines supplied to doctors is for promotion of the product of the pharmaceutical company. When a new product is launched, the doctors through the free sample provided, test marketability of new drug launched in the market, give necessary inputs regarding its acceptability etc. of the product. Provision of free samples help impart knowledge to other doctors about the new medicine/product coming into the relevant practice of their profession. Therefore, distribution of free samples is directly related to business promotion activity of the pharmaceutical company. Thus it is wholly and exclusively for the purposes of the business of the company. Providing samples of pharmaceutical products is not prohibited under either the Indian Medical Council (Professional Conduct, Etiquette and Ethics), Regulations 2002 (MCI Code) or the Uniform Code of Pharmaceutical Marketing Practices by the Department of Pharmaceuticals, 2014 (UCPMP) or 2019 Organization of Pharmaceutical Producers of India (OPPI) Code of Practice. UCPMP prescribes guidelines under which medical samples should be dispensed which ensure that they are used strictly for clinical evaluation purposes and each sample shall be marked free medical sample not for sale . Even the draft Uniform Code for Medical Device Marketing Practices (UCMDMP) published for stakeholder consultation on March 16, 2022 lays down guidelines to ensure that medical devices are distributed as samples for evaluation purposes only. The Drugs and Cosmetics Rules, 1945 also recognizes the practice of providing drugs for distribution to medical professionals as a free sample by providing specific labelling requirements, requiring such samples to be labelled with the words Physician s Sample Not to be sold, . Further assessee has submitted the complete details of such expenses therefore disallowing it to the extent of 50 % is not justified when the same issue is covered in favour of the assessee by the decision of the coordinate bench in earlier years. Thus, we direct lower authorities to delete the disallowance of expenses on free samples. Ground no 4 is allowed. Allowability of conference expenses - HELD THAT:- We find that the issued is squarely covered against the assessee by the decision of Apex Laboratories Limited [ 2022 (2) TMI 1114 - SUPREME COURT ] Accordingly, Ground No. 5 is dismissed.

  ---

• Benami Property

• 2023 (2) TMI 219
  Benami properties purchased - Whether the respondent had established that the properties were purchased in the name of the appellant from his funds? - HELD THAT:- Respondent negotiated the transaction and paid the sale consideration. P.W.6 is the lessee in the agricultural land bought in the name of the appellant and he would also state that he had been paying rents to the respondent. Though the appellant had claimed that the properties were purchased from the funds given by the father, she had not filed documents to substantiate the said claim. Further, the evidence of the appellant and D.W.2-her father appear to be improbable for one more reason. The details of the properties and the nature of expenses and the amount of expenses incurred for purchase of the property, paying stamp papers and for construction, could not be stated by both the appellant and her father. Further, the appellant s father has three daughters. There is nothing to suggest as to why he chose only the appellant to purchase the properties in her favour. Therefore, we are of the view that the respondent had established that he had purchased the property from his funds in her name. Hence, for the above said reasons, we hold Point No.1 in favour of the respondent. If the properties were purchased from the funds of the respondent, whether the respondent had rebutted the statutory presumption u/s 3(2) of the Benami Transactions (Prohibition) Act, 1988 that the purchase of properties in the name of the wife is presumed to be for her beneficial interest? - It is the case of the appellant that merely because the respondent was managing properties and paying taxes, it cannot be inferred that the properties were not purchased for the beneficial interest of the appellant. We are in agreement with the said proposition. It is the matter of common knowledge that in an Indian family, the husband normally looks after the property which is in the name of the wife. This alone cannot determine that the husband bought the property for his interest benami in the name of his wife. The Hon ble Apex Court in [ 2015 (10) TMI 2780 - SUPREME COURT] and [ 1963 (12) TMI 31 - SUPREME COURT] had held that merely because the husband is managing the property, it cannot be held that the properties were purchased for his benefit. We are of the view that the reason given by the respondent for purchase of the property in the name of the wife was to avoid wealth tax, cannot be countenanced. An illegality cannot be endorsed by the Court. Evasion of the tax is an illegality and that reason cited by the respondent cannot be accepted. We agree with the view taken by this Court in [ 2003 (3) TMI 777 - MADRAS HIGH COURT] (cited supra) on this aspect. Whether the respondent has proved that the property was purchased by him for his interest in the name of the appellant and not for the beneficial interest of the appellant? - It is well established that the statutory presumption can be rebutted either by adducing independent evidence or by showing inherent improbabilities in the case of the person who is claiming benefit of presumption. It is not the case of the appellant that the property was purchased by the respondent for her beneficial interest. On the other hand, it is her case that she purchased the property with the use of funds provided by her father. As we have held already, the said version of the appellant is improbable. On the other hand, the respondent has clearly established that he had bought the property in the name of the appellant. While that being the case, the plea of the appellant that the respondent bought the property only for her beneficial interest, is a contrary stand. She herself has taken a stand which is contrary to the statutory presumption. We may also refer to the judgment cited by the appellant to impress upon us the guidelines issued by the Hon ble Apex Court to determine whether particular transaction is benami or not. These are the principles laid down not only for purchase of the property in the name of the wife but for determining whether the transaction is benami bought in the name of the third parties as well. But the real issue in this case, as stated earlier, is whether the presumption under Section 3(2) of the said Act has been rebutted by the respondent. We find that once the appellant herself has taken a stand that it was her own property purchased from the funds given by her father, which is now held to be improbable by us, the presumption under Section 3(2) of the Act cannot enure in her favour. We also accept the stand taken by the respondent that the properties were purchased in the appellant s name only because he felt that it would bring luck to him as admittedly Felshia means luck. Therefore, we hold Point No.2 in favour of the respondent. We find no reasons to interfere with the Judgment of the Trial Court. Accordingly, the Appeal Suit is dismissed.

  ---

• Customs

• 2023 (2) TMI 218
  Jurisdiction of High Court does to interfere in the matter of setting aside the seizure of import consignment - HELD THAT:- The operation of the order impugned was stayed by this Court on 6th September, 2021. In fact, in the order dated 21st October, 2021, this Court had indeed expressed the opinion, albeit tentatively, that the impugned order cannot be sustained in law. In the said order, at the request of the learned Additional Solicitor General, the Department was also permitted to carry on the investigation and take consequential steps in that regard. Now when Order-in-Original has been passed and an appeal challenging the same has been filed, the matter should be left open for examination by the appellate authority in accordance with law. For that matter, suffice would be to observe that none of the observations made in the order impugned or in the orders passed by this Court shall operate prejudicial to the interests of either of the parties. In other words, the appeal shall be considered by the appellate authority on its own merits, uninfluenced by any observations appearing in the impugned order or in this order. To put the record straight, the impugned order dated 26th August, 2021 is set aside but, with the observations foregoing. Petition disposed off.

  ---

• 2023 (2) TMI 217
  There are no error in the order of the Customs, Excise Service Tax Appellate Tribunal, West Zonal Bench at Ahmedabad in MS SUNRISE TRADERS, JAI DURGA IMPEX, ALISHAN IMPEX, SATISH JINDAL, ADITYA LOOMTEX, TUSHAR TILAK, JMD TRADING CO, MOHIT SOIN, AJAY HIRALAL VIJ, JAI HANUMAN OVERSEAS, PANKAJ KUMAR KATARIA, PANKAJ KUMAR, SHREE SHYAM INTERNATIONAL AND TUSHAR GUPTA VERSUS C.C. -MUNDRA [ 2022 (1) TMI 468 - CESTAT AHMEDABAD] . Appeal dismissed.

  ---

• 2023 (2) TMI 216
  Redemption of goods - Whether the first respondent was justified in upholding the levy of redemption fine having concluded that the imported goods were indeed Heave Melting Scrap and therefore, not liable to confiscation? - it was held by the Madras High Court that The subject goods were, thus, as held re-rollable scrap. HELD THAT:- There are no good ground and reason to interfere with the impugned judgment and hence, the special leave petitions are dismissed.

  ---

• 2023 (2) TMI 215
  Cancellation of Customs House Agent (CHA) licence - HELD THAT:- Having gone through the impugned judgment and order(s) passed by the High Court and the reasoning given, we see no reason interfere with the same in exercise of powers under Article 136 of the Constitution of India. SLP dismissed.

  ---

• 2023 (2) TMI 214
  Classification of imported goods - products used in the preparation of animal feed supplements - to be classified under Heading 2309 or under Heading 2936? - HELD THAT:- As per the Rule 1 of the General Rules of Interpretation, the classification of goods shall be determined according to the terms of the headings and any relative section or chapter notes. In the event that the goods cannot be classified solely on the basis of Rule 1 and if the headings and legal notes do not otherwise require Rules 2 through 6 may be applied in order. While Chapter 29 talks about separate chemically defined compounds, the explanatory notes to HSN provides for products which remain classified in Chapter 29, even when they are not separate chemically defined compounds. There are certain exceptions to the rule that Chapter 29 is limited to separate chemically defined compounds. These exceptions include provitamins and vitamins (including concentrates and intermixtures), whether or not in a solvent - Chapter Heading 2309 is in the nature of a residuary heading as Chapter Note I to Chapter 23 says that the Heading 2309 includes products of a kind not elsewhere specified or included, whereas chapter sub-heading 2936 is a specific heading for vitamins and provitamins. As per the Rule 3(a) of General Interpretation Rules, the specific heading shall prevail over the general heading. The Hon ble High Court of Allahabad in the case of COMMISSIONER OF CUSTOMS CGO. VERSUS SONAM INTERNATIONAL SHOP NO. 9 [ 2010 (10) TMI 120 - ALLAHABAD HIGH COURT ], held that vitamins of high concentration used for manufacture of animal feed will be classified under 2936. Admittedly all the products in this case has high concentration of vitamins ranging from 40% to 98%. Even though, the applicant in their application has stated that these products which they are importing are going to be used in the manufacture of animal feed, as discussed in the preceding paragraphs, vitamin products intended for use in animal feed preparations are not excluded from the ambit of the Chapter 29. Therefore, when confronted with a specific classification entry vis-a-vis a residuary classification entry, one must favour the specific entry. In fact, that the mandate of Rule 3A of the General Rules of Interpretation of Customs Tariff. The products in this case viz. LUTA.CALPA N 98%, LUTA.E 50, LUTA. 0A/D3 1000/200 PLUS, LUTAVIT A 1000 PLUS, CHOLINC.LSG would merit classification under Heading 2936 of the First Schedule to the Customs Tariff Act, 1975.

  ---

• Corporate Laws

• 2023 (2) TMI 188
  Liquidation proceedings - Right of secured creditors - Legality of declaration that the action of Union Bank of India, the respondent No. 3, of taking possession of the assets of the company in liquidation including the plant and machinery situated at Aurangabad and sale of the said assets without the order of this Court - HELD THAT:- A conjoint reading of the provisions contained in Sections 529 and 529A, would indicate that the secured creditor has an option to realise or relinquish his security. If the secured creditor exercises the option to realise his security, he is entitled to do so in a proceeding other than the winding up proceeding. But he has to pay to the liquidator the costs of preservation of the security till he realises the security. The workmen of the company in winding up also acquire the status of secured creditor. Where a company is in liquidation, a statutory charge is created in favour of workmen in respect of dues over the security of every secured creditor and this charge is pari passu with that of the secured creditor. Such statutory charge is to the extent of workmen s portion in relation to the security held by the secured creditors of the company as illustrated by Section 529 of the Act. In the light of the provisions contained in RDB Act, which has an overriding effect, two propositions emerge. First, RDB Act confers exclusive jurisdiction upon DRT for determination of the matters specified in Section 17. Second, the Act ousts jurisdiction of all other Courts in determining and deciding the issues which are within the province of the Authorities under RDB Act, save and except the powers of the Supreme Court and High Court under Articles 226 and 227 of the Constitution. Both the submissions on behalf of the applicant that the Official Liquidator ought to have taken physical possession of the subject assets, despite the secured creditor having initiated steps to enforce the security interest therein, and before sale respondent No. 3 must have obtained the permission of the Company Court, fell through. Application dismissed.

  ---

• 2023 (2) TMI 187
  Recovery of debt under NCD issued - Maintainability of plaint - rejection of plaint on the ground that the plaint does not disclose a cause of action and on the ground that the suit appears from the statements in the plaint to be barred by law - whether an application seeking interim relief in the form of interim injunction or provision of security is maintainable in the context of a suit for damages? - HELD THAT:- Both the CRAs did not provide details of the progressively weakening liquidity of DHFL in their reviews. More importantly, they did not take reasonable notice or give reasonable weight to the same and downgrade the ratings on such basis. Instead, they waited until DHFL s collapse became imminent before downgrading the ratings. By so doing, a strong prima facie inference may be drawn that they failed to fulfil their statutory and common law obligation to monitor and review the ratings so as to provide a true and accurate rating. For such reason, they are prima facie liable. Therefore, the CRAs cannot be absolved from liability. The three firms of auditors (the eight to tenth defendants) endeavoured to absolve themselves of responsibility on the ground that they were not responsible for the financial statements, which were referred to and relied on in the prospectus. While the eighth defendant contended that the financial statements for the financial years 2011-2012 to 2015-2016 were relied upon in the prospectus and that the eighth defendant did not carry out audit during the said period, the ninth defendant contended that the prospectus was issued in the financial year 2016-2017 after the said defendant had resigned. However, the question arises as to whether they owe a duty of care to the plaintiff. 63 Moons became a debenture holder upon subscribing to the debentures floated under the prospectus. In the case of shareholders, whose interest is ordinarily aligned with that of the company, an argument that the company should espouse the cause may be required to be dealt with by a complaining shareholder. As regards debenture holders, the argument that the debenture trustee and not an individual debenture holder should espouse the cause could ordinarily be made. But, here, the plaintiff alleges with prima facie a fair measure of justification that the Debenture Trustee failed to fulfil obligations to debenture holders, including 63 Moons. Therefore, such objection is untenable. The manner in which DHFL collapsed over the period when the eighth defendant played a critical role as statutory auditor leads to the strong prima facie conclusion that they failed to fulfil their statutory obligations, thereby causing immense losses to investors such as the plaintiff. Therefore, they cannot be absolved from responsibility and liability. All the defendants who were represented by counsel contended with great vigour that this is an action for unliquidated damages and, therefore, the interim order in force should be discharged and that the defendants should not be called upon to provide security - liability to provide security for the suit claim cannot be apportioned with any degree of accuracy. Nonetheless, by taking into account the role played by the respective defendant, the obligation to provide security is apportioned for interlocutory purposes. All the applications to reject or return the plaint are dismissed - All the applications to delete a party from the array of parties are dismissed - All the applications for injunction, to vacate the injunction and to provide security are disposed of.

  ---

• Insolvency & Bankruptcy

• 2023 (2) TMI 186
  Right of secured creditor to recover his dues (during liquidation proceedings) - Seeking direction to Appellant to make the payment of 1.84 Crores to the liquidation estate along with interest at the rate of 6% - whether the secured creditor s claim has to be confined to the amount of principal and interest as claimed in Form D filed by the secured creditor or secured creditor in addition to the amount claimed in Form D can also claim further amount in the facts of the present case? HELD THAT:- In the present case, Liquidation Commencement Date is a date when the Adjudicating Authority passed the Order of Liquidation. Thus claim has to be with reference to the liquidation commencement date. The statute pegs the claim on a particular date for a purpose and object. When a claim is filed in Form D where interest and principal have been included up to the date of liquidation commencement date, claimants cannot be allowed to claim any further amount in addition to the amount which they have claimed in their Form D. The IBC contains particular statutory scheme under which Liquidation Process has to be undertaken. The claim of all stakeholders are claims invited by the Liquidator as per the Liquidation Regulation and after receipt of the claims, further steps have to be taken in accordance with the claims received. Permitting any claimant to increase his claim on any ground or reason will not be in accordance with the liquidation scheme as contemplated by the Liquidation Process, Regulations. The statutory scheme provides submission of claim on a liquidation commencement date which is a fixed connotation. When a statute provides for liquidation commencement date as a date up to which claims can be filed and proved, no claim thereafter can be entertained by the Liquidator. The amount of interest which was retained by the Appellant claiming to be interest in addition to the claim as filed by it in Form D till the date of realization of receipt of the sale, cannot be permitted to be retained by the Appellant and the Adjudicating Authority has rightly passed the order allowing application filed by the Liquidator to hand over the additional amount to the Liquidator. Learned Counsel for the Appellant submits that out of Rs. 1.84 Crores, amount of Rs. 20 Lakhs have already been paid. There are no error in the order passed by the Adjudicating Authority allowing an Application filed by the Liquidator - there is no error in the appeal - appeal dismissed.

  ---

• 2023 (2) TMI 185
  Initiation of CIRP - NCLT rejected the application - Financial Creditors - non-disbursement of part of financial assistance sanctioned by the Financial Creditors - contributory negligence on the part of Financial Creditors, which was beyond the scope of inquiry of Section 7 or not - HELD THAT:- There is no denial to the sanction of financial facilities to the respective Corporate Debtors and restructuring of the debt on account of default committed by the Corporate Debtors. It is further on the record that the Corporate Debtors were unable to carry out its repayment obligation as per Restructuring Agreement. From the judgment of the Adjudicating Authority in State Bank of India s case, it is clear that Adjudicating Authority has based its decision of rejecting Section 7 Application on the ground that the default committed by the Corporate Debtor in restructuring its debt, there is contributory negligence by the State Bank of India as well as Punjab National Bank. The fact that certain portion of sanction amount of financial facilities could not be disbursed by the Financial Creditors can be ground for rejecting Section 7 Application has already been answered by the Hon ble Supreme Court in its judgment in Innoventive Industries Limited [ 2017 (9) TMI 58 - SUPREME COURT ]. In Innoventive Industries Limited, a Section 7 Application was filed by the Financial Creditors. Nineteen Banking entities had extended credit to the Innoventive Industries Ltd. In the above case also restructuring proposal given by the Corporate Debtor was approved in the meeting of Joint Lenders Forum. A Restructuring Agreement was entered into on 09.09.2014, under which funds were to be infused by the creditors and certain obligations were to be met by the debtors. Insolvency resolution process was set in motion by filing a Section 7 Application. In reply to Section 7 Application, Corporate Debtor took plea that under the Maharashtra Relief Undertakings (Special Provisions) Act, 1958, all liabilities of the Corporate Debtor except certain liabilities and remedies for enforcement thereof were temporarily suspended, hence the Application under Section 7 could not have been filed. The Corporate Debtor also filed a second application taking another plea that owing to non-release of funds under Master Restructuring Agreement, the Corporate Debtor was unable to pay back its debts as envisaged. It was pleaded that no default has been committed by the Corporate Debtor - The Hon ble Supreme Court in the above judgment has also held that it is of no matter that the debt is disputed so long as the debt is due and payable. The Clause (u) of the Restructuring Agreement entered between the parties is in the identical words as Clause 20(t), which was noticed by the Hon ble Supreme Court in Innoventive Industries Ltd. The Hon ble Supreme Court in Innoventive Industries Ltd. having held that The Obligation of the corporate debtor was, therefore, unconditional and did not depend upon infusing of funds by the creditors into the appellant company is a declaration of law in reference to an Application under Section 7. The view taken by the Adjudicating Authority in the impugned order dated 28.06.2022 is clearly not in consonance with the law declared by the Hon ble Supreme Court in Innoventive Industries Ltd. - This alone is sufficient to set aside the impugned order passed by the Adjudicating Authority. Under the Scheme of IBC, when a Corporate Debtor is unable to pay its debt, which becomes payable, it is a warning signal for Corporate Debtor and when an Application is filed by a Financial Creditor to initiate CIRP under Section 7 and there are ample material that Corporate Debtor is unable to pay its debt and has committed default, the Adjudicating Authority is not required to go into the reasons of default and ignore the real status of the Corporate Debtor and close its eyes to the fact that the Corporate Debtor needs insolvency resolution - There being sufficient material before the Adjudicating Authority that consistent defaults have been committed by the Corporate Debtor and it is unable to pay its debt, rejection of Section 7 Application on the ground that for default committed by the Corporate Debtor, the Financial Creditors have also to be blamed is closing the eyes to the Scheme of the insolvency resolution. The orders of Adjudicating Authority dated 28.06.2022 and 29.06.2022 are unsustainable and are set aside - Appeal allowed.

  ---

• Service Tax

• 2023 (2) TMI 184
  Rejection of petitioner s applications under Sabka Vishwas (Legacy Dispute Resolution) Scheme (SVLDRS) 2019 - appeal dismissed due to non-compliance of making pre-deposit - no hearing notice was given to the petitioner - gross violation of the principles of natural justice - HELD THAT:- On the date of filing of the applications under the aforesaid Scheme on 15th January, 2020 when the aforesaid scheme was valid by virtue of notification issued by the Central Government it can be easily said that the applications under the aforesaid Scheme were filed within time and before the expiry of the aforesaid scheme - the show cause cum demand notices in question issued by the adjudicating authority were received by the petitioner before the 30th June, 2019, as per Section 123(b) of the aforesaid scheme and the duty was due and payable by the petitioner and the tax dues were relatable to show cause cum demand notices which were pending adjudication on 30th June, 2019 as per Section 124(1)(a) of the Scheme. Petitioner could not be called not eligible or excluded to make declaration under the said scheme in view of Section 125(1)(c) of the aforesaid scheme since no final hearing had been taken place on or before the 30th June, 2019, after setting aside of the order-in-original and remanding the matter back by the CESTAT to adjudicating authority concerned for de novo adjudication on the show cause cum demand notices in question which is an admitted factual position and even till date no final order has been passed on the said show cause cum demand notices in question. Petition is disposed of by setting aside the impugned orders dated 12th February, 2020 rejecting the applications of the petitioner filed under SVLDRS- 2019 and the respondents authority concerned are directed to grant appropriate relief to the petitioner under the aforesaid Scheme by reconsidering the aforesaid applications in the light of the observations made in this judgment, after giving opportunity of hearing to the petitioner or its authorised representative.

  ---

• 2023 (2) TMI 183
  100% EOU - Levy of Service Tax - manpower recruitment or supply agency service - deputation of employees from group companies to the appellant - expenses incurred in foreign currency in relation to the salaries/expenses of deputed employees, paid by the group companies, and same was reimbursed by raising bills/invoices on the respective group companies - reverse charge mechanism - section 66A of the Finance Act, 1994 - levy of interest u/s 75 of FA - extended period of limitation - HELD THAT:- This issue has been considered and decided by the Supreme Court in Commissioner of Customs, Central Excise Service Tax-Bangalore (Adjudication) ETC. v/s M/s Northern Operating System Pvt. Ltd. [ 2022 (5) TMI 967 - SUPREME COURT ] wherein Supreme Court observed that the assessee was the service recipient for service (of manpower recruitment and supply services) by the overseas entity, in regard to the employees it seconded to the assessee, for the duration of their deputation or secondment. The arrangement in the present seven appeals is similar. Thus, the assessee would be a service recipient of the overseas group company concerned, which provided manpower supply service, which is a taxable service. The appellant, therefore, is required to discharge service tax on reverse charge mechanism. Extended period of limitation - HELD THAT:- The Supreme Court in Northern Operating System did not agree with the contention of the Department that it was correctly invoked and it was held that the Department was not justified in invoking the extended period of limitation - In view of the aforesaid decision of the Supreme Court in Northern Operating Systems, it has to be held that the demand confirmed for the extended period cannot be sustained. Levy of interest under Section 75 of the Finance Act - HELD THAT:- It is seen from provisions of Section 75, that every person who fails to credit the tax or any part thereof within the period prescribed shall pay simple interest at such rate not below ten per cent and not exceeding thirty six per cent per annum for the period by which such crediting of the tax or any part thereof is delayed. Thus, imposition of interest is irrespective of the fact whether such nonpayment/ short payment was on account of innocence or malafide. In Pratibha Processors v/s Union of India [ 1996 (10) TMI 88 - SUPREME COURT ] the Supreme Court pointed out the difference between the imposition of interest and penalty. Whereas penalty is ordinarily levied on an assessee for some contumacious conduct or for deliberate violation of the provision of a particular statute, interest is compensatory in character and is imposed on the assessee who has withheld payment of any tax when it is due. Thus, in terms of section 75 of the Finance Act, payment of interest is mandatory on every person who fails to deposit the service tax or any part thereof within the prescribed period. It is, therefore, not possible to accept the contention of the learned counsel for the appellant that imposition of interest under section 75 of the Finance Act should be set aside. The appellant has stated that an amount of Rs. 38,875,209/- was deposited on 12.08.2022 which covers the demand for the normal period. The demand to the extent of Rs. 96,668,469/- and Rs. 16,305,344/-, which are in relation to the extended period of limitation in Service Tax Appeal No. 3195 of 2011 and Service Tax Appeal No. 26058 of 2013 respectively, are set aside. These facts may be verified by the adjudicating authority and in case any further amount is due for the normal period, the same may be recovered from the appellant - Appeal disposed off.

  ---

• 2023 (2) TMI 182
  Recovery of irregular availment of CENVAT credit with interest liability of the said credit - Constitutional Validity of Rule 14 of the Cenvat Credit Rules 2004 in so far as it levies interest on Cenvat Credit of service tax taken - ultra vires Section 94 of the Finance Act, 1994 or not - time limitation for issuance of demand of interest - HELD THAT:- As applicable during the relevant period, Rule 14 of CCR provided for interest where CENVAT credit was availed or it was utilized. The Hon ble Supreme Court has interpreted this clause in the case of Indswift Laboratories [[ 2011 (2) TMI 6 - SUPREME COURT] ] in this manner and has clearly held that the High Court had attempted erroneously to read down the provisions by way of substituting the word OR by AND so as to give relief to the assessee. This decision was followed in various other judicial decisions. The case of Billforge Pvt Ltd [[ 2011 (4) TMI 969 - KARNATAKA HIGH COURT] ] was different inasmuch as it was an assertion of the learned counsel for the assesse in that case that it had neither availed not utillised CENVAT credit and therefore no interest was liable to be paid. It is in that factual matrix that Hon ble High Court of Karnataka has held that no interest was liable to be paid and distinguished it from the judgement of IndSwift. Recovery of Interest - no show-cause notice was issued to the appellant for recovery of interest - time limitation - HELD THAT:- If there is no specific provision under which a show-cause notice can be issued, any notice issued without the authority of law cannot be sustained. If we see the scheme Finance Act 1994 Section 75 provides for payment of interest automatically based on the amount of service tax due. Therefore there is no mechanism for separately deciding how much interest is due and adjudicating upon it. The only question is if interest is not paid and notice must be issued to the appellant, in some form asking it to pay the interest so that it can defend itself - the notice for demand of interest alone can be issued only after quantifying it. It is a different matter if the show-cause notice is issued for payment of service tax along with applicable interest. If a demand has to be issued only for amount of interest, it has to be quantified. And such quantification is possible only after the date of availment of CENVAT credit and the date of reversal are known. Therefore until 6.12.2011 when the appellant has reversed the CENVAT credit, no notice could have been issued demanding any amount as interest. Because it has to be counted from this date. A letter seeking payment of interest was issued within four months. Therefire, it cannot be said to be time barred. The recovery of interest by the Revenue from the appellant is sustainable both on merits and on limitation - the impugned order upholding such proceedings are correct and proper and call for no interference - Appeal dismissed.

  ---

• Central Excise

• 2023 (2) TMI 213
  Maintainability of appeal - appropriate forum - High Court or Supreme Court - question is/was whether the respondents can be said to be manufacture of stators or not and therefore liable to pay central excise duty or not. HELD THAT:- The aforesaid dispute cannot be said to be dispute either related to rate of duty and/or valuation. Only in a case where the dispute is with respect to the rate of duty and/or valuation, the appeals will lie to this Court. In any other cases where the dispute is with respect to the liability of the assessee to pay central excise duty the appeal shall be maintainable before the High Court under Section 35(G) of the Central Excise Act. In the case of Motorola India Limited [ 2019 (9) TMI 229 - SUPREME COURT ], while considering the pari materia provisions under the Customs Act, namely, Section 130 of the Customs Act, it is observed and held that an appeal shall lie to the High Court against every order passed in appeal by the Appellate Tribunal, if the High Court is satisfied that the case involves a substantial question of law. In the instant case, the dispute has no relation to the rate of duty or the value of the goods and/or the dispute with respect to the valuation, the appeals were maintainable before the High Court under Section 35(G) of the Central Excise Act. Therefore, the High Court has committed a very serious error in not entertaining the appeals and relegating the Revenue to prefer the appeals before this Court. As the High Court has not considered the appeals on merits and/or on any other question, we have no other alternative but to remand the matter to the High Court to decide the appeals in accordance with law and on its own merits. The impugned common judgment and order passed by the High Court in not entertaining the appeals and relegating the Revenue to prefer appeals before this Court under Section 35L of the Customs Excise Act is hereby quashed and set aside. The matters are remanded to the High Court to entertain the appeals under Section 35(G) of the Customs Excise Act and thereafter to consider the same in accordance with law and on its own merits. Appeal allowed in part.

  ---

• 2023 (2) TMI 181
  Interest on differential duty from the date of clearance of goods - payment of duty assessed provisionally by the Jurisdictional Assistant/Deputy Commissioner of Central Excise under Section 7(1) of the Central Excise Act, even though the provisional duty had been paid prior to the date of the passing of the final assessment order under Section 7(3) of the Central Excise Act, 2002. HELD THAT:- The issues raised in this case are squarely covered in M/S. STEEL AUTHORITY OF INDIA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, RAIPUR [ 2019 (5) TMI 657 - SUPREME COURT] , where it was held that Section 11A and section 11AB as it stood at the relevant time did not provide read with the rules any other point of time when the amount of duty could be said to be payable and so equally the interest. Thus, interest would be payable from the due date of payment of provisional duty for the purpose of removal of the goods in question till the date of payment of the balance/differential duty upon final assessment. SLP disposed off.

  ---

• 2023 (2) TMI 180
  Short paid Central excise duty (Valuation) - non-inclusion of value of freight charged by the appellant for delivering the cement to their buyers premises - error in calculation or not - clearance of cement dispatched on Free on Road (FOR) basis to their customers - place of removal - the place of delivery was the place of removal that Department alleged that the appellant has short paid central excise duty as it has not included the freight charges in assessable values - contravention of the provisions of Section 4 of the Central Excise Act, 1944 read with Rule 5 and 7 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 and the Rule 4, 6, 8, 11 and 12 of the Central Excise Rules 2002. HELD THAT:- Learned DR has laid emphasis upon clause 3 of the definition of place of removal as was relevant for the period in question because said clause includes the place from where the goods are to be sold in the definition of place of removal , the buyer s place becomes the place of removal where sale gets concluded at buyer s place. The said submission is not acceptable in the light of decision of Hon ble Apex Court in Ispat Industries Ltd., [[ 2015 (10) TMI 613 - SUPREME COURT] ] only wherein the Hon ble Apex Court has held that the words used in the provision are goods are to be sold . The contention of the Revenue would be correct if and only if the words in the provision would have been goods have been sold . The earlier decision in the case of Escorts JCB Ltd., Vs CCE [ 2002 (10) TMI 96 - SUPREME COURT ] was held to have similar facts as were there in the case of Ispat Industries Ltd. The Hon ble Court also observed that in the case of Commissioner of Customs Excise, Aurangabad Vs Roofit Industries Ltd., [ 2015 (4) TMI 857 - SUPREME COURT ] the Hon ble Supreme Court had distinguished Escort s JCB s case. But based on the facts of that case (Roofit s), it was held that the sale of goods in terms of Section 19 of sale of goods Act did not take place at the factory gate of assessee. The Court also observed that the Court s attention was not drawn to Section 4 of Excise Act as originally enacted and as amended to demonstrate that the buyer s premises cannot, in law, be a place of removal under the said section. Hence, the reliance of Department on the decision of Roofit Industries Ltd., is also no more sustainable. The value of freight charged by the appellant for delivering the cement to their buyers premises is not to be included while assessing the value for the purpose of payment of central excise duty. Appellant has rightly excluded the same - The differential duty confirmed by the order under challenge is therefore wrong. Appeal allowed.

  ---