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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter March 1, 2023 Case Laws in this Newsletter: GST Income Tax Benami Property Customs Corporate Laws Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax Articles 1. PENALTY IMPOSED ON NIDHI COMPANY BY RoC By: DR.MARIAPPAN GOVINDARAJAN Summary: A Nidhi Company was penalized by the Registrar of Companies, Chennai, for violating provisions of the Companies Act, 2013. The company failed to file MGT-14 forms for board resolutions from 2015 to 2019, resulting in a penalty of Rs.8,65,400 for the company and Rs.2,50,000 for an officer. Additionally, the company did not mention Director Identification Numbers in certain documents, leading to a Rs.1,50,000 penalty each for the company and a director. Lastly, the company failed to appoint a Company Secretary after increasing its capital beyond Rs.10 crores, incurring a Rs.5,00,000 penalty. Penalties must be paid within 90 days, with potential fines or imprisonment for non-payment. 2. Ex-parte assessment order passed in violation of the principles of natural justice entails civil consequences By: Bimal jain Summary: The Patna High Court annulled an ex-parte assessment order by the Revenue Department against a petitioner for rejecting an Input Tax Credit claim and imposing a tax liability of INR 10,06,826/-. The court found the order violated natural justice principles by not providing a fair hearing or sufficient time for the petitioner to present their case. The court directed the petitioner to deposit 20% of the demand and ordered the respondent to unfreeze the petitioner's bank accounts. The case must be decided on merits within two months, ensuring compliance with natural justice, allowing further challenges if necessary. 3. Mere expiry of E-way Bill does not create any scope for evasion By: Bimal jain Summary: The Madras High Court ruled that the mere expiry of an E-way bill does not indicate tax evasion or revenue loss, setting aside a detention order against a transport company. The company was transporting goods when the E-way bill expired due to a truck breakdown. The court noted that the E-way bill portal was blocked, preventing timely extension. The court directed the release of the detained truck upon payment of a INR 5,000 penalty, as per a relevant circular. The ruling emphasized that expired E-way bills alone do not justify detention under Section 129(3) of the CGST Act. News 1. Prime Minister inaugurates post budget webinar on ‘Unleashing the Potential - Ease of living using Technology’ Summary: The Prime Minister inaugurated a post-budget webinar focused on enhancing ease of living through technology, with over 1,000 participants from various sectors. The event emphasized using technology to improve ease of living and doing business, particularly for small businesses. Discussions included the need for a Common Business Identifier, simplified KYC processes, and a unified filing process to streamline compliance. The webinar featured breakout sessions on technology's role in justice, business, and 5G applications. Key figures from industry and academia shared insights, and participants provided feedback on issues like MSME funding and compliance challenges. The webinar aimed to disseminate budget information and foster collective efforts towards technological solutions. 2. Aizawl to host the second B20 event from 1-3 March 2023 Summary: Aizawl will host the second B20 India event from March 1-3, 2023, as part of four scheduled events in the Northeast. B20, the official G20 dialogue forum for the global business community, aims to provide policy suggestions to boost economic growth. The event will focus on multilateral business partnerships in sectors like urban planning, infrastructure, bamboo, startups, and healthcare. Approximately 500 participants, including ministers, officials, and business representatives, are expected. The event will feature cultural programs and conclude with the Chapchar Kut festival. The B20 events aim to highlight the Northeast's untapped potential and opportunities. 3. 47th Civil Accounts Day to be celebrated tomorrow in New Delhi Summary: The 47th Civil Accounts Day will be celebrated in New Delhi to commemorate the foundation of the Indian Civil Accounts Service (ICAS), established in 1976. The event will feature the Union Minister of State for Finance and the Union Finance Secretary. The ICAS, responsible for separating the Union Government's accounts from audits, plays a crucial role in public financial management. It oversees budgeting, payment, accounting, and pension disbursements, aiming for a robust financial system. The Public Financial Management System (PFMS) has enhanced financial administration, enabling efficient fund management and improving transparency and accountability in government schemes. Highlights / Catch Notes GST Court Orders Correction of GST Error from 2017-18; Directs Proper Adjustment Under GSTR-9 Misinterpretation Issue. Case-Laws - HC : Seeking adjustment of GST amount deposited by the petitioner in the financial year 2018- 19, which inadvertently could not be deposited in the financial year 2017-18 - Both the assessing authority as well as the appellate authority have committed the said misreading of GSTR-9, hence both the impugned orders cannot stand and are set aside - the respondents are directed to adjust the amount of GST deposited by the petitioner. - HC Visit to Get Source CGHB maintenance and security services not exempt from GST, as ruled by Authority for Advance Rulings (AAR). Case-Laws - AAR : Exemption from GST on the services provided by the applicant - the provision of services by the applicant to CGHB in relation to maintenance of various colonies of CGHB / provision of security guards etc. do not qualify for be benefit of Nil rate of GST - AAR Visit to Get Source Income Tax Court Narrows "Transfer" Definition in Income Tax Act's Section 50C, Limits Application to Stamp Duty Scenarios. Case-Laws - HC : Capital gain computation - addition invoking the provisions of the Section 50C - the legislature used the words and expressions in Section 50C of the Act consciously to give the same a restricted meaning - the term “transfer” used in Section 50C has to be given a restricted meaning and the same do not have a wider connotation so as to include all kinds of transfer as contemplated under Section 2(47) of the Act. This Court accordingly holds that the provisions of Section 50C shall be applicable in cases where transfer of the capital asset has to be effected only upon payment of stamp duty. - HC Visit to Get Source Court Orders Tax Refund with Interest from 2018; Urges Quick Resolution of Taxpayer Grievances u/s 244A. Case-Laws - HC : Non grant of Refund along with interest u/s. 244A - The legislature and executives have taken due care of the grievances of the commoners or the assessees to be redressed at the earliest without putting them any jeopardize. However, if there is any technical glitch which does not resulted the grant of refund which is otherwise the entitlement of the petitioner from the year 2018. This petition deserves to be allowed directing the respondent to release the refund of amount with statutory interest within two weeks - HC Visit to Get Source Tax Assessment Reopening Invalid: No Concrete Evidence, Lack of Independent Evaluation Violates Section 148A(d) Requirements. Case-Laws - HC : Reopening of assessment - validity of order passed u/s 148A(d) - the reopening of the assessment was bad as it was based on certain alleged “potential” cash borrowings and certain alleged “possible” financial transactions. That apart, the assessing officer did not independently apply its mind to the information furnished by the DDIT which he is required to do while exercising the power to reopen an assessment. - HC Visit to Get Source Section 148A(d) Order Not an Assessment or Demand; Petitioner Can Challenge Section 147 Proceedings Later. High Court Dismisses Writ. Case-Laws - HC : Validity of order u/s 148A(d) - An order under Section 148 (d) of the Income Tax Act, 1961, itself is neither an assessment nor a demand and petitioner still will have ample scope and opportunity to make out a case if any for dropping of the proceeding under Section 147 of the Act in subsequent proceeding after the order passed under Section 148 (d) of the Act. WP dismissed. - HC Visit to Get Source Court Rules in Favor of Assessee: No Incriminating Material Found During Search u/s 153A for 2011-12 Assessment Year. Case-Laws - HC : Assessment u/s 153A - incriminating material found in search or not? - On the date of search, admittedly, the assessment with respect to the AY under consideration 2011-12 admittedly stood completed. Since no assessment was pending for the relevant AY 2011-12 on the date of search and no incriminating material was found during the course of search, the issue is covered in favour of the assessee by the judgment of this Court - HC Visit to Get Source Transfer Pricing Order Invalid Without Draft; Final Assessment Order Exceeds Time Limit u/s 153. AO Jurisdiction Lacks Basis. Case-Laws - AT : Validity of order u/s 92CA - time limit for passing of the TPO order - period of limitation - despite the fact that the reference made to the Ld. TPO is valid, in absence of a legally valid transfer pricing order and a valid draft assessment order, the Ld. AO cannot assume jurisdiction to proceed with the assessment under Section 144C of the Act and pass the consequential final assessment order. - the final assessment order passed is beyond the prescribed period of limitation u/s 153 - AT Visit to Get Source Improper Exercise of Revision Jurisdiction u/s 263: PCIT's Decision Based on Audit Objection Overturned. Case-Laws - AT : Revision u/s 263 - Scope of audit objection - The entire exercise seems to have been done because of audit objection only. Since, the Assessing Officer had duly enquired about the matter and was satisfied with the explanation given by the assessee, the ld. PCIT, in our view, has wrongly exercised his revision jurisdiction on the issue which is nothing but change of opinion, that too, at the instance of audit party. - AT Visit to Get Source Surcharge and cess cannot exceed the 10% tax rate on royalty and FTS under DTAA Articles 12 and 2. Case-Laws - AT : Levy of Surcharge and cess - to be computed over the rate of tax as per DTAA or not - Article 12 read with Article 2 of the tax treaty makes it clear that the rate of tax at 10% would encompass surcharge and education cess as it is also in the nature of surcharge. Therefore, we hold that levy of surcharge and cess over and above the taxable rate of 10% on royalty and FTS is not permissible as per the treaty provisions. - AT Visit to Get Source Taxable Income for Unmaterialized Price Reduction Dismissed; Bookkeeping Entries Not Sufficient for Tax Assessment. Case-Laws - AT : Price reduction of purchase which was offered to tax in subsequent AY - If the income does not result at all, there cannot be a tax, even though the book keeping entry is made about hypothetical income which does not materialize. In the case on hand, the right to receive income was certain and merely the assessee had adopted its books of accounts in the annual general meeting which is prior to the receipt of information from Denso Kirloskar Industries Pvt. Ltd. - Contention of the assessee dismissed - AT Visit to Get Source TPO's 75% Service Income Filter Validates Inclusion of Concentrix as Comparable Company in Analysis. Case-Laws - AT : TP Adjustment - Comparable selection - TPO on his part has also adopted a filter whereby he has chosen companies having service income of 75% or more in each of the segments. We also notice that it has not been demonstrated as to how owning intangibles will render this company out of the ambit of comparability. In the given circumstances of the case, we are of the view that Concentrix was rightly included as a comparable company by the TPO. - AT Visit to Get Source Customs Merchandise Exports from India Scheme Duty Credit Scrips cancellation ignored Jindal Drugs precedent, leading to unnecessary litigation. Case-Laws - HC : Entitlement for Duty Credit Scrips under the Merchandise Exports from India Scheme (MEIS) - The Petitioner was rightly issued the MEIS scrips. However, due to inexplicable reasons, the same was sought to be cancelled leading this long protracted litigation between the parties. - In this entire process, the Respondents failed to take into consideration the decision in Jindal Drugs. All these proceedings could have been easily avoided if the Respondents had taken into consideration the said judgment, which was binding upon it. - HC Visit to Get Source Exemption for Jewellery Parts from Countervailing Duty Effective July 26, 2016; Legislative Decision Required for Duty Exemptions. Case-Laws - AT : Exemption from countervailing duty [CVD] - there is no manner of doubt that it is only w.e.f. 26.07.2016 that parts of articles of jewellery have been included in the CVD exemption notification. It cannot be urged that the amendment made in entry no. 199 on 26.12.2016 is clarificatory in nature - It is for the legislature, in its wisdom, to grant exemption from payment of CVD or SAD and an assessee cannot be permitted to urge that if articles of jewellery have been granted the benefit of exemption from payment of CVD or SAD, the benefit of such exemption should necessarily flow to ‘parts of articles of jewellery’ also. - AT Visit to Get Source IBC Appellant's Claim Admission in CIRP Form B is Conclusive, Validating Interim Award without Further Evidence, Rules High Court. Case-Laws - HC : Validity of interim award granted - CIRP - The appellant herein, while giving a detailed statement of claims in Form B before the IRP, has also indicated that the set-off amount has to be paid by it to the respondent. It is a categorical admission by the appellant which requires no further adjudication, and there can be no evidence better than an admission. - HC Visit to Get Source Service Tax Exemption from Service Tax for Agricultural Machinery Rentals to Farmers Under 2006 Circular and Madhya Pradesh Law. Case-Laws - AT : Exemption from payment of Service Tax - supply of tangible goods - providing agricultural machinery on rental basis to the farmers - statutory functions performed under the Madhya Pradesh Tractor Dwara Kheti (Prabharo Ki Vasuli) Adhiniyam, 1972 or not - the services provided by the appellant fall under the category of "supply of tangible goods", then too by virtue of the Circular dated December 18, 2006, the appellant cannot be called upon to pay any service tax. - AT Visit to Get Source CENVAT Credit Denial: Commission Paid to Auto Dealers from Premiums Not Eligible for Credit, Authority's Opinion Binding. Case-Laws - AT : Denial of CENVAT Credit - Out of the premium collected from the buyer of the motor car/vehicle, a portion thereof is paid by the appellant to the automotive dealer as a commission - the law is well settled that when a competent authority has issued an opinion on a particular matter, the same shall be binding and cannot be questioned by the other agencies. - AT Visit to Get Source Reverse Charge Mechanism Not Applicable for Hiring Refrigerated Vehicles Unless Criteria in Section 65(105)(zzp) Met. Case-Laws - AT : Reverse charge mechanism (RCM) - charges incurred for hiring of refrigerated vehicles - mere hiring of vehicles does not suffice for transaction to be taxed under Finance Act, 1994 unless the elements of section 65 (105) (zzp) of Finance Act, 1994, in which the definition of ‘goods transport agency’ is vital, is conformed to. - AT Visit to Get Source Central Excise CENVAT Credit Distribution by ISD Validated: Allocation Weight Method Complies with Rule 7(d) of CENVAT Credit Rules 2004. Case-Laws - AT : CENVAT Credit - distribution of common input services (ISD) - Except that in few of the statements by ISD invoices in one of the columns, the credit was distributed by specifying turnover as “quantity based” and in some other it was on “allocation weight”. It is observed in terms of Circular No. 178/4/2004-S.T. dated 11.07.2014 as relied upon by the department, the distribution as per allocation weight is also based on turnover, hence, apparently such distribution is also in compliance of Rule 7(d) of CCR, 2004. - AT Visit to Get Source VAT KVAT Act Section 4 and Rule 3 lack a method to value goods in composite transactions, preventing separate tax levies. Case-Laws - HC : Rate of Tax - Valuation - A bare perusal of the Section 4 (charging section) of KVAT Act and Rule 3 (computation provision) of KVAT Rules would clearly indicate that there is no prescribed mechanism provided for determining the value of individual goods in a composite transaction. Thus, in the absence of a valuation mechanism, tax cannot be levied differently on each of the component by separating a single composite package - HC Visit to Get Source Case Laws: GST 2023 (2) TMI 1129 Seeking adjustment of GST amount deposited by the petitioner in the financial year 2018- 19, which inadvertently could not be deposited in the financial year 2017-18, but deposited by the petitioner in the month of June 2018 i.e. financial year 2018-19 - circular dated 31.12.2018 as well as provisions of Section 39(9) of the GST Act - HELD THAT:- Learned Standing Counsel, on instructions, could not dispute that the GSTR-9 dated 30.1.2020 is the only GSTR-9 form submitted by the petitioner and also could not dispute the figures provided therein. Both the assessing authority as well as the appellate authority have committed the said misreading of GSTR-9, hence both the impugned orders cannot stand and are set aside - the respondents are directed to adjust the amount of GST deposited by the petitioner. Petition allowed. 2023 (2) TMI 1128 Validity of SCN - Reversal of Input Tax Credit - Penalty - misuse of earlier GST Registration of the petitioner - HELD THAT:- A show cause notice can be challenged only if the same is issued without Authority under Law or has been issued without jurisdiction or has predetermined the issue - In the instant case, none of the above mentioned requirements have been satisfied - As seen from the documents filed along with this Writ Petition, the petitioner has been afforded a personal hearing on 21.02.2023. Learned counsel for the petitioner also submits that the petitioner shall appear for the personal hearing today (21.02.2023) and he also requests for one more personal hearing for the petitioner. No prejudice would be caused to the respondents if one more personal hearing is afforded to the petitioner - this Writ Petition is disposed of by directing the petitioner to appear for personal hearing with the respondents on 02.03.2023 at 10:30 a.m. and the respondents, after affording a personal hearing to the petitioner, after giving due consideration to the reply dated 10.02.2023 submitted by the petitioner and after adhering to the principles of natural justice, shall pass final orders on merits and in accordance with law, pursuant to the impugned show cause notice dated 08.03.2022, within a period of eight weeks from the date of the personal hearing. Petition disposed off. 2023 (2) TMI 1127 Seeking revocation of the cancelled registration - appeal dismissed for the sole reason that it was time barred - HELD THAT:- It cannot be denied that on account of cancellation of registration, the petitioner would be unable to continue with her business and which would lead to deprivation of means of livelihood, resulting into violation of right to life and liberty as enshrined in Article 21 of the Constitution of India. This would in turn, cause loss of revenue to the exchequer. The impugned order dated 06.10.2022 dismissing the appeal preferred by the petitioner is set aside - Petition disposed off. 2023 (2) TMI 1126 Exemption from GST on the services provided by the applicant - services provided in relation to maintenance of various colonies developed by Chhattisgarh Housing Board (CGHB) and not handed over to the local authority by CGHB - composite supply - Pure services or not - SI. No. 3 of exemption Notification no. 12/2017-Central Tax (Rate) dated 28.6.2017 as amended - HELD THAT:- With effect from 25.1.2018 vide Sr. no. 3A to Notification no. 2/2018-Central Tax (Rate), composite supply of goods and services in which the value of supply of goods constitutes not more than 25 per cent of the value of the said composite supply provided has been included. Thus, from 25.1.2018 composite supply of goods and services has also been included for the said benefit of Nil tax rate with the stipulation that the value of supply of goods constitutes not more than 25 per cent of the total value of the composite supply has been provided with principal supply of services. However, from the application it is unclear as to how much percentage of the value of composite services provided by the application consists of supply of goods. The Central Government means the President and the officers subordinate to him while exercising the executive powers of the Union vested in the President and in the name of the President. Similarly, as per clause (60) of section 3 of the General Clauses Act, 1897, the State Government , as respects anything done after the commencement of the Constitution, shall be in a State the Governor, and in an Union Territory the Central Government. As per Article 154 of the Constitution, the executive power of the State shall be vested in the Governor and shall be exercised by him either directly or indirectly through officer s subordinate to him in accordance with the Constitution. Further, as per article 166 of the Constitution, all executive actions of the Government of State shall be expressed to be taken in the name of Governor. Therefore, State Government means the Governor or the officers subordinate to him who exercise the executive powers of the State vested in the Governor and in the name of the Governor. By no stretch of imagination Chhattisgarh Housing Board (CGHB) could be termed as Government or local authority. Chhattisgarh Housing Board was formed under Chhattisgarh Housing Board Act vide notification no. 177/3236/32/2003 dated 12/12/2004. Chhattisgarh Housing Board is the main arm of the Government of Chhattisgarh for giving effect to its housing schemes and for implementing the Government s schemes under social housing. Therefore, CGHB can at best be covered under the definition of Government Authority or Government Entity . However, the benefit of exemption to both Government Authority and Government Entity has been withdrawn with effect from 1st of January 2022 vide Notification no. 16/2021-Central Tax (Rate) dated 18.11.2021. Thus, the service recipient of the applicant in the instant case viz. Chhattisgarh Housing Board (CGHB) does not fall in the specified category of Government , or local authority - The much important second criterion of the service recipient being Government or Local authority, for availing the benefit stipulated therein as provided under Notification No. 12/2017-Central Tax (Rate) dated 28 June 2017 as amended by Notification No. 16/2021 -Central Tax (Rate) dated 17.11.2021 effective from 1.1.2022, stands unfulfilled by the applicant. The third decisive condition to be verified is whether the services provided by the applicant are any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution - The applicant is of the view that they are exempt from the liability of GST in terms of clause 3 of the Notification No 12/2017, as they are providing services which are activities in relation to functions entrusted to a Municipality under article 243W of the Constitution - Based on the work order furnished by the applicant, it is evident that the services in relation to maintenance of various colonies of Chhattisgarh Housing Board / provision of security guards can in no way be equated to the functions entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. Also supply of security guards as is forthcoming from the tender documents cannot be termed as functions entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. Thus, it can be concluded that the provision of services by the applicant to CGHB in relation to maintenance of various colonies of CGHB / provision of security guards etc. do not qualify for be benefit of Nil rate of GST as provided under Sr. no. 3/ (3A) to Notification No. 12/2017- Central Tax (Rate) New Delhi, dated 28th June, 2017 as amended. Income Tax 2023 (2) TMI 1125 Capital gain computation - addition invoking the provisions of the Section 50C - land in question was compulsorily acquired for the NHAI - whether the assessing officer was justified in invoking the provisions of the Section 50C? - HELD THAT:- CIT(A) relied on the decision of the Hyderabad tribunal in the case of Southern Steel Limited [ 2018 (1) TMI 582 - ITAT HYDERABAD ] and granted relief to the assessee. This finding of the CIT(A) was affirmed by the tribunal - revenue seeks to distinguish the decision in the case of Southern Steels by contending that it was not the case of the transfer of the immovable consisting of land and building but it is the case of transfer of their rights to receive the amount of compensation and the TDR rights and both the assets do not fall under the category of immovable property. Though it may be true that in the case of Southern Steels the facts were slightly different, the Hyderabad tribunal had analyzed the scope of Section 50C and the purpose for introducing the said provisions in the statute namely to curb the menace of unaccounted cash being infused in the real estate transaction. The principle which was culled out by the Hyderabad tribunal is a correct interpretation of the provisions of the Section 50C in the case of the compulsory acquisition of land. Thus, the findings rendered by the CIT(A) as affirmed by the tribunal on this issue does not call for any interference. Disallowance on account of claim of shortage of coal - AO noticed shortage of coal was abnormally high in view of the facts in the preceding assessment year where there was a surplus of 18,450.24 metric tons of coal - CIT(A) refused to accept the conclusion arrived at by the assessing officer and allowed the assessee s appeal and deleted the disallowance on the shortage of coal - HELD THAT:- As mentioned about the quantity and value as was shown and from the notes and financial statements for the year ended 31.03.2015, we find that the quantity of 27,426.39 metric tons was subtracted from the total quantity of 10,52,299.00 metric tons which would show that the actual consumption of coal was 10,24,872.61/- metric tons. The total value of the coal as at 31.03.2015 was Rs. 41,278.13/-. If these figures are compared with the figures shown in the chart for coal consumption of power plant for the year 2014-2015, it clearly matches as the figures 27,426.39/- is reflected. Thus, the assessee did not properly explain the said aspect before the CIT(A) nevertheless such explanation has been given before us which we find to be factually acceptable - the issue relating to the alleged shortage of coal being entirely factual had been rightly explained. Taxability of the compensation received by the assessee for the lands compulsory acquired under the 2013 Act - stated that the 2013 Acquisition Act came into effect from 01.01.2014 and Section 96 inter alia provides that income tax shall not be levied on any award or agreement made except those made under Section 46 of the said Act. Therefore, it was directed that compensation for compulsory acquisition of land under the 2013 Acquisition Act except those made under Section 46 of the said act is exempted from the levy of income tax. Further it was ordered that as no distinction has been made between compensation received for compulsory acquisition of agricultural land and non-agricultural land in the matter of providing exemption from income tax under 2013 Acquisition Act, the exemption provided under Section 96 of the 2013 Acquisition Act is wider in scope than the tax exemption provided under the existing provisions of the Income Tax Act, 1961. It was pointed out that this aspect has created uncertainty in the matter of taxability of compensation received on compulsory acquisition of land especially those relating to acquisition of non-agricultural land. This matter was examined by the CBDT and it was clarified that compensation received in respect of award or agreement which has been exempted from the levy of income tax under Section 96 of the 2013 Acquisition Act shall also not be taxable under provisions of the Income Tax Act, 1961 even if there is no specific provision of exemption for such compensation in the Income Tax Act, 1961. The said Circular No. 36 of 2016 would come to the aid and assistance of the assessee and the compensation received by the assessee on account of the compulsory acquisition of land under the 2013 Acquisition Act is exempt from the tax - Decided against revenue. HIRANMAY BHATTACHARYYA, J. - Consent Judgement Addition u/s 50C - When the language of a statutory provision is plain and unambiguous, it is not permissible for the Court to add a substract words to or from a statute or read something into it which is not there. The Court cannot rewrite or recast a legislation in [Kotak Mahindra Bank Limited [ 2022 (6) TMI 13 - SUPREME COURT ] and Md. Shahabuddin Versus State of Bihar Others [ 2010 (3) TMI 991 - SUPREME COURT ] It is also well settled that the Court has to make an effort to give effect to each and every word used by the legislature and it is to be presumed that the legislature inserted every part thereof for a purpose and the legislative intention is that every part of the provision should have effect. While interpreting a provision the Court should keep in mind that the legislature did not intend to use superfluous word(s) or expressions in a statutory provision. Nathi Devi Versus Radha Devi Gupta [ 2004 (12) TMI 668 - SUPREME COURT ] Therefore, keeping in mind the aforesaid canons of interpretation and the object behind inserting the said provision it appears to this Court that the legislature used the words and expressions in Section 50C of the Act consciously to give the same a restricted meaning - the term transfer used in Section 50C has to be given a restricted meaning and the same do not have a wider connotation so as to include all kinds of transfer as contemplated under Section 2(47) of the Act. This Court accordingly holds that the provisions of Section 50C shall be applicable in cases where transfer of the capital asset has to be effected only upon payment of stamp duty. Whether in cases of compulsory acquisition of a capital asset being land or building or both, the provisions of Section 50C will be applicable? - In case of a transfer by way of compulsory acquisition, the capital asset being land or building or both vests upon the government by operation of the provisions of the relevant statute governing such acquisition proceeding and subject to the terms and conditions laid down in the said statute being followed. In case of compulsory acquisition the transfer of property takes place by operation of law and the provisions of the Transfer of Property Act or the Indian Registration Act do not have any manner of application to such transfers. The question of payment of stamp duty also does not arise in such cases. This Court accordingly holds that in case of compulsory acquisition of a capital asset being land or building or both, the provisions of Section 50C cannot be applied as the question of payment of stamp duty for effecting such transfer does not arise. In the instant case, the property was acquired under the provisions of the National Highways Act 1956. The property vests by operation of the said statute and there is no requirement for payment of stamp duty in such vesting of property. As such there was no necessity for an assessment of the valuation of the property by the stamp valuation authority in the case on hand. Ths the provisions under Section 50C of the Income Tax Act cannot be applied to the case on hand. 2023 (2) TMI 1124 Maintainability of appeal before HC on low tax effect - whether the appeal filed by the revenue comes under the exception clause as enumerated in circular no. 3/2018 dated 11.07.2018 ? - Disallowance of Retention Money Deposit Security Deposit - ITAT Allowed the appeal of the Assessee and the aforesaid disallowance of Expenditure of Rs. 1,07,35,595/- on account of Security Deposit, Retention Money deposit etc. was deleted - HELD THAT:- Having heard learned counsel for the parties and after going through the documents available on record and the different circulars whereby monetary limit for filing appeal under 260A of the Income Tax Act, 1961 has been fixed; it appears that in exercise of powers conferred under section 268A of the Income Tax Act, 1961, the Central Board of Direct Taxes (CBDT), vide its Circular No.3/2018 dated 11.07.2018 read with Circular No. 17/2019 [F. No.279/MISC. 142/2007- ITJ (PT.)], dated 08.08.2019 has fixed a monetary limit of tax effect of Rs.1,00,00,000/- for filing appeal u/s 260A of the Act by the Income tax department before the High Courts. Thus it is crystal clear that on the one hand the tax effect in the instant case is much below the monetary limit as enumerated in Circular No. 3/2018 read with Circular No. 17 of 2019 and on the other hand none of the exception clause much less the audit objection is involved in this case and as such, we are having no hesitation in dismissing this appeal on the question of maintainability itself. Instant appeal is dismissed at the admission stage itself. 2023 (2) TMI 1123 Non grant of Refund along with interest u/s. 244A - Refund as approved which sent to CPC, Bangalore which had shown as accounting closed by the CPC - HELD THAT:- Refund after marathon litigation had been culminated in favour of the petitioner. It had also been given with interest. The reasons which are not in the hands of the Assessing Officer could not be actually verified in favour of the petitioner because all that was needed to be at the end of the Assessing Officer had been done. It is reiteratively written in the affidavit-in-reply that once the refund is finalized and interest under Section 244A of the Income Tax Act is given, the same had been sent to the Range Head for refund approval and it was also approved. It had been sent to CPC, Bangalore which had shown as accounting closed by the CPC and therefore, no action could be initiated or pursued as the same would be visible to the Assessing Officer. According to us, this is nothing but pure harassment to the assessee, the assessing officer himself has shown difficulties and this helplessness in helping the assessee who has otherwise done what all it needed to do at his ends. This appears to be a classic case where, there is a technical glitch which no officer could have helped. The CPGRMS was approached by the petitioner and thereafter, it had on number of occasions attempted to approach the respondent No.2 - the Principal commissioner of Income Tax for its redressal . However, in wake of the technical glitch in the system, the payment of refund was not possible. Approval was already granted and sent to CPC, Bangalore for issuance of the refund. It had declared the accounting closed as per the version of the respondent in affidavit-in-reply, no action was permissible as nothing would be visible to the AO. We need also to take note of Section 119A of the I.T. Act where, it is an obligation of the Board to adopt and declare a Taxpayer s Charter and issue such instructions, directions and guidelines to the Income Tax authorities as upon administratively necessary. The Centralized Public Grievance Redress and Monitoring System (CPGRMS) also approached the number of occasions by the petitioner as the application had been filed and there are merely 5 communications without any success. The legislature and executives have taken due care of the grievances of the commoners or the assessees to be redressed at the earliest without putting them any jeopardize. However, if there is any technical glitch which does not resulted the grant of refund which is otherwise the entitlement of the petitioner from the year 2018. This petition deserves to be allowed directing the respondent to release the refund of amount of Rs.17,15,34,707/- with statutory interest within two weeks from the date of receipt of this order . 2023 (2) TMI 1122 Reopening of assessment u/s 147 - Reason to believe - expenditure incurred on Colour Idea Stores - HELD THAT:- As during the scrutiny assessment, the AO had sought from the petitioner the relevant details with regard to the advertisement and sales promotion expenses which details were furnished by the petitioner vide its response dated 17th October 2016. It can also be seen that the AO had disallowed some of the expenses which had been reflected in the break-up under the head details of advertisement and sales promotion expenses while passing the final order of assessment, which reflects that the AO had applied its mind to the appellant s claim while passing the order under section 143(3) of the Act. The reasons do not disclose as to what material or fact was not disclosed by the assessee. It, therefore, clear that there was, in fact, a complete disclosure of all the primary material facts on the part of the petitioner and it cannot be said that there was any failure on the part of the petitioner to disclose fully and truly facts which were material and necessary for assessment. Thus notice impugned does not satisfy the jurisdictional requirement of section 147 - Decided in favour of assessee. 2023 (2) TMI 1121 Validity of order passed u/s 148A(d) - Shorter period granted to respond to notice - Non consideration of reply while passing the order - notice dated 22.03.2022 issued under Section 148A(b) required response to the same being filed by 28.03.2022 - since the portal was closed, the reply was transmitted to the concerned officer via email dated 29.03.2022 - HELD THAT:- It is not disputed that this reply was not considered by the assessing officer while passing the order dated 30.03.2022 under Section 148A(d) of the Act. A perusal of the said order would show that according to the assessing officer, income amounting to Rs. 1,03,24,000/- has escaped assessment. In this context, reference is made to cash deposits and withdrawals reflected in the petitioner s current account maintained with HDFC Bank Ltd. Given the fact that the timelines were short and the petitioner s reply could not be considered, we are inclined to set aside the impugned order with a direction to the assessing officer to consider the petitioner s reply and pass a fresh order. 2023 (2) TMI 1120 Reopening of assessment u/s 147 - validity of order passed u/s 148A(b) - Department/ Revenue going beyond the show-cause notice - as contented authorities while passing the order u/s 148A(b) and Section 148 of the Act have considered certain transactions which were not part of the notice that was originally issued to the petitioner under Section 148 of the old Act and also u/s 148A(b) of the new Act - HELD THAT:- As glaringly visible from the two notices that were issued on 29.06.2021 as also on 25.05.2022 i.e. the notice initially issued under Section 148 of the old Act and under Section 148A(b) of the new Act that the department has not disclosed the fact in its notice of the petitioner having suppressed this 14 Lakh rupees transaction and this has also escaped assessment of the Department. In the absence of the same being reflected in the notice, the assessment yet being made of the said amount would be prima facie bad in the light of the judgment of the Supreme Court in case of Commissioner of Customs, Mumbai Vs. Toyo Engineering India Ltd. [ 006 (8) TMI 184 - SUPREME COURT ] wherein as emphatically held that the Department cannot travel beyond the show cause notice. Thus keeping in view the circular of the Department this court is of the opinion that the order under Section 148A(b) and order Section 148 in the given factual backdrop would not be sustainable. The same therefore deserves to be and is hereby set aside reserving the right of the Department, if the law permits, to take appropriate recourse available in accordance with law. 2023 (2) TMI 1119 Reopening of assessment - validity of order passed u/s 148A(d) - Second round of litigation - non independent application of AO s mind to the information furnished by the DDIT - HELD THAT:- If the assessing office fails to obey the directions issued by the Court, stringent action should be taken and it is not clear as to whether the Principal Commissioner of Income Tax is aware that in his field formations, such officers are functioning. These are all sufficient grounds to quash the order dated 25th August, 2022. But, however, this being a second round of litigation, we are constrained to go a step further to consider as to whether there was any justification for reopening the assessment. Reopening of the assessment is alleged to have been based upon an information given by the Deputy Director of Income Tax (Inv.) Unit-2(4), Kolkata. From the information, it is not clear as to how reopening of the assessment could have been resorted to. The report is as vague as possible as it states that possible financial transactions could be deduced and decoded from hard copies obtained from DDIT. Further, it says there is potential cash borrowed from various lenders and the probable names of the group have been mentioned and set out without any particulars. Assuming that material was available as annexures to the said report of the DDIT, such documents should have been made known to the assessee so as to enable them to give an effective reply. The only conclusion that can be arrived at is to hold that the reopening of the assessment was bad as it was based on certain alleged potential cash borrowings and certain alleged possible financial transactions. That apart, the assessing officer did not independently apply its mind to the information furnished by the DDIT which he is required to do while exercising the power to reopen an assessment. We are of the considered view that the entire reopening proceedings commencing from issuance of the notice under Section 148A(b) and culminating in the order under Section 148A(d) is a clear abuse of the process of law. - Decided in favour of assessee. 2023 (2) TMI 1118 TP Adjustment - Comparable selection - exclusion of Certification Engineering International Ltd., HSCC India Ltd. and Mitcon Consultancy Engineering Services Ltd. - HELD THAT:- ITAT excluded Certification Engineering International Ltd. and HSCC India Ltd. not only on the ground that these companies were government undertaking, but also on ground of functional dissimilarities with the assessee company. The ITAT excluded the Mitcon Consultancy Engineering Services Ltd. on the ground of functional dissimilarity with the assessee company as well on the ground that the same comparable was excluded by ITAT in assessee s own case for the AY 2011-12, and the said order of the ITAT was confirmed by this Court [ 2019 (7) TMI 1147 - DELHI HIGH COURT] 2023 (2) TMI 1117 Validity of order u/s 148A(d) - formalities required under the law in issuing notice under Section 148A(b) - second round of litigation by the petitioner - HELD THAT:- As perused the impugned order and find the same neither in violation of principle of natural justice nor contrary to any statutory provision nor there is any procedural irregularity nor without jurisdiction, thus once an order has been passed after observing formalities required under the law in issuing notice u/s 148A(b), giving opportunity of hearing to file an objection to the same and after that if the order has been passed by the assessing officer under Section 148A(d) and if the assessee petitioner is not satisfied with the reasoning given in such order and has any grievance on merit of the same, he may agitage the same in course of subsequent proceedings after notice under Section 148 of the Act as per view taken in the case of Anshul Jain Vs. Principal Commissioner of Income Tax Anr. [ 2022 (10) TMI 3 - SC ORDER] . An order under Section 148 (d) of the Income Tax Act, 1961, itself is neither an assessment nor a demand and petitioner still will have ample scope and opportunity to make out a case if any for dropping of the proceeding under Section 147 of the Act in subsequent proceeding after the order passed under Section 148 (d) of the Act. WP dismissed. 2023 (2) TMI 1116 Assessment u/s 153A - incriminating material found in search or not? - HELD THAT:- We have perused the statement dated 3rd August, 2015 and the contents of the letter dated 31st July, 2015, both authored by Sh. Madho Gopal Agarwal. There is no reference to M/s KGN Industries Limited in either of the said documents. No other material found during search pertaining to M/s KGN Industries Ltd. has been placed on record. The Revenue has not placed on record any incriminating material which was found as a result of the search conducted on the assessee herein. On the date of search, admittedly, the assessment with respect to the AY under consideration 2011-12 admittedly stood completed. Since no assessment was pending for the relevant AY 2011-12 on the date of search and no incriminating material was found during the course of search, the issue is covered in favour of the assessee by the judgment of this Court in the case of Commissioner of Income Tax v. Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT ] and Principal CIT vs. Meeta Gutgutia [ 2017 (5) TMI 1224 - DELHI HIGH COURT ] Thus no substantial questions of law arise for consideration. Accordingly, the present appeal is dismissed. 2023 (2) TMI 1115 Denial of exemption u/s. 80P - Return was filed belatedly u/s. 139(4) of the Act - adjustments prescribed in Section 143(1) - HELD THAT:- It is apparent from the Ld. NFAC order when the assessee has clearly pointed out the amendment in Section 143(1) made by Finance Act, 2021 which is not applicable for the present assessment year 2019-2020. However the same was not been considered by the Ld. NFAC and erroneously dismissed the assessee s appeal. As relying on Lunidhar Seva Sahakari Mandali Ltd [ 2023 (2) TMI 1012 - ITAT RAJKOT] assessee cannot be denied the deduction u/s. 80P of the Act on the ground that the assessee did not file the Return of Income within the due date prescribed u/s. 139(1) of the Act under proceedings made u/s. 143(1) of the Act for the Assessment Year 2019-20. Appeal filed by the Assessee is hereby allowed. 2023 (2) TMI 1114 Penalty levied u/s 271(1)(b) - assessee failed to comply notice u/s 142(1) - scope of bonafide reason - HELD THAT:- Division Bench of Delhi Tribunal in Akhil Bhartiya Prathmik Shmshak Sangh Bhawan Trust [ 2007 (8) TMI 386 - ITAT DELHI-G] held that where assessee had not complied with notice under Section 142(1) but assessment order was passed under Section 143(3) and not under Section 144, that meant that subsequent compliance in the assessment proceedings was considered as a good compliance and defaults committed earlier were ignored by Assessing Officer and, therefore, penalty under Section 271(1)(b) was not justified. As find that similar view was followed in a series of decisions as has been relied by the ld. AR for the assessee in his submission. Thus, considering the fact that assessment in the present case was completed u/s 153A/143(3) in accepting return of income, find that it was sufficient compliance, merely because the assessee could not make compliance due to some bonafide reason, no penalty under Section 271(1)(b) of the Act could be levied on the assessee. In view of aforesaid factual and legal position, direct the Assessing Officer to delete the entire remaining impugned penalty. In the result, ground of appeal raised by assessee is allowed. 2023 (2) TMI 1113 Disallowance u/s 14A r.w.r. 8D - suo moto disallowance made by the assessee - sufficiency of interest free funds - HELD THAT:- The aggregate of the Share Capital, the General Reserves and Surplus in Profit and Loss account, which can be termed as interest free funds available with the assessee as at 31st March 2009 is much in excess of the investments as on 31st March 2009. In the case of Reliance Utilities Power Ltd. ( 2009 (1) TMI 4 - BOMBAY HIGH COURT ) has held that where an assessee had own funds as well as borrowed funds, a presumption can be made that the advances for non-business purposes have been made out of the own funds and that the borrowed funds have not been used for this purpose. We further find that identical issue arose before the co-ordinate Bench of Tribunal in assessee s own case in A.Y. 2012-13 [ 2020 (2) TMI 1485 - ITAT DELHI ] also. The Coordinate Bench of Tribunal while deciding the issue in that year has deleted the additional disallowance made by AO for the reasons noted therein. Before us, Revenue has not placed on record any contrary binding decision in its support nor has pointed to any distinguishing feature of the case in the year under consideration and that of earlier years. Considering all we are of the view that no additional disallowance as made by AO in excess of the suo moto disallowance made by the assessee was warranted in the present case. We, therefore, direct the deletion of the additional disallowance made by AO. Thus the ground of assessee is allowed. TP adjustment u/s 92CA(3) - interest on loan to assessee s 100% subsidiary - HELD THAT:- We find that identical issue arose before the Tribunal in assessee s own case in A.Y. 2014-15 [ 2021 (12) TMI 1428 - ITAT DELHI ] and Co-ordinate Bench of Tribunal by following the order of Tribunal in assessee s own case for A.Y. 2010-11 [ 2018 (2) TMI 2030 - ITAT DELHI ] has decided the issue in favour of the assessee. Nature of receipt - Receipts of of Carbon Emission Reduction (CERs) - According to assessee, the aforesaid amount was in the nature of capital receipt and should have been excluded while computing the taxable income but however it had recognized it as Revenue receipt in the return of income - HELD THAT:- We hold that the AO was not justified in considering the receipt from CERs to be revenue receipts. We, therefore, direct the AO to consider the receipts on transfer of CER to be capital receipt. Since the amount is held to be capital receipt, it cannot be considered for the purpose of computing book profit u/s 115JB of the Act. Thus the grounds of assessee are allowed. Claim of depreciation on goodwill - claim of depreciation of goodwill was not made by assessee either in the return of income or during the assessment proceedings - HELD THAT:- No material has been placed by the Revenue to point out any judicial precedence to support his contention that when depreciation arising out of the same transaction has been allowed in other years, whether it can be denied in other years. Before us, Revenue has also not pointed to any distinguishing feature in the facts of the case in the year under consideration and that of the earlier years. Revenue has also not placed any material on record to demonstrate that the order of Tribunal in assessee s own case for A.Y. 2012-13 [ 2020 (2) TMI 1485 - ITAT DELHI ] has been stayed/set aside/overruled by higher judicial forum. In view of the aforesaid facts, we are of the view that Assessee is eligible to claim depreciation on goodwill. We accordingly direct the AO to allow the claim of depreciation. Calm first time made before CIT-A - Disallowance of donation paid to Schools of SRF Vidyalay and SRF Foundation - Claim for deduction was neither made by the assessee in the original return of income nor had the assessee filed revised return of income to claim such deduction - HELD THAT:- As decided in Mitesh Impex [ 2014 (4) TMI 484 - GUJARAT HIGH COURT] held that CIT(A) was not justified in not deciding the claim made by the assessee before him for the first time. We for the same reasons hold that CIT(A) has erred in not deciding the claim made before him for the first time and should have decided the claim of the assessee. Revenue has also not placed any material on record to demonstrate that the order of Tribunal in assessee s own case for A.Y. 2010-11 [ 2018 (2) TMI 2030 - ITAT DELHI ] has been stayed/set aside/overruled by higher judicial forum. In view of the fact that there is no finding by the lower authorities on the allowability of the expenses, we, following the order of the coordinate bench of Tribunal in assessee s own case and for similar reasons restore the issue back to the file of the AO and direct him to decide the claim of the assessee in accordance with law. The AO shall be free to call for such information and explanations as he deems fit to adjudicate the claim of the assessee. Nature of receipt - additional depreciation, seeking of indexation benefit for long term capital gains and treating the TUF subsidy as revenue receipts - HELD THAT:- We for the reasons given while deciding the issue A.Y. 2014-15 [ 2021 (12) TMI 1428 - ITAT DELHI ] and for similar reasons, restore the issue back to the file of AO and direct him to decide the issue afresh in accordance with law. The AO shall be free to call for such information and explanations as he deems fit to adjudicate the claim of the assessee. Assessee shall also be free to file such documents, explanations, submissions as it deems fit in respect of this claim. Needless to state that the AO shall grant adequate opportunity of hearing to the assessee. Indexation benefit for the calculation of Long Term Capital Gain - We find that though the issue was raised by the Assessee before CIT(A) but however CIT(A) did not admit the claim for the reasons noted in the order and therefore there is no finding of the lower authorities on the issue. Since there is no finding by the lower authorities on the issue, we restore the issue back to the file of AO and direct him to decide the claim of the assessee in accordance with law. The AO shall be free to call for such information and explanations as he deems fit to adjudicate the claim of the assessee. 2023 (2) TMI 1112 Validity of order u/s 92CA - time limit for passing of the TPO order - period of limitation - HELD THAT:- As relying on M/s. Pfizer Healthcare India Private Limited [ 2021 (2) TMI 1152 - MADRAS HIGH COURT] time limit for passing the TPO order in the case of assessee would expire on mid-night of 30th January 2016 i.e. (00:00 Hrs of 30th January 2016). Here in this case, the order of TPO has been passed on 31st January 2016 and accordingly, the TPO order is clearly barred by limitation by one day by virtue of time limit provided under section 92CA(3). The TPO order admittedly has been passed after the limitation has expired and consequently, the same has to be treated as bad in law and is hereby quashed. Thus, in such a situation it has to be reckoned, as if there is no TPO order and consequently, the entire transfer pricing adjustment proposed by the TPO on the international transaction becomes non-est and liable to be quashed. Assessment u/s 144C - eligible assessee - whether, once the TPO order is held to be nullity or quashed on the ground of being barred by limitation, then could AO have passed the draft order treating it to be as eligible assessee ? - Section 144C was brought on the statute as special scheme of assessment and to provide alternative dispute resolution scheme to certain categories of eligible assessee . Section 144C provides that the AO has to pass and forward a draft assessment order in the case of eligible assessee if he proposes to make any variation which is prejudicial to the interest of such assessee, Sub-section 15 has defined eligible assessee for the purpose of section 144C. The issue being fairly settled and the intent of legislature in strictly interpreting the provision of section 144C of the Act being repeatedly held so, the act of the Ld. AO in proceeding to pass a draft assessment order on the basis of an order by the Ld. TPO which is barred by limitation and thus bad in law/ non-est, results in an incurable illegality which is liable to be held as null and void, and thus, consequentially holding the final assessment order to be bad in law as well. Thus, despite the fact that the reference made to the Ld. TPO is valid, in absence of a legally valid transfer pricing order and a valid draft assessment order, the Ld. AO cannot assume jurisdiction to proceed with the assessment under Section 144C of the Act and pass the consequential final assessment order. The decisions of the Hon ble jurisdictional High Court in case of International Air Transport Association [ 2016 (2) TMI 897 - BOMBAY HIGH COURT] and Dimension Data Asia Pacific PTE Ltd. 2018 (7) TMI 1256 - BOMBAY HIGH COURT] forties appellant s contentions and the irresistible conclusion that the draft assessment order imbibes a jurisdictional power in terms of Sec. 144C(1) of the Act and creates/ envisages special rights upon the eligible assessee . If such an order is passed on an assessee who is not an eligible assessee as defined in section 144C(15)(b)(i) of the Act, then it would render the entire proceedings pursuant to such order null and void. We find that section 153(1) of the Act, as it stood applicable for the AY 2012-13, provided a time limit of 3 years from the end of AY 2012-13 for completion of assessment under section 143(3) of the Act, i.e., on or before 31 March 2016. In such a case if the Ld. AO invokes the provisions of section 144C of the Act and passes the final assessment order after 31 January 2016 i.e. beyond the period of limitation as stated above, such final assessment order u/s 143(3) r.w.s 144C of the Act is liable to be quashed as being barred by limitation. Thus we hold that the final assessment order passed on 31 January 2017 is beyond the prescribed period of limitation under section 153 of the Act expiring on 31 March 2016, thus, barred by limitation and is hereby quashed. Decided in favour of assessee. 2023 (2) TMI 1111 TDS u/s 194J - Disallowance u/s 40(a)(i) - non-deduction of TDS - payment of interconnect user charges as it could not be categorized as fee for technical services - HELD THAT:- Hon ble High Court has noted in the case of Vodafone South Ltd.[ 2016 (8) TMI 422 - KARNATAKA HIGH COURT] which hold that no TDS is required to be deducted by the assessee on payment of interconnect user charges as it cannot be categorized as fee for technical services, thus decided the aforesaid issue in favour of the respondent-assessee. Addition on account of excess depreciation claimed - assessee has taken license which allows the assessee to use that particular right on payment of certain amount and that being an intangible asset on which depreciation is allowable @ 25% only - HELD THAT:- As in assessee s own in AY 2013-14 case granted the relief to the assessee holding that depreciation on a limited user license is eligible @ 60%. Disallowance as excessive depreciation claimed, is directed to be deleted. Appeal of the Revenue stands dismissed. 2023 (2) TMI 1110 Set off of Credit of MAT u/s 115JB - HELD THAT:- According to Section 115JB of the Act income tax payable is to be compared with the specified percentage of Book Profits computed u/s 115JB. In the case before us the AO as compared the assessed income with the Book Profits and thereby, arrived at the incorrect conclusion that income tax is payable under MAT provisions contained in Section 115JB. We hold that in the facts and circumstances of the present case the income tax for the AY 2018-19 would be payable under normal provisions and therefore, the Appellant would be entitled to claim set-off of the MAT credit as per the provisions of Section 115JAA - Accordingly, we direct the AO to verify the records and re-compute the tax liability of the Appellant after granting the set off of MAT credit as available to the Appellant in terms of Section 115JB of the Act while passing order giving effect to the decision in the present appeal. 2023 (2) TMI 1109 Revision u/s 263 - Scope of audit objection - licence fee payments to the Municipal Corporation, Ambala during the year under consideration was not properly verified by the AO - HELD THAT:- The assessee, in this case, has been subjected to multiple litigation only because of non-settlement of audit objection. Firstly, the audit party mistook the figures and held that 2/3 of the expenditure was a deferred revenue expenditure which was to be disallowed. However, the said objection was not admitted by the Assessing Officer. Since, the said audit objection was not settled by the audit party, therefore, the assessee was subjected to reassessment proceedings. Even no addition was made in the reassessment proceedings and the Assessing Officer time and again wrote letters to the CCIT to settle the audit objection. However, since the ITO(Audit) did not agree to settle the objection, the ld. PCIT initiated the revision proceedings u/s 263 of the Act stating that the expenditure pertained to the earlier year as against earlier objection that the 2/3 of the total expenditure booked on account of the municipal fees was not allowable being deferred revenue expenditure. Even, since the assessee had to litigate as the agreement did not mature and arbitration award has been passed, about which the assessee has claimed that the award amount will be offered for taxation. Any expenditure incurred by the assessee has also to be deducted and to be allowed. The assessee explained that the agreement with municipal corporation was entered on 28.02.2011 and that no amount was incurred in the financial year 2010-11 and the expenditure was rightly booked in the year 2011-12, therefore, we do not find justification on the part of the ld. PCIT in exercising his revision jurisdiction u/s 263 of the Act in this case. The entire exercise seems to have been done because of audit objection only. Since, the Assessing Officer had duly enquired about the matter and was satisfied with the explanation given by the assessee, the ld. PCIT, in our view, has wrongly exercised his revision jurisdiction on the issue which is nothing but change of opinion, that too, at the instance of audit party. In this case, even the AO did not admit to the audit objections rather requested to settle the audit objection. Therefore, the revision jurisdiction exercised by the ld. PCIT cannot be held to be justified. The revision order passed u/s 263 of the Act is, therefore, quashed. Appeal of assessee allowed. 2023 (2) TMI 1108 Income deemed to accrue or arise in India - Royalty receipts - Revenue earned from sale/distribution of software - Income chargeable to tax in India as Royalty under Article 12 of India- Ireland Double Taxation Avoidance Agreement (DTAA) - assessee is a non-resident corporate entity incorporated in Ireland engaged in the business of sale of software and hardware and provision of support services - HELD THAT:- As in assessee s own case in assessment year 2013-14 2018 (12) TMI 112 - ITAT DELHI] and AY 2014-15 [ 2020 (7) TMI 824 - ITAT DELHI] has decided the issue in favour of the assessee to hold that the amount received by the assessee from sale of software cannot be treated as royalty under Article 12 of India Ireland tax treaty. In any case of the matter, now the issue is no more res integra in view of the decision of Engineering Analysis Centre of Excellence Pvt. Ltd. [ 2021 (3) TMI 138 - SUPREME COURT] . Accordingly, we delete the addition - Assessee Grounds are allowed. 2023 (2) TMI 1107 Permanent Establishment (PE) in India - Article 5 of Indian - Japan Double Taxation Avoidance Agreement (DTAA) - attribution of profit to the PE - assessee is a non-resident corporate entity incorporated in Japan - HELD THAT:- There cannot be any dispute that factually the impugned assessment year stands in identical footing to assessment years 2014-15 and 2015-16. [ 2022 (3) TMI 660 - ITAT DELHI] - This is further evident from the fact that, both, the AO and learned DRP have acknowledged that the factual position in the present assessment year is identical to the preceding assessment years. Thus, respectfully following the decision of the Coordinate Bench, as discussed above, we hold that the assessee had no PE in India in any form whatsoever. Therefore, the addition made by attributing a part of the income of the assessee to the alleged PE has to be deleted. Accordingly, we do so. Grounds are allowed. Levy of Surcharge and cess - to be computed over the rate of tax as per DTAA or not - HELD THAT:- We accept assessee s contention that levy of surcharge and cess cannot exceed the tax rate of 10% as per India Japan DTAA. Article 12 of India Japan tax treaty provides that the tax to be charged on royalty and FTS shall not exceed 10% of the gross amount of royalty or FTS. Article 2 of the tax treaty defines tax in India as income tax including any surcharge thereon. Therefore, Article 12 read with Article 2 of the tax treaty makes it clear that the rate of tax at 10% would encompass surcharge and education cess as it is also in the nature of surcharge. Therefore, we hold that levy of surcharge and cess over and above the taxable rate of 10% on royalty and FTS is not permissible as per the treaty provisions. Decided in favour of assessee. 2023 (2) TMI 1106 TP Adjustment - comparable selection - exclusion of persistent loss company - HELD THAT:- A similar case has been decided in the case of Commissioner of Income-tax v. Future First Info Services (P.) Ltd. [ 2022 (7) TMI 748 - DELHI HIGH COURT] has held that the persistent loss company cannot be considered as a good comparable. We further noted from the judgement relied by the Ld DR in which it has also been held that the persistent loss company cannot be considered as a comparable company with the assessee company. The facts of the case on hand are also similar and, therefore, the decisions quoted (supra) are squarely applicable. Respectfully following we dismiss the grounds taken by the assessee that M/s. Hindustan Motors Ltd. is not a good comparable company and accordingly we uphold the orders of the lower authorities. In the result the ground raised by the assessee is dismissed. Inappropriate computation of margins by the AO/TPO/DRP by not considering the income and expenses which is as i) Interest received, ii) Claims received from Insurance Companies, iii) Liabilities/Provisions written back, iv)Miscellaneous income and v) Interest paid as non-operating in nature - HELD THAT:- We noted that the ld.AR of the assessee wanted to include/exclude the above 5 types of income/expenditure for calculating operating margin of the assessee. A similar issue has been decided by the coordinate bench of the Delhi Tribunal in the case of Bucher Hydraulics (P.) Ltd. [ 2020 (10) TMI 1147 - ITAT DELHI] - We remit this issue to the AO for de-novo consideration and the assessee is directed to produce necessary documents for substantiating his case. Custom Duty Adjustment - assessee has paid custom duty for which he sought to be excluded for the computation of operating margin - HELD THAT:- Given the fact that the assessee imported more raw materials for manufacturing, it is but natural that the corresponding sale price would also have been on higher side, thereby nullifying the effect of higher payment of Customs duty, forming a part of the Operating cost based on the overall basis. The situation would have been different if the assessee had paid Customs duty at a rate higher than that paid by its comparables, which would have called for adjustment to have a level playing. Instantly, we are confronted with a case in which the assessee is claiming exclusion of extra custom duty on the strength of its higher quantum and not the higher rate of Customs duty. In case of comparable companies, there are various costs which also fluctuate so as to have disadvantageous position viz., to the taxpayer. These differences would not have material effect on net margins that s why the TNMM method is adopted as a MAM. As during the course of hearing, AR could not substantiate that there is a variation in the rate of custom duty paid by the assessee in the imported goods for consumption of raw materials, the quantum of imported materials of the assessee company as well as the comparable companies are immaterial - we direct the assessee for providing rates of custom duties paid by the assessee company as well as the comparable company to the AO/TPO and if the assessee could prove that the custom duty of assessee is higher than the comparable company s custom duty rate for the import of goods, then the assessee would be eligible for claiming adjustment. Accordingly, this ground is remitted for fresh consideration by the AO/TPO for ascertaining the custom duty adjustment. Not providing adjustment for abnormal expenditure incurred due to Thai floods - AR submitted that during the Thai flood, the cost of imported raw material was increased high - AR requested that the matter may be remitted back to the AO for a fresh consideration and he has sufficient material to prove that there was a substantial increase in the price, therefore, the assessee has to incur extra cost - HELD THAT:- After considering the rival submissions and perusing the order of the authorities, we accept the prayer of the assessee for remitting this ground to the file of TPO for de-novo consideration. Considering the findings recorded by the ld.DRP. The assessee is directed to produce necessary documents for early disposal of the issue. Not providing working capital adjustment - HELD THAT:- The working capital adjustment is an accepted adjustment and this issue has also been decided by various High Courts in favour of the assessee. A similar issue has been decided by the coordinate bench of the Tribunal in assessee s own case [ 2021 (9) TMI 12 - ITAT BANGALORE] . Thus allow this issue and the assessee is directed to provide requisite details for computation of working capital adjustments. Cash PLI and alternatively depreciation adjustment - HELD THAT:- We noted that the assessee has sought for cash PLI and depreciation adjustments and submitted that being involved in manufacturing segment, which require huge capital outlay for setting up of plant and machinery. We also noted that in the financial years 2010-11 and 2011-12, the assessee has enhanced its production capacity and new Plant No.2 was also utilized by the assessee. The assessee is also involved in manufacturing segment before the AY 2003-04. In assessment year 2003-04, the assessee had sought for adjustment of cash PLI which has been rejected by the coordinate bench of the Tribunal in the assessee s own case in [ 2013 (1) TMI 86 - ITAT BANGALORE] - Thus following the above judgment, AO/TPO is directed to compute the adjustment in accordance with the above view taken by the coordinate bench in assessee s own case. TP adjustment to be restricted only to AEs transactions only - HELD THAT:- Considering the submissions from both sides, we observed that a similar issue has been decided by us in assessee s own case for the assessment year 2013-14 [ 2021 (9) TMI 12 - ITAT BANGALORE] wherein as accepted that TP adjustment has to be restricted to AEs transactions alone. Thus we hold that the CIT(A) has correctly directed the AO / TPO to restrict the TP adjustment to the AEs transaction. Relating to royalty adjustments - AR submitted the assessee adopted TNMM at the entity level, in which process the royalty has been considered as a closely linked transaction as a part of operating cost - separate adjustment for royalty is not required - HELD THAT:- We observe from the order of the TPO, he has calculated the ALP in regard to royalty payment determined under TNMM of Rs.154.54 crores however, no separate adjustment of royalty has been proposed by the TPO since the TNMM was adopted at NTT level which includes royalty also. DRP also expressed his opinion that the TPO has not proposed any adjustment towards royalty payment. Considering the above observations and arguments, we uphold the order of the DRP and no separate adjustment is required for the payment of royalty if the TNMM approach has been adopted at entity level as decided by the coordinate bench of the Tribunal in the assessee s own case noted supra, therefore ground Nos.8 to 15 become academic in nature, accordingly, we allow ground nos.8 to 15. Provision for Employees Long Term Benefit - HELD THAT:- As provision was made as per accounting standard 15 towards future liability accruing to other employees, who are in service for 10 years. The provision was based on the actuarial valuation and the assessee is adopting mercantile system of accounting and he further submitted that similar issue has been decided in assessee s own case by the coordinate bench of the Tribunal [ 2021 (9) TMI 12 - ITAT BANGALORE] and the matter has been remitted back to the AO. Excess claim of depreciation - assessee submitted that it was only because of the price negotiations with the vendors was not finalized, therefore the assessee claimed depreciation on the basis of liability, which has neither been quantified nor crystallized - HELD THAT:- During the impugned assessment year, the assessee has submitted that the assets were put to use by the assessee but from the documents available it is not clear whether the ownership of the assets were transferred to the assessee because there was no price fixed by the suppliers as stated of the assessee. The assessee has not satisfied both the conditions, therefore, the assessee is not eligible for claiming depreciation on provisional basis. We also notice that from the above table the provision was made in the books of accounts for Rs.48.35 crores and even after expiry of 2 years the price was finalized only of Rs.6.44 crores and the assessee has reversed the provisions only. We also noted it from the order of the AO vide his letter dated 25/02/2016. Accordingly, we uphold the order of the lower authorities. The assessee admitted that there was excess claim of depreciation on the provisions created, which has been reversed subsequently. Considering the totality of the facts and circumstances of the case, we uphold the order of the revenue authorities. Accordingly, this ground is dismissed. Deduction u/s 40(a) - assessee has debited an expenditure towards payment of royalty - addition made u/s 92CA - revenue authorities noted that the disallowance was adjustment u/s 92CA towards the royalty payment, accordingly it was disallowed - HELD THAT:- DRP observed that the disallowance of Rs.57.53, which was a part of the disallowance made u/s 92CA in the previous assessment year, therefore, it cannot be allowed/disallowed as per sec.40(a)/37(1) - addition made u/s 92CA cannot be correlated with the disallowance u/s 40(a)/37(1) - no substance on the submissions of the ld. AR. The case law relied by the ld. AR is not applicable on the present facts of the case. AR submitted that the ITAT has decided this issue in favour of the assessee for the AY 2011-12 wherein it has been held that if the assessee has applied TNMM at entity level then no separate adjustment can be made for Royalty payments u/s 92CA, but no copy of the order was produced before us for the AY 2011-12 on this issue. Therefore, the assessee is directed to produce the order of the ITAT for the AY 2011-12 on this issue and if there is no separate adjustment for royalty u/s 92CA, no addition can be made during the year because the assessee has complied the provisions of section 40(a) - we are remitting this issue to the AO for verification. This ground is allowed for statistical purposes. Price reduction of purchase which was offered to tax in subsequent AY - HELD THAT:- The computational provisions cannot enlarge or restrict the contents of taxable income. Accordingly, the range of taxable income or ambit of taxation is to be determined in accordance with the charging provisions. Even where an assessee is following the mercantile system of accounting, it is only accrual of real income which is chargeable to tax; that accrual is a matter to be decided on commercial belief, having regard to the nature of business of the assessee and character of the transaction. Accordingly, for the purpose of determining whether there has been accrual of real income or not, recourse is to be made to the business character of the transaction. No doubt, the Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of income or its receipts but the substance of the matter is the income. If the income does not result at all, there cannot be a tax, even though the book keeping entry is made about hypothetical income which does not materialize. In the case on hand, the right to receive income was certain and merely the assessee had adopted its books of accounts in the annual general meeting which is prior to the receipt of information from Denso Kirloskar Industries Pvt. Ltd. Therefore, the facts of the case law relied by the ld.AR are different from the assessee s case. Accordingly, the judgment relied on by the ld.AR is not acceptable in the present facts of the case. Accordingly we uphold the order of the AO and dismissed the ground raised by the assessee. The AO is also directed to give benefit for the subsequent assessment year. The AO has to keep in mind that while giving tax effect that it should not be taxed twice and necessary effect should be given to the assessee. TP Adjustment - RPT Filter as contested by the AR of the assessee as per his written synopsis - HELD THAT:- We direct the AO/TPO to calculate RPT ratio in above terms as per assessee s own case in the assessment year 2013-14 [ 2021 (9) TMI 12 - ITAT BANGALORE] considering the direction of the CIT (A), accordingly, this issue is allowed for statistical purposes. Not Providing Capacity Underutilization Adjustment - HELD THAT:- The appellant claims that the average industry utilization is 52.20% during the year whereas its own capacity utilization is 49.56%. However, in absence of data of capacity utilization in respect of comparables the revenue authorities have not granted capacity utilization adjustment. A similar case has been decided by the coordinate bench of Tribunal in the case of IKEA India Pvt. Ltd. [ 2018 (10) TMI 49 - ITAT BANGALORE] we direct the TPO to exercise powers u/s 133(6) of the Act to call for information on capacity utilization of the comparable companies such as Installed Capacity,Actual Production in Units,Break-up of Fixed Cost and Variable Cost, Segmental/ product wise information, if any. Post obtaining the information, he is requested to provide the assessee an opportunity by sharing the details so obtained, and accordingly, grant the adjustment for capacity under-utilized. Miscellaneous Expenses - HELD THAT:- We also allow 30% of the total expenditure incurred by the assessee. Accordingly, this ground is partly allowed. Capacity utilization adjustment and providing Cash PLI/Depreciation adjustment - HELD THAT:- As we note that while calculating these two adjustments the depreciation expenses has major role, therefore we direct to the lower authorities while calculating these adjustments (if granted to both) the assessee should not get double benefit of depreciation expenses adjustment. 2023 (2) TMI 1105 TP Adjustment - interest on outstanding receivables - Outstanding receivables from unrelated parties - HELD THAT:- We find force in the contention of assessee. Since the assessee has provided similar services to unrelated parties and claims that no interest was charged with respect to outstanding receivables from unrelated parties, in all fairness, this contention cannot be brushed aside lightly, though needs due verification by lower authorities. We, therefore, restore this issue to the file of the TPO/AO. The assessee is directed to furnish necessary documentary evidences to demonstrate that on outstanding receivables from unrelated parties, no interest was charged on similar transactions as that with AEs and the AO/TPO is directed to examine the same and decide the issue afresh as per provisions of law. In light of the above, if the AO/TPO, after verification, finds that no interest was charged from receivables from non-AEs on similar transactions, then no adjustment is warranted. Appeal of the assessee is allowed for statistical purposes. 2023 (2) TMI 1104 TP Adjustment - determination of ALP of the back-office support services rendered by the assessee for which the assessee received payments from its AE - Comparable selection - HELD THAT:- Concentrix Daksh Services India Pvt. Ltd. in the search matrix of BPO back-office services and therefore is no evidence brought on record to show that the predominant activity of the assessee is not that of backoffice support services. In this regard, we also notice that in the search matrix / filter applied by the assessee, the assessee itself has adopted a filter of choosing companies with income from a major line of activities 50% of the total revenue selected for performing similar functions such as the assessee. It has also applied a filter of comparing companies performing broadly comparable companies of rendering services with similar cost structure. TPO on his part has also adopted a filter whereby he has chosen companies having service income of 75% or more in each of the segments. We also notice that it has not been demonstrated as to how owning intangibles will render this company out of the ambit of comparability. In the given circumstances of the case, we are of the view that Concentrix was rightly included as a comparable company by the TPO. Tricom India Ltd. ( Tricom ) - In the case of 24/7 Customer.com (P) Ltd. [ 2013 (1) TMI 45 - ITAT BANGALORE ] for AY 2004-05, the assessee was engaged in back-office support BPO services and Tricom was chosen as a comparable company by the TPO. The Tribunal held in paragraph 15.3.3 of its order that Tricom had a unique software developed in house which renders specialized services in it area of specialization given the company a competitive edge. Since this company had unique intangible, it was regarded as not comparable with a normal back-office service provider. Following the view taken in the aforesaid decision by a co-ordinate Bench, we are of the view that Tricom ought to be excluded from the final list of comparables. We hold and direct accordingly. TPO is directed to compute ALP of the international transaction as per the directions contained in this order after affording the assessee opportunity of being heard. 2023 (2) TMI 1103 TP Adjustment - Comparable selection - HELD THAT:- Datamatics Financial Services Ltd. comparable is functionally dissimilar and hence cannot be considered. Allsec Technologies Ltd. - TPO has considered the financial over the period of three years and hence rejected this as a comparable. We decline to interfere with the order of the ld. CIT(A) who affirm the order of the TPO. Computation of profit margin of two comparables - ICRA Online Ltd. and Axis IT T Ltd. - ICRA Online Ltd. (19.13%) TPO wrongly adopted margin of 19.13% in its order dated 01 June 2015 while giving effect to CIT(A) order. Corrected margin of 17.08% should be considered.TPO has incorrectly treated Interest and Miscellaneous Income as operating income and loss on sale of assets as operating expense. In doing so, the TPO failed to appreciate that these are non-operating items and cannot be included. Axis-I T T Ltd. (13.13%) - TPO wrongly adopted margin of 13.13% in its order dated 01 June 2015 while giving effect to CIT(A) order. It is submitted that corrected margin should be computed after excluding non-operating income/expenses like dividend, interest, liabilities written back, provision for bad debts, prior period expenses. TPO shall re-compute the profit margins. Risk adjustment to the Appellant - We direct that the assessee shall demonstrate the risk involved, encountered before the TPO and the TPO shall after examining the facts of the case and allow risk adjustment. 2023 (2) TMI 1089 Validity of penalty levied u/s 271(1)(b) - non-compliance of notice u/s 142(1) - HELD THAT:- CIT(A) while confirming the action of Assessing Officer held that no submission is filed before him despite affording reasonable opportunity. As in Akhil Bhartiya Prathmik Shmshak Sangh Bhawan Trust [ 2007 (8) TMI 386 - ITAT DELHI-G] held that where assessee had not complied with notice u/s 142(1) but assessment order was passed u/s 143(3) and not u/s 144, that meant that subsequent compliance in the assessment proceedings was considered as a good compliance and defaults committed earlier were ignored by Assessing Officer and, therefore, penalty u/s 271(1)(b) was not justified. Similar view was followed in a series of decisions as has been relied by assessee in his submission. Thus, considering the fact that assessment in the present case was completed u/s 153A/143(3) in accepting return of income, find that it was sufficient compliance, merely because the assessee could not make compliance for single hearing due to some bonafide reason on the penalty u/s 271(1)(b) - AO in the assessment order recorded that the assessee made compliance of notice at the same time he has levied penalty for default of the same notice. Even otherwise, if it is considered that the assessing officer might have committed mistake while recording various dates of notice, subsequent compliance is sufficient and no penalty is sustainable in the present case - we direct the AO to delete the impugned penalty. In the result, ground of appeal raised by assessee is allowed. Benami Property 2023 (2) TMI 1102 Prohibition of Benami Property Transactions - attachment and confiscation of properties which were admittedly acquired prior to the enforcement of the Benami Transactions (Prohibition) Amendment Act, 2016 - HELD THAT:- These petitions would be liable to be allowed in light of the recent decision rendered in Union of India Anr. v. Ganpati Dealcom Pvt.Ltd. [ 2022 (8) TMI 1047 - SUPREME COURT] Continuation of only the civil provisions u/s 4, etc. would mean that the legislative intention was to ensure that the ostensible owner would continue to have full ownership over the property, without allowing the real owner to interfere with the rights of benamidar. If that be the case, then without effective any enforcement proceedings for a long span of time, the rights that have crystallized since 1988, would be in jeopardy. Such implied intrusion into the right to property cannot be permitted to operate retroactively, as that would be unduly harsh and arbitrary. As we hold as under - a) Section 3(2) of the unamended 1988 Act is declared as unconstitutional for being manifestly arbitrary. Accordingly, Section 3(2) of the 2016 Act is also unconstitutional as it is violative of Article 20(1) of the Constitution. b) In rem forfeiture provision under Section 5 of the unamended Act of 1988, prior to the 2016 Amendment Act, was unconstitutional for being manifestly arbitrary. c) The 2016 Amendment Act was not merely procedural, rather, prescribed substantive provisions. d) In rem forfeiture provision under Section 5 of the 2016 Act, being punitive in nature, can only be applied prospectively and not retroactively. e) Concerned authorities cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to the coming into force of the 2016 Act, viz., 25.10.2016. As a consequence of the above declaration, all such prosecutions or confiscation proceedings shall stand quashed. f) As this Court is not concerned with the constitutionality of such independent forfeiture proceedings contemplated under the 2016 Amendment Act on the other grounds, the aforesaid questions are left open to be adjudicated in appropriate proceedings. In light of the aforesaid enunciation of the law on the subject, it is evident that the impugned proceedings cannot be sustained. Accordingly, and in view of the law as declared by the Supreme Court, the instant writ petitions are allowed. Customs 2023 (2) TMI 1101 Entitlement for Duty Credit Scrips under the Merchandise Exports from India Scheme (MEIS) - pure export - case of export within India from Domestic Traffic Area (DTA) unit to Special Economic Zone (SEZ)/ Free Trade Warehouse Zone (FTWZ) unit located in India or not - HELD THAT:- A perusal of the FTP would show that the same is meant for providing incentives for manufacture and export of goods from India. The exports made under this policy are to be rewarded, by issuance of MEIS scrips which can be encashed for exports, against custom duty which would be payable for future imports. The clauses of the MEIS came upon consideration before the Hon ble Madras High Court, in Jindal Drugs [ 2021 (7) TMI 1034 - MADRAS HIGH COURT ] wherein the Petitioner - Jindal Drugs Pvt. Ltd. was involved in export to Ireland. In the said transaction, DHL logistics in Chennai was used as logistics support. In the context of the said facts, the ld. Single Judge of the Hon ble Madras High Court held that DHL logistics, the FTWZ, merely offers a facility to the petitioner to warehouse its consignments that are to be exported. The destination is decided by UTEXAM, which is the ultimate purchaser, which has paid the petitioner in USD for the consignment. The stipulation in Clause (vii) deals with exports made by a unit in the FTWZ. DHL, the FTWZ does not export the consignments but only facilitates such exports. The exports are thus, by the petitioner through DHL to a destination abroad. In the present case, the decision of Jindal Drugs would be clearly applicable. The company i.e. M/s Siddhartha Logistics is merely a FTWZ logistics company located in Andhra Pradesh. The said company was involved neither in the manufacture of the products nor the entire sale transaction. It was merely providing logistical support to enable the shipment move within India and ultimately to the French customer i.e. Dedienne Aerospace. Further, it is also noticed that M/s Siddhartha Logistics has already issued its no objection giving consent to the Petitioner to claim the drawback benefits. The documents, which have been placed on record, leave no manner of doubt that the case of the Petitioner is clearly covered by the FTP, which has been extracted above. None of the exclusionary clauses would be applicable. The Petitioner was rightly issued the MEIS scrips. However, due to inexplicable reasons, the same was sought to be cancelled leading this long protracted litigation between the parties. The cancellation of MEIS scrips was done on 14th July, 2021 leading to the show cause notice proceedings, thereafter proceedings before the Appellate Authority of DGFT and also two writ petitions before this Court. In this entire process, the Respondents failed to take into consideration the decision in Jindal Drugs. All these proceedings could have been easily avoided if the Respondents had taken into consideration the said judgment, which was binding upon it. The action of the Respondent cancelling the MEIS scrips is also set aside. The Respondent is directed to revalidate the MEIS scrips which were granted to the Petitioner so as to enable the Petitioner to encash the same in its usual course of business - Petition allowed. 2023 (2) TMI 1100 Exemption from countervailing duty [CVD] under the Notification No. 12/2012-CE dated 17.03.2012 and special additional duty of customs [SAD] under the Notification No. 21/2012-CUS dated 17.03.2012 - gold/platinum/silver findings, which are parts of jewellery - parts of Articles of jewellery are covered in the phrase Articles of jewellery , when not separately specified, or not - parts of Articles of silver jewellery are covered in the phrase Articles of silver jewellery , when not separately specified, or not. HELD THAT:- It is not in dispute that the goods involved in these appeals, namely gold/platinum/silver findings that have been imported by the appellant are parts of jewellery . Chapter 71 contained in section XIV to the Customs Tariff Act deals with natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad with precious metal, and articles thereof; imitation jewellery; coin - It would be seen that articles of jewellery and parts of articles of jewellery have been separately classified under the restrictive sub-headings of the Customs Tariff. They should, therefore, be treated as separate articles. A perusal of the CVD exemption notification also shows that entry no. 199 of Chapter heading 7113 contains (I) articles of jewellery and (II) articles of silver jewellery. It does not exempt parts of articles of jewellery . When this entry is compared to entry no. 199, as amended by notification dated 26.07.2016, it is seen that parts of articles of jewellery have been included. Such being the position, there is no manner of doubt that it is only w.e.f. 26.07.2016 that parts of articles of jewellery have been included in the CVD exemption notification. It cannot be urged that the amendment made in entry no. 199 on 26.12.2016 is clarificatory in nature - It is for the legislature, in its wisdom, to grant exemption from payment of CVD or SAD and an assessee cannot be permitted to urge that if articles of jewellery have been granted the benefit of exemption from payment of CVD or SAD, the benefit of such exemption should necessarily flow to parts of articles of jewellery also. The decisions of the Tribunal in Derewala Jewellery [ 2017 (3) TMI 5 - CESTAT NEW DELHI ] and V.K. International [ 2012 (10) TMI 739 - CESTAT, NEW DELHI ], on which reliance has been placed by the learned counsel for the appellant, do not support the case of the appellant. The issue involved in both the decisions was not whether parts of articles of jewellery would be also entitled to benefit of the exemption notification if the benefit of such exemption was granted to articles of jewellery. An exemption notification has to be strictly construed and the burden of proving that the case falls within the parameters of the exemption clause or the exemption notification is on the assessee; and if there is any ambiguity in the notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the assessee and it must be interpreted in favour of the revenue. This is what was observed by the Supreme Court in Commissioner of Cus. (Import), Mumbai vs. Dilip Kumar Company [ 2018 (7) TMI 1826 - SUPREME COURT ] . Similar would be the position with regard to the SAD exemption notification. Entry at serial no. 78 of Chapter heading 7113 describes the goods as articles of jewellery and not as parts of articles of jewellery. The Commissioner (Appeals) has recorded a finding that since they are different articles, an assessee cannot claim the benefit of SAD exemption notification on import of parts of articles of jewellery. The finding recorded by the Additional Commissioner and the Commissioner (Appeals), therefore, does not suffer from any legality. Appeal dismissed. Corporate Laws 2023 (2) TMI 1099 Oppression and mismanagement - petitioners in the original petition were entitled to maintain the said Company Petition under sections 241-242 of the Companies Act or not - waiver granted under section 244 to prefer such a petition is correct, or not - AoA regarding election of President of FHRAI have been followed properly in letter and spirit in the election of President of FHRAI for the year 2018-19, or not? Whether petitioners in the original petition were entitled to maintain the said Company Petition under sections 241-242 of the Companies Act and whether the waiver granted to them under section 244 to prefer such a petition is correct? - HELD THAT:- Tribunal in its judgment in the matter of Cyrus Investments Pvt. Ltd. [ 2017 (9) TMI 1500 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ] has held therein that if the Appellants are members of the company in question and have alleged oppression and mis-management, which is not a frivolous complaint, the Tribunal should examine whether similar allegation of oppression and mis-management was earlier made by any other member or there is exceptional circumstance made out to grant waiver. A perusal of the Impugned Order, wherein the issue of grant of waiver has been dealt by the NCLT shows that the NCLT has considered the matter of Casino Hotels, where the proposed action of the Executive Committee to amend clauses IV(1)(a) and (b) of Appendix-A of the AoA of FHRAI was under challenge, and in which the Eastern Region members had opposed the stand of Northern and Western Regions members. The NCLT has found that the issue which was raised in the Casino Hotels case has found reflection in the process of election of President of FHRAI for the year 2018-19 - Looking to the facts and circumstances pleaded by the Respondent HRAEI, the acts of oppression and mis-management have continued in one form or the other right from the filing of the Casino Hotels petition, and therefore, in the interest of corporate democracy and to ensure proper functioning of FHRAI in accordance with the AoA and to examine the alleged ats of oppression and mismanagement, we are of the view that it is a case whether exceptional circumstances demand grant of waiver under section 244 of the Companies Act to enable the petitioners of CP 473/241-242/2018 to raise their grievances which could then be adjudicated upon. Whether the actions of the sitting President Mr. Garish Oberoi and other Executive Committee members, mainly from the Western and Northern Regions, can be labelled as acts of oppression and mis-management? - HELD THAT:- The procedure being adopted in the election of the President of FHRAI for the year 2018-19 as interpreted by the siting President Mr. Garish Oberoi is clearly an act of oppression and mismanagement, which if not checked at nascent stage right in the beginning, can result in further oppression of FHRAI s members and mismanagement of the affairs of the company to the detriment of the functioning of the company FHRAI and against the legitimate interests of its members. The intent of sections 241-242 is to protect the company s members from acts of oppression and mis-management and to also protect and preserve the interest of the company, and in that light we are of the clear view that in the present case, the acts as stated in CP 473/241-242/PB/218, clearly constitute acts of oppression and mismanagement . Reliance placed upon judgment of Hon ble Supreme Court in the matter of Chatterjee Petrochem (India) Private Limited [ 2011 (9) TMI 842 - SUPREME COURT ], by the appellants - What follows from the above judgment of the Hon ble Supreme Court is that the conduct of the majority shareholders should be considered not in isolation, but as part of consecutive story in order to maintain a case of oppression of the minority member. In the present case it is seen that from the time certain members of the Executive Committee initiated attempt to amend clause IV (b) and (c) of Appendix A of AoA, which was resolutely opposed by some other members of the Executive Committee which section was challenged in the CASINO HOTELS UNIT OF CGH EARTH PVT. LTD. VERSUS THE FEDERATION OF HOTELS RESTAURANTS ASSOCIATION OF INDIA ORS. [ 2018 (4) TMI 1943 - NATIONAL COMPANY LAW TRIBUNAL, NEW DELHI PRINCIPAL BENCH] and the later actions of members of the Executive Committee to subvert the proper election process for the post of President of FHRAI for the year 2018-19, in the instant case, there is a continuing story of oppression by some members of the Executive Committee against some other members of the Executive Committee who are both members of FHRAI - the judgment of Hon ble Supreme Court in the matter of Chatterjee Petrochem (India) Private Limited (supra) is distinguished from the issue in the instant case on the above basis. Whether the alleged acts of oppression and mis-management as claimed by the petitioners in original CP No. 473/241-242/2018 actually amount to oppression and mis-management as claimed by the petitioners in original company petition and as are required for a section 241-242 petition? - HELD THAT:- Article 52 of the AoA of FHRAI stipulates that the election to the post of President of FHRAI is carried out by the members of the Executive Committee region-wise by rotation for one term and theorder of rotation as stipulated is in the order of Eastern Region, Western Region, Northern Region and Southern Region. It is not disputed that it was the turn of Eastern Region to have its member elected as President of FHRAI for the term 2018-19 - Article 49 of the AoA, provides that question before the Executive Committee shall be decided by a majority of members present. Further, clause (g) of Article 40 of the AoA stipulates that the Executive Committee could devise its own procedure in so far as such procedure is not inconsistent with the Companies Act or the AoA. Whether the AoA regarding election of President of FHRAI have been followed properly in letter and spirit in the election of President of FHRAI for the year 2018-19, as was required by law? - HELD THAT:- Once the new Executive Committee members were elected in the Annual General Meeting held on 30.10.2018, they were to have taken office. Also, the other office bearers which would certainly include the President also continued to hold office until the new office bearers are elected by the incoming Executive Committee. By not completing the process of election of President for the year 2018-19, and presiding over the Executive Committee as sitting President and also electing the office bearers including the .Vice Presidents and others, Mr. Garish Oberoi not only exhibited a blatant and high-handed oppressive behaviour nefariously assisted by some other members who were acting like a clique , he also disregarded provisions of the AoA and acted in an oppressive manner. The Representation of the People Act, 1951, it is lucidly clear that, even when there is a single candidate in fray, she will be elected unopposed provided she is eligible to contest, and such election is proper and legitimate election in the eyes of law. Thus, the act of the Appellants not to let Mr. Sudesh Kumar Poddar s name be proposed as a nominated candidate of the Eastern Region when no other candidate opposing him was in the fray, was certainly not in accordance with the principle of corporate democracy and corporate governance and also not in consonance with the requirement of Article 52 of the AoA of FHRAI - the word nomination when used in a reference to putting forward the name of Mr. Sudesh Kumar Poddar may give an impression that he is not a contesting candidate, but practically in the eyes of law he is merely a candidate, whose name would be duly proposed by any Executive Committee member, and be considered a valid nomination/candidate as is understood, under The Representation of the People Act, 1951, where nomination merely means that someone has proposed and some other person has seconded the name of the candidate, but it that the nominated candidate is elected unopposed without going through the process of voting. Further, if such candidate is a sole candidate, she can obviously be elected unopposed, but the fact is that she will still be elected in accordance with the provisions of AoA and in the manner which is correct in the eyes of law. The waiver granted by the NCLT with regard to section 244 of the Companies Act, 2013 to the petitioners of CP No. 437/242-242/2018 was in order and was necessary to allow the petitioners to agitate their case about alleged oppression and mis-management under sections 241-242 of the Companies Act, 2013 - the acts of some members of the Executive Committee, who have formed a clique to give shape to their chosen but perverse design are clearly acts of oppression and mismanagement beginning from the attempts to amend clause IV(b) and (c) of Appendix A of the AoA, which had carried on till the time of election of President of FHRAI for the year 2018-19. The period starting from 30.10.2018 till the pronouncement of this judgment shall not be included while considering the term and eligibility of the Executive Committee members as provided in the A0A in the election of President, Executive Committee members and other office bearers of FHRAI - the judgment of NCLT and Impugned Order dated 30.8.2022 of NCLT is correct. Appeal disposed off. Insolvency & Bankruptcy 2023 (3) TMI 3 Approval of Resolution plan - non-payment of the full amount of Provident Fund Dues - violation of provision of Section 30(2)(e) - Time limitation - HELD THAT:- There are no error in the order of the National Company Law Appellate Tribunal, Principal Bench, New Delhi in ASSAM TEA EMPLOYEES PROVIDENT FUND ORGANIZATION VERSUS MR. MADHUR AGARWAL, HAIL TEA LIMITED [ 2022 (11) TMI 403 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] where it was held that provident fund dues are not the assets of the Corporate Debtor and they have to be paid in full. Hence, the Appellant was clearly entitled for payment of full provident fund dues i.e. an amount of Rs. 2,10,13,798/-. Appeal dismissed. 2023 (3) TMI 1 Maintainability of appeal - HELD THAT:- Intervenor submits that he does not want to press the said I.A. The I.A. No. 3670 of 2019 is dismissed. Hearing stands concluded. 2023 (2) TMI 1098 Validity of interim award granted - interim Award dated was based on the premise that the set-off/Counter-Claims raised by the Operational Creditor/appellant herein could not have been filed before the learned Arbitrator, being barred under Section 14 of the Insolvency and Bankruptcy Code, 2016. HELD THAT:- The first ground of challenge is that the alleged admissions mentioned as setoff in Form B submitted before IRP in the proceedings under Insolvency and Bankruptcy Code, 2016 cannot be considered as a determinate amount, unless adjudicated. Moreover, Form B in which the set-off amount is mentioned had been filed before the IRP and not before the learned Arbitrator and cannot be treated as an unequivocal admission in the present proceedings. In AMIT KUMAR CHOPRA VERSUS NARAIN COLD STORAGE ALLIED INDUSTRIES PVT. LTD. AND ORS. [ 2014 (3) TMI 1210 - DELHI HIGH COURT] , the Co-ordinate Bench of this Court observed that from the aforesaid enunciation of law it is quite clear that equitable set-off is different than the legal set-off; that it is independent of the provisions of the Code of Civil Procedure; that the mutual debts and credits or cross-demands must have arisen out of the same transaction or to be connected in the nature of circumstances; that such a plea is raised not as a matter of right; and that it is the discretion of the court to entertain and allow such a plea or not. The concept of equitable set-off is founded on the fundamental principles of equity, justice and good conscience. Thus, set-off is an admitted amount adjustable from the due being claimed a person. The appellant herein, while giving a detailed statement of claims in Form B before the IRP, has also indicated that the set-off amount has to be paid by it to the respondent. It is a categorical admission by the appellant which requires no further adjudication, and there can be no evidence better than an admission. The scope of interference under Section 37 of the Act, 1996 is extremely limited. Sections 34 and 37 demand respect to the finality of the arbitral ruling and the party autonomy in having chosen to get their issues resolved through alternate forum of arbitration which would be thwarted if the courts were to accept the challenge to the arbitral rulings on factual issues in a regular manner as reiterated in the recent decision of PROJECT DIRECTOR, NATIONAL HIGHWAYS NO. 45 E AND 220 NATIONAL HIGHWAYS AUTHORITY OF INDIA VERSUS M. HAKEEM ANR. [ 2021 (7) TMI 1343 - SUPREME COURT ] - It was observed by the Apex Court that Section 34 has a different methodology and it cannot be considered as a typical Appellate Jurisdiction. The Award, being supported by reasons, does not call for any interference. The Court is not permitted to independently evaluate the merits of the Award, but must confine its authority to the parameters permitted under the statute. The learned Arbitrator has judiciously exercised its jurisdiction under Section 31(6) of the Act, 1996 to give an interim Award on the basis of admission made by the appellant in Form B by way of set-off. There is no illegality, perversity or irrationality in the findings so returned by the learned Arbitrator which have been accepted by the learned District Judge - appeal dismissed. PMLA 2023 (2) TMI 1097 Money Laundering - proceeds of crime - seeking release of the attached properties - HELD THAT:- In Vijay Madanlal Choudhary Ors. v. UOI Ors., [ 2022 (7) TMI 1316 - SUPREME COURT ] the Supreme Court has held that if the person accused has been discharged or acquitted of the scheduled/predicate offence, then there can be no offence of money laundering against the said accused person. The Supreme Court in Indrani Patnaik Anr. v. Enforcement Directorate and Ors. [ 2022 (11) TMI 1311 - SUPREME COURT ] has recently held that there cannot be any prosecution in relation to an offence for which the accused person has already been discharged. This position of law in terms of proceedings under the PMLA has been recently considered by this Court in EMTA Coal Limited and Ors. v. The Deputy Director of Directorate of Enforcement [ 2023 (1) TMI 694 - DELHI HIGH COURT ]. In the said judgement it was held that once the closure report in the offences under respective FIRs has been filed, no criminality is ascertainable and the respective PAOs as well as the ECIRs are liable to be quashed. In view of the settled legal position in Vijay Madanlal Choudhary and the subsequent decisions and orders thereafter, the properties of Mr. Sachin Joshi and M/s. Muktanand Agro Farming Pvt. Ltd. which were attached by the impugned PAOs shall be released - Petition disposed off. Service Tax 2023 (2) TMI 1096 Nature of transaction - service or not - lease transaction - appellants have transferred the right of possession and effective control of the wagons leased out by them to the South Western Railways - appellants have also discharged applicable VAT / Sales Tax on such transaction - deemed sale or not - it was held by CESTAT that In the impugned case, the appellants have transferred the right of possession and effective control of the wagons leased out by them to the South Western Railways. The appellants have also discharged applicable VAT / Sales Tax on such transaction, therefore, the activity undertaken by the appellants does not constitute a taxable service of Supply of Tangible Goods . HELD THAT:- It cannot be said that the Tribunal had committed any error which calls for interference by this Court. In fact, we are in complete agreement with the view taken by the Tribunal. Appeal dismissed. 2023 (2) TMI 1095 Levy of Service tax - Business Auxiliary Service - activity of Epoxy Coating of pipelines undertaken by the appellant - HELD THAT:- Reliance placed in the case of CCE., CUS., DAMAN VERSUS PSL CORROSION CONTROL SERVICES LTD. [ 2010 (3) TMI 784 - GUJARAT HIGH COURT ] where it was held that It is an admitted position that the liability arose only with effect from 10-9-2004 when clause (v) came to be inserted in the definition of business auxiliary services so as to include production of goods on behalf of the client . Hence, it cannot be gainsaid that the services rendered prior to the said date were required to be excluded while computing the tax liability. The facts in the instant case are similar. Relying on the aforesaid decision of Hon ble High Court, while demand of service tax and interest is upheld, the penalties imposed under Section 76, 77 and 78 are set aside invoking Section 80 of the Finance Act, 1994. Appeal allowed in part. 2023 (2) TMI 1094 Exemption from payment of Service Tax - supply of tangible goods - providing agricultural machinery on rental basis to the farmers - statutory functions performed under the Madhya Pradesh Tractor Dwara Kheti (Prabharo Ki Vasuli) Adhiniyam, 1972 or not - Applicability of Circular dated December 18, 2006 issued by the Department of Agriculture - HELD THAT:- It cannot be doubted that the functions performed by the appellant are statutory in nature. The Act has been enacted to provide for cultivation to certain lands by means of tractors by the State Government and for the recovery of charges in respect thereof. A cultivator can make an application to the Director for carrying out tractor cultivation in whole or part of his land. If the application is accepted, a bond has to be executed by the cultivator and on execution of the bond, the Director shall cause tractor cultivation to be carried out on the land of the cultivator. The view that has been taken is supported by the judgment of the Supreme Court in Krishi Upaj Mandi Samiti vs. Commissioner of Central Excise [ 2022 (2) TMI 1113 - SUPREME COURT ] where it was held that it does not provide that on deposit of the money received by the Market Committees into the Government Treasury/sub-treasury or a bank duly approved, it ceases to be the Market Committee Fund. It will continue to be the Market Committee Fund. Even it is the case on behalf of the appellants that the fees collected, which will be deposited in the Market Committee Fund will be utilized by the Market Committee for expanding/benefit of the Market Committee etc. In the instant case, it is seen that a mandatory duty has been cast upon the appellant to provide tractor cultivation on the land of the cultivator if the application of the cultivator is accepted and a bond is executed on payment of charges as specified in the Act and the Rules. Such charges are also deposited in the District Treasury by the appellant - The Principal Commissioner, therefore, committed an error in concluding that the services performed by the appellant are not statutory in nature as they have not been performed in terms of specific responsibility assigned to it under the law in force. The Principal Commissioner was, therefore, not justified in confirming the demand of service tax. Such a being decision, even if it is held that the services provided by the appellant fall under the category of supply of tangible goods , then too by virtue of the Circular dated December 18, 2006, the appellant cannot be called upon to pay any service tax. Appeal allowed. 2023 (2) TMI 1093 Denial of CENVAT Credit - Out of the premium collected from the buyer of the motor car/vehicle, a portion thereof is paid by the appellant to the automotive dealer as a commission - on the basis of the invoices issued by the automotive dealer and the service tax paid by the automotive dealer to the government, the appellant had availed CENVAT credit - HELD THAT:- In this case, it is an undisputed facts that the automotive dealers had paid service tax on the nature of services described in the invoices issued to the appellant; that payment of service tax by such dealers have been accepted by the service tax authorities having jurisdiction over their business premises. Since, the service tax paid by such dealers was availed as Cenvat credit by the appellant, availment of such credit is in conformity with the Cenvat statute. In an identical case, Cenvat credit was denied by the Department, holding that the invoices issued by the automotive dealers are false/fraudulent/invalid, since no service of the description contained therein was rendered by the auto dealer. The dispute was resolved by the co-ordinate Bench of the Tribunal in the case of M/S. CHOLAMANDALAM MS GENERAL INSURANCE CO. LTD. VERSUS THE COMMISSIONER OF G.S.T. CENTRAL EXCISE, CHENNAI [ 2021 (3) TMI 24 - CESTAT CHENNAI] , holding that since the service tax was paid by the auto dealer, under the taxable head of Business Auxiliary Service and the assessment of auto dealer has not been re-opened or questioned, credit availed cannot be denied to the insurance company. The regulatory authority namely, Insurance Regulatory Development Authority (IRDA) has also clarified the correct position in the letter dated 12.08.2015 addressed to the Chairman, CBEC. Such clarification furnished by the Regulatory Authority regarding the procedures followed for outsourcing non-core services of the automotive/automobile dealers, is binding on the Revenue. - thus, the law is well settled that when a competent authority has issued an opinion on a particular matter, the same shall be binding and cannot be questioned by the other agencies. Appeal allowed - decided in favor of appellant. 2023 (2) TMI 1092 Reverse charge mechanism (RCM) - charges incurred for hiring of refrigerated vehicles, deployed for distribution of ice cream at different places across the country - lower authorities have held that liability devolved on the appellant, as recipient of goods transport agency service, defined in section 65(50a) of Finance Act, 1994, for discharge of tax. HELD THAT:- The catena of decisions cited by Learned Counsel relate to tax liability not arising in circumstances that are similar to that of appellant; mere hiring of vehicles does not suffice for transaction to be taxed under Finance Act, 1994 unless the elements of section 65 (105) (zzp) of Finance Act, 1994, in which the definition of goods transport agency is vital, is conformed to. In re Nandganj Sihori Sugar Co. Ltd [ 2014 (5) TMI 138 - CESTAT NEW DELHI ], it has been held that there will be no Service Tax liability on the appellant sugarcane mills, as they have not received the service from a Goods Transport Agency. The appeal of Revenue against the decision in re South Eastern Coalfields Ltd [ 2016 (8) TMI 677 - CESTAT NEW DELHI ] does not, in the absence of stay, alter the validity of the decision of the Tribunal on non-taxability of the very same transaction of the appellant herein for the subsequent period. Appeal allowed. Central Excise 2023 (2) TMI 1091 CENVAT Credit - distribution of common input services - credit availed on the basis of ISD challans raised by their Corporate Office situated in Chennai and four Regional Offices situated in Hyderabad, Bangalore, Chennai and Cochin - Department alleged that the credit availed on quantity based distribution is in violation of amended Rule 7 of Cenvat Credit Rules, 2004 - extended period of limitation - HELD THAT:- Section 11A of Central Excise Act, 1944 empowers the Central Excise Officer to initiate proceedings where duty has not been levied or short levied within 6 months from the relevant date but this period to commence proceedings under proviso to the said section stands extended to 5 years if the duty could not be levied or it was short levied due to fraud, collusion, willful misstatement or suppression of facts. A bare reading of the proviso to Section 11A indicates that it is in nature of an exception to the principal clause. Therefore, its exercise is hedged on one hand with existence of such situations as have been visualised by the proviso by using such strong expression as fraud, collusion etc. and on the other hand it should have been with intention to evade payment of duty. Both must concur to enable the Excise Officer to proceed under this proviso and invoke the exceptional power - However, it is the settled cannon of decision that when the law requires an intention to evade payment of duty then it is not mere failure to pay duty. It must be something more. Except that in few of the statements by ISD invoices in one of the columns, the credit was distributed by specifying turnover as quantity based and in some other it was on allocation weight . It is observed in terms of Circular No. 178/4/2004-S.T. dated 11.07.2014 as relied upon by the department, the distribution as per allocation weight is also based on turnover, hence, apparently such distribution is also in compliance of Rule 7(d) of CCR, 2004. Extended period of limitation - HELD THAT:- There is no willful intent of any of the three appellants to evade their duty/tax liability. Hence, there cannot be suppression on the part of the appellant as alleged and confirmed. The appellant was availing and utilizing such amount of Cenvat credit as was distributed by their ISD. The question of suppression or evasion does at all arise in such a case at least against the appellants who were the receivers of the distributed Cenvat credit. They otherwise were regularly mentioning the availment/utilized amount in their ER returns. In light of these findings, we hold that the department was not entitled to invoke the extended period of limitation. Hence, the major demand for the period w.e.f. August, 2012 to March 2016 is liable to be set aside. The demand even for the normal period is also not sustainable - the interests and penalties has wrongly been invoked - Appeal allowed. CST, VAT & Sales Tax 2023 (3) TMI 2 Classification of goods - packaged drinking water or natural mineral water - HELD THAT:- Copies of the documents have been handed over to learned counsel for the Department who needs some time to examine them and make submissions. List on 7th February, 2023. 2023 (2) TMI 1090 Classification of goods - rate of tax - mobile phone chargers sold along with mobile phone in a composite pack - whether liable to tax at the same rate as applicable to mobile phone only and it cannot be taxed at higher rate as unscheduled goods under Section 4(1) (b) (iii) of the Act? - Applicability of Entry 53 of Schedule III of the KVAT Act read with the Notification No. FD 43 CSL 07(02) dated April 4, 2007 issued by the State Government. HELD THAT:- The issue involved in Nokia India Case [ 2014 (12) TMI 836 - SUPREME COURT ] was whether mobile charger should be excluded from the entry of concessional rate of tax which applies to cellphones under the Entry 60(6)(g) of Schedule B of the Punjab VAT Act - the Apex Court had held that the battery charger cannot be held to be a composite part of the cellphone but is an independent product which can be sold separately without selling the cellphone. The High Court failed to appreciate the aforesaid fact and wrongly held that the battery charger is part of the cellphone. It is relevant to note that the decision in Nokia India Case is based on Entry 60(6)(g) of the Schedule B of the Punjab VAT Act. In the said Entry only cellular phone is defined and accessories are not included. The Hon ble Supreme Court of India has upheld Revenue s contention in that case because Entry 60(6)(g) of Schedule B of the Punjab VAT Act does not mention accessories for the purpose of taxing the items/product at 4%. Applicability of Entry 53 of Schedule III of the KVAT Act read with the Notification No. FD 43 CSL 07(02) dated April 4, 2007 issued by the State Government - HELD THAT:- In Entry No. 60(6)(g) of the Punjab VAT Act, the expression used is cellular telephone whereas in the Notification issued under KVAT Act, the words used are and parts thereof . Further, the parts falling under Heading 8843, 8825, 8527 or 8528 have been specifically excluded. It is relevant to notice that, battery charger which falls under Entry 8504 40 30 under the CET Act and CT Act, has not been excluded. This makes it clear that charger is a composite part in the package. Thus, the intention of the Revenue is unambiguous that the Notification was applicable for telephone sets and parts thereof which includes charger. Thus, the Entries in Punjab VAT Act and the KVAT Act are different and the Entry under the Punjab VAT Act is limited only to cellular telephones in contradistinction to the Notification under KVAT Act. A bare perusal of the Section 4 (charging section) of KVAT Act and Rule 3 (computation provision) of KVAT Rules would clearly indicate that there is no prescribed mechanism provided for determining the value of individual goods in a composite transaction. Thus, in the absence of a valuation mechanism, tax cannot be levied differently on each of the component by separating a single composite package - the definition contained in the Notification issued under the KVAT Act includes the charger which is sold along with the mobile phone in one set and accordingly taxable at 5%. These revision petitions are dismissed.
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Newsletter: Where Service Meets Reader Approval.

TMI Tax Updates - e-Newsletter March 1, 2023

Articles

1. PENALTY IMPOSED ON NIDHI COMPANY BY RoC

2. Ex-parte assessment order passed in violation of the principles of natural justice entails civil consequences

3. Mere expiry of E-way Bill does not create any scope for evasion

News

1. Prime Minister inaugurates post budget webinar on ‘Unleashing the Potential - Ease of living using Technology’

2. Aizawl to host the second B20 event from 1-3 March 2023

3. 47th Civil Accounts Day to be celebrated tomorrow in New Delhi

Highlights / Catch Notes

GST

Court Orders Correction of GST Error from 2017-18; Directs Proper Adjustment Under GSTR-9 Misinterpretation Issue.

CGHB maintenance and security services not exempt from GST, as ruled by Authority for Advance Rulings (AAR).

Income Tax

Court Narrows "Transfer" Definition in Income Tax Act's Section 50C, Limits Application to Stamp Duty Scenarios.

Court Orders Tax Refund with Interest from 2018; Urges Quick Resolution of Taxpayer Grievances u/s 244A.

Tax Assessment Reopening Invalid: No Concrete Evidence, Lack of Independent Evaluation Violates Section 148A(d) Requirements.

Section 148A(d) Order Not an Assessment or Demand; Petitioner Can Challenge Section 147 Proceedings Later. High Court Dismisses Writ.

Court Rules in Favor of Assessee: No Incriminating Material Found During Search u/s 153A for 2011-12 Assessment Year.

Transfer Pricing Order Invalid Without Draft; Final Assessment Order Exceeds Time Limit u/s 153. AO Jurisdiction Lacks Basis.

Improper Exercise of Revision Jurisdiction u/s 263: PCIT's Decision Based on Audit Objection Overturned.

Surcharge and cess cannot exceed the 10% tax rate on royalty and FTS under DTAA Articles 12 and 2.

Taxable Income for Unmaterialized Price Reduction Dismissed; Bookkeeping Entries Not Sufficient for Tax Assessment.

TPO's 75% Service Income Filter Validates Inclusion of Concentrix as Comparable Company in Analysis.

Customs

Merchandise Exports from India Scheme Duty Credit Scrips cancellation ignored Jindal Drugs precedent, leading to unnecessary litigation.

Exemption for Jewellery Parts from Countervailing Duty Effective July 26, 2016; Legislative Decision Required for Duty Exemptions.

IBC

Appellant's Claim Admission in CIRP Form B is Conclusive, Validating Interim Award without Further Evidence, Rules High Court.

Service Tax

Exemption from Service Tax for Agricultural Machinery Rentals to Farmers Under 2006 Circular and Madhya Pradesh Law.

CENVAT Credit Denial: Commission Paid to Auto Dealers from Premiums Not Eligible for Credit, Authority's Opinion Binding.

Reverse Charge Mechanism Not Applicable for Hiring Refrigerated Vehicles Unless Criteria in Section 65(105)(zzp) Met.

Central Excise

CENVAT Credit Distribution by ISD Validated: Allocation Weight Method Complies with Rule 7(d) of CENVAT Credit Rules 2004.

VAT

KVAT Act Section 4 and Rule 3 lack a method to value goods in composite transactions, preventing separate tax levies.

Case Laws:

GST

Income Tax

Benami Property

Customs

Corporate Laws

Insolvency & Bankruptcy

PMLA

Service Tax

Central Excise

CST, VAT & Sales Tax

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TMI Tax Updates - e-Newsletter
March 1, 2023