TMI Tax Updates - e-Newsletter
March 12, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Revocation of cancellation of Registration - bogus firm or not - by merely describing the assessee firm “bogus”, the respondent authority did not make known to the assessee the exact charge that was being levelled against the assessee. Correspondingly, the respondent authority deprived the assessee of the necessary opportunity to rebut the charge - It is equally remarkable to note that the Appeal Authority also chose to consider the matter on merits. - Order set aside - HC
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GST:
Opportunity of personal hearing is mandatory u/s 75(4) of the CGST/UPGST Act 2017 or not - where an adverse decision is contemplated against the person, such a person even need not to request for opportunity of personal hearing and it is mandatory for the authority concerned to afford opportunity of personal hearing before passing an order adverse to such person. - HC
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GST:
Issuance of undated notice under Section 73(1) of the C.G.S.T/ U.P.G.S.T. Act, 2017 - reasonable time to the petitioner to submit his reply to the show cause notice granted or not - non-compliance of principles of natural justice renders the impugned order to be unsustainable. - HC
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GST:
Validity of Show cause notice (SCN) u/s 74 - Under Section 74(1) notice is an independent notice to be issued in DRC-01, whereas the notice under Section 74(5) was to be issued in DRC- 01A. Herein the case in hand, admittedly DRC-01A was issued, thereafter straightaway the respondent revenue proceeded to pass the impugned assessment order - notice under Section 74(1) of the Act, which is also mandatory to be issued before passing the impugned order of assessment has not been issued in this case. In the absence of any such notice, the proceedings, which is culminated in the order of assessment, which is impugned herein, is, no doubt, vitiated. - HC
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GST:
Input tax credit - Capital Goods (demo cars) - The Demo Vehicles received by the Appellant have never been received with the intent to simply 'further supply/ sell' as such. Input Tax Credit on these vehicles, thus, cannot be allowed - AAAR
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GST:
Input tax credit - Stock transfer - IGST and Compensation Cess paid on receipt of cars (on stock transfer basis) for use in relation to specified business activities - it appears that the BMW Vehicles received by the Appellant under stock transfer have never been received with the intent to simply 'further supply of such motor vehicles/'sell as such'. Input Tax Credit on these vehicles, thus, cannot be allowed. - AAAR
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GST:
Classification of services - product poultry crate - goods falling under chapter 84 or chapter 39 or some other classification - appropriate classification of poultry crates - The said equipments are a necessity in a poultry set up and are covered under Chapter 8436 - Liable to GST @18% - AAR
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GST:
Classification of services - Job-Work or not - sending of Naphtha, DM water, Power, Cooling water, service water and instrument air by the Applicant to Praxair and receiving back of Hydrogen gas. Nitrogen gas and HP steam - activities being undertaken do not qualify for 'Job Work' - AAR
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Income Tax:
Validity of the re-assessment proceedings initiated against the individual petitioners - Explanations A(a)(ii)/A(b) to the notifications dated March 31, 2021 and April 27, 2021 are declared to be ultra vires the Relaxation Act, 2020 and are, therefore, bad in law and null void. All the impugned notices under section 148 of the Income Tax, 1961 are quashed with liberty to the assessing officers concerned to initiate fresh re-assessment proceedings in accordance with the relevant provisions of the Act as amended by the Finance Act, 2021 and after making compliance of the formalities as required by the law. - HC
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Income Tax:
TDS u/s 195 - assessee in default as per Section 201(1) - As Section 195 is applicable only to a person who is responsible for paying to deduct tax at the time of credit to the account of the payee or at the time of payment and petitioner did not make any payment to THL, there is no obligation on petitioner to deduct tax at source. Respondent’s arguments that petitioner had made payment through IMAHI is also not acceptable because there is no evidence that petitioner made any payment through IMAHI. The Section is applicable to a person who is responsible for paying. - HC
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Income Tax:
Disallowance on account of payment of octroi expenses - There is no dispute that the entire liability was discharged before filing return of income for the year under consideration. On perusal of the facts, we are of the considered opinion that since the liability of F.Ys. 2011-12 and 2012-13 crystallized during the Assessment Year under consideration, the same has to be allowed. - AT
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Income Tax:
Revisional powers u/s 263 with respect to the deduction claimed u/s 36 (1) (viii) - With respect to the inclusion of interest on income tax refund considered both by the assessee as well as by the learned assessing officer as part of long-term finance income of the assessee, the assessee itself agreed that there is an error and it should not have been included in the long-term finance income of the assessee. - the action of the learned principal Commissioner of income tax u/s 263 of the act is confirmed to that extent only. - AT
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Income Tax:
Revision u/s 263 by CIT - limited scrutiny case -It is not a case where the ld. PCIT has set-aside the assessment order rather he has examined these transactions and has carried out broad analysis of the ledger account so submitted by the assessee company and has come to a conclusion that the AO has failed to carry out adequate and proper enquiries which he should have conducted in respect of labour and wages payable. - Decided against assessee. - AT
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Income Tax:
Bad debts - Writing off of Loan to farmers - The treatment of the write-offs of such loans would then have to be viewed probably as bad debts, though this may not be treated as our decision on the issue. What is necessary therefore for adjudicating the issue of eligibility to claim of write off of principal loan amount is the nature of the transaction resulting in the loan being granted to farmers. It is only thereafter it can be decided as to whether the assessee is eligible to claim write off of the same as per law and under which provision - AT
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Income Tax:
Undisclosed income - gross profit margin on unaccounted sales - It is quite possible that the assessee was able to generate more profit post search period depending upon the quality of blocks. Hence it may not be correct on the part of the AO to consider the post search period results for determining the gross profit margin of unaccounted sales despite the fact that the gross profit margin worked out by the assessee has been accepted by the search officials, i.e., another wing of the income tax department. Hence, what the AO has done is to substitute one estimation with another one, which is not warranted in the facts of the present case. - AT
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Customs:
Non-compliance with the pre-deposit - section 129E of the Customs Act 1962 - As the statutory requirement stipulated under section 129E of the Customs Act has not been satisfied and the application for waiver of deposit has been rejected, the appeal stands dismissed. - AT
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Service Tax:
Commercial or Industrial Constructions Services - With respect to activity conducted by the assessee, CBEC circular referred to and relied upon by the Tribunal is specific. By virtue of Clause 2 and 8 of the paragraph 3 of the said circular, the activity of laying cables under or alongside roads and alongside railway tracks was clearly opined to be not taxable under the Finance Act, 1994. That view had been formed by the highest administrative authority under the Finance Act, 1994, namely - Central Board of Indirect Taxes and Customs. The Tribunal has not erred in applying that Circular and deleting the proposed demand of service tax liability. - HC
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Central Excise:
Recovery of CENVAT Credit - capital goods - availability of credit when the production started become dutiable - even if the goods per se were exempted during the receipt and installation of the capital goods but if the said capital goods were not put to use for manufacture of any exempted goods it cannot be said that the said capital goods were used exclusively for manufacture of exempted goods in terms of Rule 6(4) of Cenvat Credit Rules, 2004. - AT
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Central Excise:
CENVAT Credit - Extended period of limitation - Technical Testing and Analysis - there is nothing found which can substantiate the allegation of the department about wilful suppression. Learned Counsel have taken me through various invoices during the period in issue, which have been placed on record. From the perusal of the said invoices also it is clear that the services were availed for the existing plant at Rajariyawas and not for any new or proposed plant. - Credit cannot be denied - AT
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VAT:
Revision of assessment - stock difference in respect of groundnut and groundnut kernal - The Tribunal was of the view that inasmuch as the suppression is proved by the recorded evidence, the same is warranted, however, restricted to the actual suppression and is accordingly, modified. There are no fault with the finding of the Tribunal in this regard - HC
Articles
Notifications
GST - States-
38/2021-State Tax - dated
27-1-2022
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Chhattisgarh SGST
Seeks to bring in force provisions of sub-rule (2), sub-rule (3), clause (i) of sub-rule (6) and sub-rule (7) of rule 2 of the Chhattisgarh Goods and Services Tax (Eighth Amendment) Rules, 2021
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16/2021 – State Tax (Rate) - dated
19-1-2022
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Chhattisgarh SGST
Amendment in Notification No. 12/2017–State Tax (Rate) dated 28th June, 2017
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15/2021 – State Tax (Rate) - dated
19-1-2022
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Chhattisgarh SGST
Amendment in Notification No. 11/2017–State Tax (Rate) dated 28th June, 2017
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14/2021 – State Tax (Rate) - dated
19-1-2022
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Chhattisgarh SGST
Amendment in Notification No. 01/2017–State Tax (Rate) dated 29th June, 2017
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13/2021 – State Tax (Rate) - dated
19-1-2022
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Chhattisgarh SGST
Amendment in Notification No. 1/2017–State Tax (Rate), dated the 28th June, 2017
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56/2020–State Tax - dated
10-3-2022
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Delhi SGST
Amendment in Notification No. 46/2020- State Tax, dated the 8th July, 2021
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33/2021– State Tax - dated
10-3-2022
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Delhi SGST
Amendment in Notification No. 76/2018– State Tax, dated the 3rd September, 2019
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11/2021– State Tax (Rate) - dated
10-3-2022
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Delhi SGST
Amendment in Notification No. 39/2017-State Tax (Rate), dated the 27th November, 2017
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10/2021– State Tax (Rate) - dated
10-3-2022
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Delhi SGST
Amendment in Notification No. 4/2017-State Tax (Rate), dated the 30th June, 2017
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08/2021–State Tax (Rate) - dated
10-3-2022
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Delhi SGST
Amendment in Notification No. 01/2017-State Tax (Rate), dated the 30th June, 2017
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07/2021– State Tax (Rate) - dated
10-3-2022
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Delhi SGST
Amendment in Notification No. 12/2017- State Tax (Rate), dated the 30th June, 2017
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05/2021–State Tax - dated
10-3-2022
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Delhi SGST
Amendment in Notification No. 13/2020 – State Tax, dated the 31st March, 2021
News
Case Laws:
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GST
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2022 (3) TMI 496
Provisional attachment of bank accounts as well as immovable properties - petitioners states that without prejudice to the rights and contentions of the petitioners, they have no objection to their accounts being debit freezed for ₹ 25,000/- each, subject to final determination of the show cause notices - HELD THAT:- This Court directs the bankers of the Petitioners to debit freeze the account of the Petitioners for ₹ 25,000/- each. The immovable properties of the Petitioners are directed to be released/de-freezed not later than three days from today. The Petitioners’ bankers are also directed to allow the Petitioners to utilize the amount lying in their bank accounts over and above the amount of ₹ 25,000/-.
The present writ petition along with pending applications stands disposed of.
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2022 (3) TMI 495
Provisional attachment of bank accounts of the petitioner - Section 74 of the Delhi GST Act - HELD THAT:- Admittedly, after issuance of the impugned orders/letters, no fresh attachment order has been issued to the Petitioners. According to Section 83(2) of the CGST Act, every provisional attachment order ceases to have effect after the expiry of one year from the date the order was passed under Section 83(1) of the CGST Act. Consequently, the impugned provisional attachment order/letter is no longer effective.
Accordingly, this Court directs the Respondents to defreeze the bank accounts of the Petitioners not later than three days from today - Petition disposed off.
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2022 (3) TMI 494
Provisional attachment of immovable property - no show cause notice under Section 74 of the CGST Act has been issued to the Petitioner till date - HELD THAT:- Admittedly, after the issuance of the impugned letter dated 07th December, 2020, no fresh attachment order in Form GST DRC-22 has been issued. According to Section 83(2) of the CGST Act, every provisional attachment order ceases to have effect after the expiry of a period of one year from the date the order was passed under Section 83(1) of the CGST Act. Consequently, the impugned provisional attachment order/letter is no longer effective. Accordingly, this Court directs the Respondent to defreeze the bank accounts and release the immovable properties of the Petitioner not later than three days from today.
The present writ petition along with pending applications stand disposed of.
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2022 (3) TMI 486
Classification of services - product poultry crate - goods falling under chapter 84 or chapter 39 or some other classification - appropriate classification of poultry crates - rate of tax under Central, and State Tax - HELD THAT:- Poultry keeping machineries are very important requirement in poultry set up. Poultry keeping machineries includes feeding, drinking, monitoring systems which are installed in order to improve productivity and create an ideal environment for the poultry. Thus poultry machinery includes items like ventilation equipment, nest laying equipment, egg washers, heat managing systems like use of heat bulbs, and other equipment. The said equipments are a necessity in a poultry set up and are covered under Chapter 8436 - the applicant has not brought out anything on record to even remotely suggest that the impugned goods can be considered as a machinery. The applicant's submission that the crates can be considered as a poultry keeping machinery because they are made from hygienic food grade HDPE material, are rust free and safe for usage and have smoother inner surface, scientific design which makes the crate, Injury-free and are washable - the Content of the applicant that the impugned goods are poultry keeping machinery/equipment to be a covered under Chapter 8436 of the Tariff cannot be agreed upon.
Whether the impugned products are classifiable under Chapter 3923 of the Tariff? - HELD THAT:- The impugned product i.e. poultry crate is an article of plastic. It is used for the conveyance of poultry and from a reading of para 5.5.2 above it is clear that the said product is clearly covered under sub heading 392310 of the Tariff. However it is seen that the subject product does not fall under the T.I. 39231010; 39231020; 39231030; and 39231040. Thus, the impugned product will be covered under the residual T.I. i.e. 39231090 of the Tariff - the impugned product is correctly covered under T.I. 39231090 and not at all covered under T.I. 84362900. The applicant has contended that, as per section 3(c) of general rules for the interpretation of the harmonized system (HSN) If an item is prima facie classifiable under two or more headings, the same shall be classified under the heading which occurs last in numerical order and when two views are possible, the one favorable to the assessee has to be adopted.
In the subject case the impugned product i.e. poultry crate is seen to be classifiable exclusively under Chapter 39231090 and therefore the question of taking into account, the general rules for the interpretation of the harmonized system (HSN), does not arise at all - the impugned product is classifiable under Chapter 39231090.
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2022 (3) TMI 493
Revocation of cancellation of Registration - bogus firm or not - failure to appear for personal hearing on the appointed date and time - violation of principle of natural justice - HELD THAT:- In the first place, cancellation of registration has serious consequences. It takes away the fundamental right of a citizen etc. to engage in a lawful business activity. In the present case, undisputedly, the registration claimed by the assessee had been granted by the respondent authority. Therefore, a presumption does exist as to such registration having been granted upon due verification of necessary facts. If the respondent proposed to cancel the registration thus granted, a heavy burden lay on the respondent authority to establish the existence of facts as may allow for such cancellation of registration.
Therefore, the registration once granted could be cancelled only if one of the five statutory conditions was found present. Per se, no registration may be cancelled by merely describing the firm that had obtained it, was “bogus”. The word “bogus” has not been used by the statute. The only contingency to which such expression may relate may be one appearing under Clauses (c) and (d) of Section 29(2) of the Act being where a registered firm does not commence its business within six months of its registration. Other than that, the term “bogus” may also refer to a satisfaction contemplated by Section 29(2)(c) of the Act where registration may be cancelled if the registered firm has not furnished its return for continuous period of six months. Those conditions have not been shown to exist in this case - Registration having been granted earlier, the obligation existed on the authority to specify the exact reason/charge on which it proposed to cancel the registration. In the present case, unless the respondent authority had first specified the reason why it proposed to cancel the registration and unless the authority had specified the reason why it was attempting to treat the assessee firm “bogus” i.e. whether reference was being made to Section 29(2)(c) or Section 29(2)(d) of the Act, by specifically stating the facts as may give rise to that charge and unless the supporting material giving rise to that charge had been referred to in that notice, the notice itself remained defective in material aspect.
In the present case, by merely describing the assessee firm “bogus”, the respondent authority did not make known to the assessee the exact charge that was being levelled against the assessee. Correspondingly, the respondent authority deprived the assessee of the necessary opportunity to rebut the charge - It is equally remarkable to note that the Appeal Authority also chose to consider the matter on merits. Though the appeal is a continuation of original proceedings and it may have been open to the Appeal Authority to hear and decide the matter on merits, however, in absence of any legally permissible reason given by the original authority, the only proper course the Appeal Authority may have adopted, may have been to set aside the orders dated 13.08.2020 and 21.08.2020.
Petition allowed.
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2022 (3) TMI 492
Violation of principles of natural justice - opportunity of personal hearing is mandatory under Section 75(4) of the CGST/UPGST Act 2017 or not - impugned adjudication order has been passed in breach of principle of natural justice or not - HELD THAT:- From perusal of Section 75(4) of the Act, 2017 it is evident that opportunity of hearing has to be granted by authorities under the Act, 2017 where either a request is received from the person chargeable with tax or penalty for opportunity of hearing or where any adverse decision is contemplated against such person. Thus, where an adverse decision is contemplated against the person, such a person even need not to request for opportunity of personal hearing and it is mandatory for the authority concerned to afford opportunity of personal hearing before passing an order adverse to such person.
Article 226 of the Constitution of India confers very vide powers on High Courts to issue writs but this power is discretionary and the High Court may refuse to exercise the discretion if it is satisfied that the aggrieved person has adequate or suitable remedy elsewhere. It is a rule of discretion and not rule of compulsion or the rule of law. Even though there may be an alternative remedy, yet the High Court may entertain a writ petition depending upon facts of each case. It is neither possible nor desirable to lay down inflexible rule to be applied rigidly for entertaining a writ petition.
The impugned order under Section 74 of the Act for the tax period April (year 2019-20) can not be sustained and is hereby quashed - Writ petition is allowed to the extent indicated above with cost of ₹ 10,000/-.
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2022 (3) TMI 491
Violation of principles of natural justice - Issuance of undated notice under Section 73(1) of the C.G.S.T/ U.P.G.S.T. Act, 2017 - reasonable time to the petitioner to submit his reply to the show cause notice granted or not - HELD THAT:- In view of the application of the petitioner dated 16.11.2021, the respondent No.3 should have granted a reasonable time to the petitioner to submit his reply to the show cause notice. Thus, non-compliance of principles of natural justice renders the impugned order to be unsustainable.
The impugned order dated 27.11.2021 under Section 73(9) of the C.G.S.T/U.P.G.S.T. Act, 2017 passed by the respondent No.3, is hereby quashed. The matter is remitted back to the respondent No.3 to pass an order afresh in accordance with law - Petition allowed by way of remand.
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2022 (3) TMI 490
Validity of Show cause notice (SCN) u/s 74 - Violation of principles of natural justice - Notice u/s 74(5) was issued but No notice was issued u/s 74(1) - Mandatory requirement to issue notice u/s 74(1) - HELD THAT:- What has been proposed by the revenue would be intimated by way of notice under Sub Section 5 of Section 74 of the Act initially to the assessee/dealer, who on receipt of the same may or may not accept and once he accepted there would be a conclusion. However, if he does not accept the proposal sent by the Revenue under Section 74(5) of the Act, the next course of action to be followed is to issue a notice under Section 74(1) of the Act.
Under Section 74(1) notice is an independent notice to be issued in DRC-01, whereas the notice under Section 74(5) was to be issued in DRC- 01A. Herein the case in hand, admittedly DRC-01A was issued, thereafter straightaway the respondent revenue proceeded to pass the impugned assessment order - notice under Section 74(1) of the Act, which is also mandatory to be issued before passing the impugned order of assessment has not been issued in this case. In the absence of any such notice, the proceedings, which is culminated in the order of assessment, which is impugned herein, is, no doubt, vitiated.
This Court has no hesitation to hold that the impugned order cannot stand in the legal scrutiny and in that view of the matter, these writ petitions are disposed of.
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2022 (3) TMI 485
Classification of services - Job-Work or not - sending of Naphtha, DM water, Power, Cooling water, service water and instrument air by the Applicant to Praxair and receiving back of Hydrogen gas. Nitrogen gas and HP steam - section 2(68) of Central Goods and Service Tax Act,2017 (CGST Act) and Odisha Goods and Service Tax Act, 2017 (OGST Act) - Whether all the payments under the contract will attract GST as applicable to Job Work? - HELD THAT:- The production 'Plant' has been leased to the applicant (M/s IOCL, Paradip in the instant case) on a monthly rent basis. The physical and peaceful possession of the production plant has been handed over to the applicant and for that the applicant is paying Lease/Rental and O&M charges to M/s Praxair. The Plant is no more under the control and possession of M/s Praxair. Therefore, the applicant's claim that M/s Praxair uses its Plant to produce Hydrogen and Nitrogen Gas by using the inputs provided by the applicant may not be correct. Admittedly, M/s Praxair is manufacturing industrial gases out of the raw material supplied by the applicant and the gases so manufactured are exclusively used by the applicant - but there is no specific job work agreement between the applicant and M/s Praxair. No job works charges or any processing/conversion charges of inputs has been claimed by M/s Praxair as evident from the invoices raised to the applicant. Further, the manufacturing of gases is not being done at M/s Praxair's ' production plant'. Therefore, the concept of 'Job Work' is not present in the entire transaction.
The activities being undertaken in the applicant's premises/production plant do not qualify for 'Job Work' under section 2(68) of Central Goods and Service Tax Act.2017 (CGST Act) and Odisha Goods and Service Tax Act, 2017 (OGST Act) and Section 143 of the said Acts - the applicant's next question “Whether all the payments under the contract will attract GST as applicable to Job Work?” is not maintainable.
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2022 (3) TMI 489
Maintainability of appeal - requirement of statutory pre-deposit - Validity of assessment order - benefit of the extended limitation provided under order of the Supreme Court in In Re: Cognizance for Extension of Limitation [2020 (5) TMI 671 - SC ORDER] and [2020 (5) TMI 418 - SC ORDER] - HELD THAT:- Since the same request is pending before the Assessing Authority, it would be appropriate that the petitioner pursue the request before the authority and there is a direction to the Assessing Authority to hear the petitioner and dispose the representation dated 16.07.2021 within a period of four (4) weeks from today.
Petition disposed off.
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2022 (3) TMI 488
Input tax credit - credit can be availed on such Capital Goods (demo cars) and set off against output tax payable under GST or not - credit can be availed on ancillary input services such as insurance and repair and maintenance availed in respect of demo cars - HELD THAT:- Section 16 of CGST Act provides that a recipient Taxpayer is entitled to take the ITC if it has in possession of the duly issued invoices and the goods or services have been received and are intended for furtherance of business - certain restriction have been imposed on ITC availment in respect of the goods and services in Section 17(5). One such restriction expressly mentioned under Section 17(5)(g) viz-, “(g) goods or services or both used for personal consumption.” It can be inferred that sub-Section 17(5)(g) restricts ITC on the Motor Vehicles as these are potential items of personal/non-business use.
The Demo Vehicles in respect of which the Question about admissibility of ITC has been raised for Advance Ruling, have been used, have been used for the purpose of demonstration before the prospective customers. Then they are sold like second hand goods. The law provides for ITC in case of “further Supply” of said vehicles. But here, first the vehicles are purchased, then they are diverted and used for Demonstration of 2 years or so, and in the first demonstration run it loses the character of the new vehicle and demo vehicles is sold akin to second hand goods and which is different from new Vehicle and accordingly treated differently under GST law. Thus it cannot be said that the demo vehicle is for further supply of such motor vehicles'. This very restricted and specific provision has been provided in law for Motor Vehicles. The purpose and intent of the law is thus very clear. Thus by allowing the ITC this way will be ultra vires the basic provisions of 'further supply of such motor vehicles' - the use to which the Demo Vehicles are put to, does not fit into the uses which find mention in sub-Section 17(5). The vehicles under question are not meant for 'further supply of such motor vehicles', but are first put to the mentioned uses. These are disposed of after prolonged use, which may even not restrict to 2 years as mentioned by the Appellant.
The Demo Vehicles received by the Appellant have never been received with the intent to simply 'further supply/ sell' as such. Input Tax Credit on these vehicles, thus, cannot be allowed - under Section 17(5)(ab), the credit of the input services of repair/ insurance/ maintenance used in respect of said vehicles with seating capacity up to 13 passengers, cannot be allowed.
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2022 (3) TMI 487
Input tax credit - Stock transfer - IGST and Compensation Cess paid on receipt of cars (on stock transfer basis) for use in relation to specified business activities and thereafter onwards supply to dealers after use by the Applicant unit for a limited period of time - HELD THAT:- None of the uses to which the BMW Vehicles are put to, fits into the uses which find mention in sub-Section 17(5). The vehicles under question are not meant for “further supply of such motor vehicles' i.e further supply as such”, but are first put to the mentioned uses. These are disposed of after prolonged use, which may even not restrict to 12 months as mentioned by the Appellant.
If the argument of the party is allowed then in that case all the motor vehicles, irrespective of the nature of Supply will be eligible for ITC across the industries. It will no longer be a restricted clause for Car Dealers, but will be an open-clause for all the trade and industry to avail the ITC on all the Vehicles purchased by them. This has never been the intent of the Parliament - in the very first demonstration run demo car loses the character of the new motor vehicle and demo vehicles is sold akin to second hand goods and which is different from new Vehicle and accordingly treated differently under. GST law, so the demo car is not an input.
So it appears that the BMW Vehicles received by the Appellant under stock transfer have never been received with the intent to simply 'further supply of such motor vehicles/'sell as such'. Input Tax Credit on these vehicles, thus, cannot be allowed.
The input credit of the Services of repair/ insurance/ maintenance used in respect of said vehicles with seating capacity up to 13 passengers, cannot be allowed.
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Income Tax
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2022 (3) TMI 479
Unexplained & unaccounted deposit of USD 7 Million in the account of the appellant maintained with Standard Chartered Bank, Dubai - addition on the basis of the information provided by the Enforcement Directorate - HELD THAT:- As far as the evidences provided by the Enforcement Directorate are concerned, the authenticity and correctness of the same cannot be doubted, as the source of such information is a Department of Govt. of India. In any case, the appellant had failed to provide any material evidence, which even prima-facie indicate that the information provided by the Enforcement Directorate is not correct.
There is material evidence on record to show that Shri Kashinath Tapuriah, husband of the appellant was working in close association and cooperation with Shri Hassan Ali Khan and others. This is evident from a large number of seized documents, which were found independently at two places, namely, the residence of the appellant at Kolkatta and the residence of Shri Hassan Ali Khan at Pune. At this juncture, it is also brought on record that the AO had taxed the right person i.e. the Appellant on the basis of the "Transfer Instruction" provided by the Enforcement Directorate.
We find that the Ld.CIT(A) considered this aspect of the matter elaborately with reference to the submissions of the assessee and the averments in the Assessment Order and sustained the addition made by the Assessing Officer correctly. - Decided against assessee.
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2022 (3) TMI 478
Revision u/s 263 by CIT - AO has not examined/enquired some issues during the assessment proceedings and accordingly came to the conclusion that the assessments so framed in all the above 4 years from AY 2013-14 to 2016-17 were erroneous in so far as prejudicial to the interest of the revenue and revised all the above 4 assessment years by directing the AO to pass fresh assessment orders after examining all the issues - HELD THAT:- It is settled law that in order to invoke the jurisdiction u/s 263 of the Act by the PCIT, the twin conditions i.e. the order has to be erroneous and prejudicial to the interest of the revenue, have to be satisfied. In case one of the condition is satisfied out of the two, even then the PCIT cannot invoke the jurisdiction u/s 263 of the Act to revise the assessment. It is also a settled law that the jurisdiction is not available to PCIT u/s 263 of the Act to revise the assessment on the issues merely because no reference or discussion has been made in the assessment order especially when the AO has called for details/explanations from the assessee on all the issues as proposed by PCIT in the order passed u/s 263 and assessee has responded the same by filing written submissions with details/evidences which are part of the assessment records.
The revisionary jurisdiction is not available to the PCIT merely on the ground that AO sought reply from the assessee during assessment proceedings which furnished by the assessee with evidences and are available in the assessment records however it did not find an elaborate discussion or reference in the assessment order. Similarly the powers of revision u/s 263 of the Act cannot be exercised arbitrarily in order to make roving enquiries and initiate fresh enquiries - Thus the jurisdiction u/s 263 can be exercised to revise the assessments where no enquiry at all has been conducted by the AO which is a case of lack of enquiry but not in a case where the AO has conducted an enquiry which in the opinion of PCIT is inadequate /insufficient without showing as to how the order framed by the AO after appreciating the evidences filed by the assessee is contrary to facts or not in accordance with law.
Thus we hold that the revisionary jurisdiction has not been validly exercised by the ld PCIT. Accordingly we quash the revisionary proceedings initiated u/s 263 of the Act and the consequent orders passed u/s 263 of the Act. The appeal of the assessee is allowed.
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2022 (3) TMI 477
Disallowance on account of payment of octroi expenses - HELD THAT:- There is no dispute that the impugned liability pertains to F.Ys. 2011-12 and 2012-13. A perusal of the documents shows that though the assessee made several attempts of paying the same, but the Brihan Mumbai Mahanagar Palika returned the demand draft, as further investigation was going on in respect of the liability.
Finally, liability was settled and the assessee made a payment. There is no dispute that the entire liability was discharged before filing return of income for the year under consideration. On perusal of the facts, we are of the considered opinion that since the liability of F.Ys. 2011-12 and 2012-13 crystallized during the Assessment Year under consideration, the same has to be allowed. We, accordingly, direct the Assessing Officer to allow the claim - Addition is, accordingly, deleted. Ground Nos. 1, 2 and 3 are allowed.
Assessee received incentives/benefits from lessors - HELD THAT:- There is no dispute that the assessee has received incentives from the lessors - It is also not in dispute that the assessee has amortized in the profit and loss account only ₹ 34,05,526/- and balance has been spread over the entire lease period.
Assessee is following the mercantile system of accounting and, therefore, was required to recognize all revenue receipts as income in the year of accrual. Lease agreement clearly indicates that the assessee is entitled to receive lease incentives at the time of the delivery of space/opening of stores which means that the right to receive the lease incentives accrued to the assessee at the beginning of the lease.
Even in the lease agreement, there is nothing to show that the incentives accrued yearly. In fact, the assessee is not under any obligation to refund any part of the incentive to the lessor in case the lease is terminated before the completion of lease period. This also shows that the amount of incentive does not accrue yearly during the lease period. The findings of the Assessing Officer/ld. CIT(A) cannot be faulted with. Therefore, no interference is called for. Ground Nos. 4 and 5 are, accordingly, dismissed.
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2022 (3) TMI 484
Validity of the re-assessment proceedings initiated against the individual petitioners - enforcement of the Enabling Act and the Finance Act, 2021 - scope of provisions of Section 148 read with Section 148A as substituted by Finance Act, 2021 - substituting the provisions of the Act by means of the Finance Act, 2021 with effect from 01.04.2021, the old provisions were omitted from the statute book and replaced by fresh provisions with effect from 01.04.2021 - time limitation existing under the Act had been extended under the Ordinance - relaxation of limitation granted on account of general hardship existing upon the spread of pandemic COVID -19 - extension which was given one final push by the impugned Notification dated 27.04.2021 as it became necessary on account of the spread of the second wave of the pandemic COVID-19 - HELD THAT:- In view of the judgements and orders of this court in the case of Manoj Jain-vs-Union of India & Ors. [2022 (1) TMI 741 - CALCUTTA HIGH COURT] and in the case of Bagaria Properties and Investment Private Limited & Anr. [2022 (1) TMI 742 - CALCUTTA HIGH COURT], all these writ petitions herein are disposed of by allowing the same.
Explanations A(a)(ii)/A(b) to the notifications dated March 31, 2021 and April 27, 2021 are declared to be ultra vires the Relaxation Act, 2020 and are, therefore, bad in law and null void. All the impugned notices under section 148 of the Income Tax, 1961 are quashed with liberty to the assessing officers concerned to initiate fresh re-assessment proceedings in accordance with the relevant provisions of the Act as amended by the Finance Act, 2021 and after making compliance of the formalities as required by the law.
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2022 (3) TMI 476
Employees’ shares towards contribution to PF and ESI - assessee had deposited beyond the due date mentioned in the provisions of the relevant Act but had deposited before the due date of filing of return of income tax - HELD THAT:- There is no dispute between the parties regarding the dates of deposit of ESI and PF which clearly are beyond the prescribed date of deposit as applicable under the respective acts. However, there is no dispute between the parties that these deposits were made before the filing of return of income for the relevant assessment year. As in the case of Sagun Foundry (P.) Ltd. [2016 (12) TMI 1479 - ALLAHABAD HIGH COURT] has dealt with similar issue and after taking into account the judgment of Hon'ble Supreme Court in the case of CIT vs. Alom Extrusion Ltd [2009 (11) TMI 27 - SUPREME COURT] has decided the similar issue in favour of the assessee.
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2022 (3) TMI 475
Bogus purchases - addition of 100% of purchases shown from Pravin Kumar Jain Companies/entities - HELD THAT:- We find the assessee has filed bill of purchases and bank statement in order to substantiate the genuineness of purchases. The evidence furnished by assessee bills of purchases and bank statement showing the transaction through banking channel. AO has disregarded such documentary evidence furnished by assessee. The sales of the assessee is not disputed by assessing officer. AO not rejected the books of account. No other observation on books of assessee was made. It is settled law that no sale is possible in absence of purchase. We find that before, ld. CIT(A) the assessee filed in very detailed and exhaustive submissions.
The profit element in such disputed purchase is to be disallowed to avoid the possibility of revenue leakage. We find that Assessing Officer identified the disputed purchase to the extent of sale of ₹ 12.05 Crores and disallowance of 100% of such purchases. In our view, 100% of disallowance of such purchases without disputing the sales is not justified. Similarly, disallowance restricted by ld. CIT(A) to the extent of 5% is also not justified when the assessee has shown GP of less than of less than 1% (.88%). Considering over all facts and circumstances of the case, we are of the view that disallowance of 6% of the disputed purchases of ₹ 3.46 Crore, would meet possibility of revenue leakage. Hence, the Assessing officer is directed to disallow/restrict the addition of bogus purchases to the extent of 6% of such purchases. In the result, the appeal of the Revenue is partly allowed.
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2022 (3) TMI 474
Deduction u/s 54F - Long term capital gain earned in AY 2008-09 on sale of shares against which deduction u/s 54F was claimed was not shown in the e-filed return by not refuting the explanation of assessee and thereby confirming the addition for the same in the year under consideration - whether CIT(A), NFAC has erred on facts and in law in holding that the transaction of purchase & sale of shares of M/s Radha Swami Buildcon Pvt. Ltd. on which long term capital gain was earned in AY 2008-09 is an accommodation entry? - CIT(A) held that the assessee has failed to explain as to how the efiled return could not have captured the details of capital gain and claim of deduction u/s 54F - HELD THAT:- In a computerized system driven environment, it is not possible that an assessee would feed something and the IT department system would capture something else - in the case of e-filed return, immediately after submitting return, the electronic copy of the return so submitted is available for download. In normal course, the appellant would have noticed from the downloaded return that the return is not showing correct information and in that case the appellant could have revised the return.
This is not the case here - details of the purported transaction i.e. purchase of the shares of M/s Radha Swami Buildcon Pvt. Ltd. on 27.03.2006 for ₹ 2,00,000/- at the rate of ₹ 10/- per share and subsequent sale on 07.04.2007 for ₹ 40,00,000/- indicate that this was an accommodation entry taken by the assessee. Within a short span of holding for just one year, the shares of an unknown company had risen by 20 times. Thus, clearly the assessee had not shown the long term capital gain in the e-filed return of income for AY 2008-09 but it was claimed to have been submitted in the paper return which was not in the form specified under relevant rules.
Assessee had purposely done so in order to avoid any scrutiny/ investigation of the transaction. It is therefore concluded that the assessee had not shown any such income in the return of income for AY 2008-09 which has been claimed to have been brought in the capital account for the AY 2014-15. Hence, AO is justified in treating the accretion to the capital account as an undisclosed income.
Against the affidavit and copy of online ITR filed in the paper book, the ld. DR has not filed any contrary facts that the contention of the assessee are not correct. Thus, it appears that the Ld. CIT(A) has incorrectly held that this transaction of purchase & sale of shares is an accommodation entry. Thus, once the record before the lower authorities suggest that the transaction of sale of shares and the resultant capital gain has arisen in AY 2008-09, it cannot be added in the year under consideration - such capital gain which relate to AY 2008-09 cannot be taxed in AY 2014-15. Hence, for this reason alone, the addition made by AO and confirmed by Ld. CIT(A) cannot be sustained. Thus the grounds No. 1 and 2 of the assessee are allowed.
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2022 (3) TMI 473
Delayed employees’ contribution towards ESI and PF - deposits were made before the filing of return of income - HELD THAT:-There is no dispute between the parties regarding the dates of deposit of ESI and PF which clearly are beyond the prescribed date of deposit as applicable under the respective acts. However, there is no dispute between the parties that these deposits were made before the filing of return of income for the relevant assessment year. Hon'ble Allahabad High Court in the case of Sagun Foundry (P.) Ltd [2016 (12) TMI 1479 - ALLAHABAD HIGH COURT] has dealt with similar issue and after taking into account the judgment of Hon'ble Supreme Court in the case of CIT vs. Alom Extrusion Ltd. [2009 (11) TMI 27 - SUPREME COURT]and after taking into account views of different High Courts, has decided the similar issue in favour of the assessee .
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2022 (3) TMI 472
Credit of TDS & self assessment tax as reflected in Form 26AS - HELD THAT:- As the entry in Form No. 26AS at Sr. No. 1 at ₹ 8,20,307/- of Ashu Mahawar is reduced or cancelled at Sr. No. 3 of the same 26AS and entry at Sr. No. 2 for ₹ 5,53,970/- is taxable. Thus the action of the AO taxing differential amount at ₹ 2,62,930/- based from 26AS is uncalled for. We find force in the contention of the ld.AR of the assessee and inclined to agree that the addition is not required to be made basis on an entry which is subsequently changed / reduced.
Further in the intimation u/s 143(1) dated 15.04.2019, the AO has allowed the credit of TDS of ₹ 56,122/- and self assessment tax of ₹ 7,230/- whereas the same was not allowed in the intimation u/s 154 dated 15.06.2019. The fact is that tax of ₹ 56,122/- was deducted from assessee’s income and assessee had paid self assessment tax of ₹ 7,230/- which is also verifiable from Form 26AS. We also find that ITAT, Jaipur Bench in case of Shri Amit Mantri Vs. DCIT [2022 (1) TMI 181 - ITAT JAIPUR] has held that where assessee has claimed the credit of TDS in the return which is also reflected in Form 26AS, the AO cannot refuse to grant credit of the same on technicalities. In this view of the mater, AO is directed to delete the addition and allow the credit of TDS & self assessment tax as reflected in Form 26AS. Thus Ground No. 1 to 3 of the assessee are allowed.
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2022 (3) TMI 471
Revision u/s 263 by CIT - Period of limitation - Reopening of assessment against assessee concluded - HELD THAT:- As first order u/s 143 (3) of the act was passed by AO on 25th of March 2015. Subsequently the case was reopened and reassessment order u/s 143 (3) read with Section 147 of the act was passed on 31 December 2018. Therefore, apparently if the learned PCIT would like to revise the order passed u/s 143 (3) of the act which was passed on 25th of March 2015, the time limit set under the provisions of Section 263 (2) of the act would expire on 31st of March 2017. If the principal Commissioner of income tax points that order passed u/s 143 (3) read with Section 147 of the act passed on 31 December 2018 is erroneous, then the order u/s 263 could have been passed up to 31st of March 2021. In the present case the order u/s 263 of the act was passed on 31st of March 2021. Therefore, apparently the issues that have been covered in order passed u/s 143 (3) of the act but are not part of reopened proceedings, cannot be subject to revision u/s 263 of the income tax act by this order.
As we have already stated that the time limit for revising the issues involved in the original assessment order has already expired on 31/3/2017, therefore the revision on the above issues namely (1) the consideration of loss on repossessed vehicle is bad debts and not in the business loss, (2) disallowance of unpaid leave encashment u/s 43B (f) of the act is beyond the powers of the ld PCIT u/s 263 of the act. Therefore without looking into the merits of the case, we hold that the order of the learned PCIT is not sustainable on the above 2 issues.
Revisional powers u/s 263 with respect to the deduction claimed u/s 36 (1) (viii) - whether the correct lease rental income has been reduced by the assessee and ld AO in computing the income from long-term finance or not - Gross lease rental income and Arrears of lease Income should have been reduced for working out the long-term finance income. The expenditure of interest should not have been reduced from gross lease income. AO has not at all verified the above adjustment made while arriving at lease income. Therefore it is apparent that the AO has not made necessary enquiries with respect to the computation of deduction u/s 36 (1) (viii) of the act with respect to what amount of lease rent should be reduced from the long-term finance income of the assessee to arrived at deduction u/s 36 (1) (viii) of the act. This inquiry is just and proper, and should have been made by the ld AO.
With respect to the inclusion of interest on income tax refund considered both by the assessee as well as by the learned assessing officer as part of long-term finance income of the assessee, the assessee itself agreed that there is an error and it should not have been included in the long-term finance income of the assessee.
Therefore on both these issues AO has failed to make any enquiries to examine whether the correct lease rental income as well as interest on income tax refund should have been included in the long-term finance income of the assessee for working out deduction u/s 36 (1) (viii) of the act. Hence, on both these issues, we do not find any infirmity in the order of the learned principal Commissioner of income tax in invoking jurisdiction u/s 263 of the income tax act. Accordingly the action of the learned principal Commissioner of income tax u/s 263 of the act is confirmed to that extent only.
Computation of the long-term finance income of the assessee for working out deduction u/s 36 (1) (viii) - CIT has revised the order of the learned assessing officer holding it to be erroneous as the learned assessing officer has failed to apply his mind with respect to the computation of the long-term finance income qua reduction of lease rental income as well as interest income from income tax refund. Even otherwise there is no decision of the learned CIT – A on these issues, therefore it cannot be said that the learned Commissioner of Income Tax (Appeals) has ‘considered and decided’ the issue of whether the lease rental income and interest income on income tax refund is part of the long-term finance income of the assessee or not. Therefore, this argument of the learned authorised representative stands rejected.
In the result we hold that the learned principal Commissioner of income tax is correct in setting aside the assessment order passed u/s 143 (3) rws 147 of the Act dated 31-12-2018 by passing an order u/s 263 of the income tax act with respect to the deduction claimed u/s 36 (1) (viii) of the act for excluding the correct amount of lease rental income and interest income on income tax refund for working out long-term finance income of the assessee.
With respect to the issue of repossessed vehicles to be treated as bad debts and non-disallowance of unpaid leave encashment, as already held above the order of the learned principal Commissioner of income tax is not sustainable in law. Therefore on these two issues the order of the learned principal Commissioner of income tax is quashed. - Decided in favour of assessee in part.
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2022 (3) TMI 483
Reopening of assessment u/s 147 - delay in furnishing the reasons - HELD THAT:- This Court is of the view that even if the submissions advanced by learned counsel for the respondents are accepted, then also the delay in furnishing the reasons is completely attributable to National Faceless Assessment Centre i.e. the Income Tax Department. Further, in any event, the defence taken by learned counsel for the Respondents does not, in any manner, affect the Petitioner’s primary grievance that there has been a violation of principle of natural justice inasmuch as the Petitioner did not get reasonable time to file its objections to the reasons dated 23rd September, 2021.
Consequently, the impugned assessment order dated 29th September, 2021 is quashed and the Petitioner is directed to file its objections to the reasons furnished by the Respondents on 23rd September, 2021 within a week. Assessing Officer is directed to decide the said objections by way of a reasoned order in accordance with law, within two weeks thereafter.
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2022 (3) TMI 482
Income deemed to accrue or arise in India - licensing of software products of Microsoft in the Territory of India by the Respondent - whether taxable in India as Royalty under Section 9(1)(vi) of the Act read with Article 12 of the Indo US DTAA? - HELD THAT:- The issue raised in the present appeals is no longer res integra as the Supreme Court in Engineering Analysis Centre of Excellence Private Limited [2021 (3) TMI 138 - SUPREME COURT] as held that amounts paid by resident Indian end-users/distributors to nonresident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in section 195 of the Income Tax Act were not liable to deduct any TDS under section 195 of the Income Tax Act. - Decided in favour of assessee.
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2022 (3) TMI 470
Exemption u/s 11 - assessee had filed the “audit report” in Form No. 10B in the course of proceedings before the first Appellate - whether assessee-trust being well within its rights had rightly filed the “audit report” in Form No. 10B in the course of proceedings before the CIT(A), therefore, it was duly entitled for claim of exemption u/s 11? - HELD THAT:- The manner in which the A.O in the course of the set-aside proceedings had dealt with the issue in hand clearly militates against the specific directions of the Tribunal. Be that as it may, we are of the considered view, that as in the case before us, the “audit report” of the assessee trust in Form No. 10B was there before the A.O in the course of de novo assessment proceedings, therefore, it was obligatory on his part to have considered the same specifically when there was clearly a direction by the Tribunal to the said effect.
Before parting, we may herein observe, that the requirement for filing the “audit report” in Form No. 10B a/w the return of income had been made mandatory by the legislature in all its wisdom vide the Finance Act 2017 w.e.f. 01-4-2018 i.e from A.Y 2018-19 by inserting Clause (ab) to sub-sec.(1) of Sec. 12A of the Act. In the backdrop of our aforesaid observations, we find no infirmity in the view taken by the CIT(A) who had on the basis of his well reasoned observations, concluded, that there was no justification on the part of the A.O in declining the assessee”s claim of exemption u/s 11 for the reason, that it had delayed filing of its “audit report” in Form No. 10B in compliance with the provisions of Sec. 12A (b), more so, when the said Form No. 10B was available on his record during the course of the set-aside proceedings, i.e, while framing the assessment vide his order passed u/s 143(3) r.w.s 254 of the Act, and no defect therein could be detected by him. We, thus, in terms of our aforesaid observations uphold the view taken by the CIT (A). - Decided against revenue.
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2022 (3) TMI 469
TP Adjustment - Amount of margin retained by the A.E.- CIT-A rejected the ground of the assessee that the transfer pricing adjustment should be restricted to the amount retained by the A.E. - HELD THAT:- We find that on identical issue, the Co–ordinate Bench of the Tribunal in ITO v/s M/s. Ominiglobe Information Technologies India Pvt. Ltd.,[2019 (4) TMI 1726 - ITAT DELHI] restricted the transfer pricing adjustment to the amount of margin retained by the A.E - Similar view was also expressed by another Co–ordinate Bench of the Tribunal in Fortune Infotech Ltd[2016 (2) TMI 382 - ITAT AHMEDABAD]
Thus, respectfully following the aforesaid judicial precedence of the Co–ordinate Benches of the Tribunal, we direct the TPO/A.O. to restrict the transfer pricing adjustment to the amount retained by the A.E and compute the total income of the assessee in accordance with law. Since the issue relating to restricting the transfer pricing adjustment to the revenue retained by the A.E. from the customers is decided in favour of the assessee and against the Revenue, resultantly, the other grounds of appeal raised by the assessee in this appeal become academic in nature.
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2022 (3) TMI 468
Disallowance towards employees’ contribution towards PF&ESI - deposits before the due date of filing the return of income u/s 139(1) - HELD THAT:- This Tribunal in the case of Harendra Nath Biswas [2021 (7) TMI 942 - ITAT KOLKATA] has dealt the very same issue holding that Explanation-2 introduced by the Finance Act, 2021 in Section 36(1)(va) of the Act is prospective in nature and therefore, in view of the settled judicial precedence including the judgment of Hon’ble jurisdictional High Court in the case of Commissioner of Income-tax, Circle -I, Kolkata vs. Vijay Shree Ltd. [2011 (9) TMI 30 - CALCUTTA HIGH COURT] disallowance should not be made of the said amount if it has been deposited before the due date of filing the return of income u/s 139(1).
Thus no disallowance was called for u/s 36(1)(va) of the Act in the case of the assessee as the assessee deserves a relief as per the provisions of Section 43B of the Act as the alleged amount has been deposited before the due date of filing the return of income u/s 139(1) - Decided in favour of assessee.
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2022 (3) TMI 467
Penalty u/s 271(1)(c) - defective notice u/s 274 - Non specification of charge - whether the penalty can be imposed without specifying the guilt either for concealment of income or for furnishing of inaccurate particulars of income in the present facts and circumstances of the case? - HELD THAT:- It was incumbent upon the Assessing Authority to come to a definite finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by them. If no such clear cut finding is reached by the authority, penalty cannot be levied.
The principles laid down in case Snita Transport Pvt. Ltd. vs. ACIT [2012 (12) TMI 981 - HIGH COURT OF GUJARAT] are squarely applicable to the facts of the case in hand. At the cost of repetition we observe that the AO has not mentioned the specific charge/guilt in its penalty orders whether it was levied for concealment of income or for furnishing inaccurate particulars of income. Therefore, in our considered view, the penalty levied by the AO and confirmed by the Learned CIT (A) is not sustainable in the eye of law. - Decided in favour of assessee.
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2022 (3) TMI 481
TDS u/s 195 - assessee in default as per Section 201(1) - HELD THAT:- When petitioner has not made any payment and it is not respondent’s case that petitioner had directly made any payment, petitioner cannot be the person responsible for deduction of tax. Respondent’s assumption that petitioner being the ultimate beneficiary of the acquisition of the shares ought to have deducted the tax at source on the payments made for the acquisition of shares of THL is not correct. If we apply the logic of respondent no.1, as stated earlier also, then the ultimate beneficiary are the shareholders of petitioner and not petitioner and hence, the liability can never be fastened on petitioner. This is dehors the fact that even if petitioner is ultimate beneficiary of the transaction, then also it does not follow that petitioner was required to deduct tax at the time of acquisition of shares of THL by IMAHI.
As Section 195 is applicable only to a person who is responsible for paying to deduct tax at the time of credit to the account of the payee or at the time of payment and petitioner did not make any payment to THL, there is no obligation on petitioner to deduct tax at source. Respondent’s arguments that petitioner had made payment through IMAHI is also not acceptable because there is no evidence that petitioner made any payment through IMAHI. The Section is applicable to a person who is responsible for paying.
Show cause notice dated 25th March 2010 as well as order dated 10th December 2013 have to be quashed and set aside. - Decided in favour of assessee.
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2022 (3) TMI 466
Revision u/s 263 by CIT - limited scrutiny case - labour and wages payable which are beyond the scope of limited scrutiny for verification of sundry creditors - HELD THAT:- We find that when the return of income was selected for scrutiny, only information which was available with the department was the return of income filed online containing particulars as per the financial statements and not hard copy of the financial statements filed subsequently and therefore, what has been selected for examination is the figure of sundry creditor by the Assessing officer and during the course of assessment proceedings, the Assessing officer basis such selection has proceeded to examine the sundry creditors as part of limited scrutiny assessment to which the assessee has voluntary participated without raising any objections and supplied information/documentation and therefore, where the ld. PCIT issues a show cause u/s. 263 regarding the matter relating to examination of labour and wages payable, we do not find any infirmity in the said action in his assumption of jurisdiction u/s. 263 which is well within the limited scrutiny for which the matter was initially selected for examination by the Assessing officer.
Where the matter is selected for precise reason for examination of labour and wages payable, certain basic questions arises for consideration which a person of reasonable intellect and understanding should raise and examine. Firstly, who are these persons - whether regular employees or hired through a third party, name and address and other basic identification particulars of these persons who are hired and terms of such hiring in terms of salary/wages/social security, etc., work/project for which they are hired and their attendance records, etc to establish actual rendering of services and period/hours of service, payment/muster rolls etc showing salary/wages payable, actual payment and whether liable for TDS and actual TDS done and deposited in their respective accounts. And in respect of old outstandings, the persons in respect of whom the amount has remained outstanding, the period and reasons for such outstandings and whether any payments have been made during the year or not and applicability of TDS on such payments. Therefore, where the ld. PCIT has stated that besides ledger account, there is no documentation on record in support of such expenses, we agree that the Assessing officer did not make proper and adequate enquiries while making the assessment.
It is not a question of kind and extent of enquiry and hence, a difference of approach and methodology of examination of a particular transaction as done by the AO and as suggested by the ld. PCIT. No doubt every Assessing officer has his unique style of functioning and no hard and fast rule can be laid down as to how he should conduct the enquiry in discharge of his statutory functions. However, where the factual scenario of a case prima facie indicates abnormalities and cry for looking deep into it as rightly highlighted by the ld. PCIT in terms of complete lack of documentation, old outstandings, payment in cash, etc, then mere calling for the details of labour and wages payable and accepting the ledger account containing incomplete details and without calling for further information/documentation and conducting independent enquiries cannot be held as conducting proper enquiry. Therefore, on this account, we agree with the findings of the ld. PCIT that proper enquiries have not been conducted by the AO and the order thus passed is clearly erroneous and prejudicial to the interest of the Revenue.
It is not a case where the ld. PCIT has set-aside the assessment order rather he has examined these transactions and has carried out broad analysis of the ledger account so submitted by the assessee company and has come to a conclusion that the AO has failed to carry out adequate and proper enquiries which he should have conducted in respect of labour and wages payable. - Decided against assessee.
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2022 (3) TMI 465
Accrual of income - revenue recognition - Addition made to the income of the assessee on account of interest on farmer's loan - interest on farmers' loan not recognized in the books of accounts on account of change of accounting policy - HELD THAT:- As fundamental principle for recognition of Revenue as per mercantile method involves there being reasonable certainty in ultimate collection. And for interest income it states that the same is to be recognized when there is no uncertainty as to its collectability. As per the accrual/mercantile system of accounting, revenue is to be recognized as accrued only when the amount of revenue is determinable and its collectability is also certain. In the event of any of the two factors being unfulfilled, even under the accrual/mercantile system of accounting, revenue is not recognized.
Considering this position of accounting for revenue under the mercantile system and applying it to the facts of the case before us, we are in agreement with ld. Counsel for the assessee that in the present case, in view of the uncertainty in the collectability of the interest income, the same could not be said or treated as accrued. The assessee therefore, we hold, had rightly accounted for the same on receipt basis and there was no understatement of interest as per the mercantile system as alleged by the Revenue. In view of the same, the addition made to the income of the assessee on account of interest on loans under-stated is directed to be deleted.
Disallowance of farmer's loan and interest which was written off in the books of the assessee - HELD THAT:- Since the assessee fulfills all the criteria of having returned the interest income to tax earlier and having written off the same in its books of accounts, its claim to the write off as bad debts is therefore, we hold, in accordance with law and we direct the same to be allowed to the assessee. Therefore, the claim of interest written off to the extent of 5.05 crores is held to be allowable to the assessee as bad debts written off as per the provisions of Section 36(1)(vii) r.w.s. 36(2) of the Act.
Contention of the assessee before us is that it was a business loss for the assessee since it was in the business of granting loans and the same had become irrecoverable - We find that for adjudicating the issue the facts have not been clearly brought out. Assessee had stated that the assessee was undertaking activities for farmers. That the said activities were met by funds provided by the government and part of the expense incurred was raised as recoverable from the farmers as loan. What transpires from the above is that loan raised on farmers was a method of recovery of cost of expenditure incurred on activities undertaken for the farmers.
The manner of undertaking the transaction is not clear. It is not known as a fact whether the farmers are billed for the activities undertaken. Then treating a part of it as loan would only tantamount to a different method being adopted for recovery of income by the assessee and in that case the assessee cannot be said to be indulging in the activity of granting loan. The treatment of the write-offs of such loans would then have to be viewed probably as bad debts, though this may not be treated as our decision on the issue. What is necessary therefore for adjudicating the issue of eligibility to claim of write off of principal loan amount is the nature of the transaction resulting in the loan being granted to farmers. It is only thereafter it can be decided as to whether the assessee is eligible to claim write off of the same as per law and under which provision. We therefore deem it necessary to restore the issue back to the AO to determine the facts in which the impugned loans have arisen and thereafter adjudicate the issue in accordance with law. Needless to add the assessee be granted due opportunity of hearing in this regard.
Disallowance of Soil Conservation Expenses - Addition of 10% Soil Conservation Expenses for the reason that the assessee failed to produce the vouchers and hence prove their genuineness - assessee contended that there was no reason for disallowing these expenses on account of the genuineness of the same as not proved since the assessee had been subjected to internal audit, statutory audit and even audited by the CAG (Comptroller of Auditor General) and nothing to this effect of any ingenuine expenditure having been booked by the assessee was pointed out by any of the auditors - HELD THAT:- A detail of the impugned expenses incurred from AY 2008-09 to AY 2012-13 was filed before us showing the quantum of such expenses incurred in those years, which we find ranged from 2.85 crores to 5.36 crores, Copies of financial statements of the said years was also filed as evidence. Further assessment orders passed u/s. 143(3) of the Act for the said years was also filed showing that except in the impugned year no disallowance was made by the Revenue either in the preceding or succeeding years.
Considering the entire facts and circumstances as above, we hold that an ad hoc disallowance of 10% of the total expenses for failure to substantiate the claim in entirety with evidences in the impugned year is highly unjustified and a disallowance of ₹ 5 lacs would be justified. We accordingly direct the AO to restrict the disallowance of soil conservation expenses to ₹ 5 lacs.
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2022 (3) TMI 464
Disallowance of expenditure considered as capital-work-in-progress by the AO - Scope of addition u/s 40A(2)(b)assessee has claimed consultancy charges, legal and professional charges and marketing expenses - HELD THAT:- Revenue ground is not clear whether they have challenged the deletion of disallowance by invoking the provisions of section 40A(2)(b) of the Act. The only challenge to the order is deleting the disallowance of expenditure considered by the AO as capital-work-in-progress and accordingly capitalized by the AO. As we have noted that this ground is not clear and according to us, the Revenue has not challenged the disallowance made by the AO u/s. 40A(2)(b) of the Act, as is clear from the Ground No. 2.1 raised by Revenue.
Consultancy charges, legal and professional charges and marketing expenses - We noted that the assessee is engaged in the business of infrastructure development and real estate related projects and the assessee prior to launching of real estate project i.e., "Centralis @ ABM Avenue", it is engaged in the business of real estate as it has taken lease of around 81 acres of land from Coromandel Fertilizers Ltd., vide lease dated 27.03.2008, which was notified under SEZ Act, 2005 as Special Economic Zone. This land was sub-leased to Silk Road Sugars Pvt. Ltd., for setting up of sugar refinery. The assessee received lease rental from SEZ and has offered to tax.
As regards to the bifurcation of expenditure given by the assessee and the payment made by the assessee, we noted that the payment made to EID Parry India Ltd., being holding company should be considered u/s. 40A(2)(b) of the Act but no other payments as they are not related to the assessee. The assessee has made a payment of ₹ 1.2 crores to EID Parry India Ltd., as per the Business Advisory Agreement dated 04.11.2010 but these cannot be disallowed because these are paid according to agreement and actual services rendered and even the AO has not given any finding as regards to unreasonableness of the payment. Further, the only amount disallowed by AO of ₹ 20,38,461/- the CIT(A) has held only as falling under the provisions of section 40A(2)(b) of the Act which are not challenged by the assessee. Hence, we confirm the order of CIT(A) and appeal of Revenue is dismissed.
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2022 (3) TMI 463
Reopening of assessment u/s 147 - accretions to the capital account emanate from the returns filed by the partnership firms and the assessee in his individual capacity - HELD THAT:- We are of the view that though the return of income for Assessment Year 2012-13 and 2013-14 of the assessee in his individual capacity and the two partnership firms in which the assessee was a partner, was filed on 22.01.2017 and that too in response to a notice under section 148 of the Act, the fact that the assessee has disclosed the source of accretions of the capital account in these returns has not been doubted or disputed or examined by the AO or the CIT(A).
In our view, if the accretions to the capital account emanate from the returns filed by the partnership firms and the assessee in his individual capacity for Assessment Years 2012-13 and 2013-14 and if the said source is not disputed by the Revenue in a manner known to law, the accretions to the capital account and the corresponding opening balance in the capital account in Assessment Year 2014-15 cannot be doubted or disputed.
Thus it would be just and appropriate to set aside the order of CIT(A) and remand the case to the AO for consideration denovo in the light of the returns filed for Assessment Years 2012-13 and 2013-14 and after verification, accept the claim of the assessee, so long as the source of the accretions as declared in the returns for Assessment Years 2012-13 and 2013-14 are not disputed in a manner known to law. Assessee appeal is treated as allowed for statistical purposes.
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2022 (3) TMI 462
Disallowing claim of loss - Setting up of business - Scope of setting up of business" and actual "commencement of business" - whether the CIT(A) was justified in holding that the assessee has not set up its business during the year under consideration and hence, the A.O. was justified in disallowing the claim of loss? - HELD THAT:- There is no dispute with regard to the fact that there could be a time gap between "setting up of business" and actual "commencement of business". It is also settled principle that the expenses incurred after setting up of business is allowable as deduction.
Hence the answer to the question as to whether the assessee has set up its business or not would depend upon the facts prevailing in each of the case. In the instant case, A.R. has shown to us that the assessee has taken a premises on rent, employed few employees, purchased certain assets. In the case of Omniglobe Information Tech India P Ltd. [2014 (9) TMI 6 - DELHI HIGH COURT] the Hon'ble Delhi High Court was considering the question of "setting up" of business in the context of a BPO Service industry.
Since the assessee is in service industry providing IT application maintenance support services its requirement of man power and electronic equipment would depend upon the nature and type of work, i.e., type of IT application, it is getting. Hence, in the instant case, the assessee could plan its further recruitment of employees, depending upon the nature and type of work it is getting, which is essential to determine the skill set required for executing the said work.
The directors have stated in the Directors' report that the nature of work required to be performed under the agreement entered with its AE would require 25 employees. In the instant case, in our view, this kind of decision is taken after setting up of business but before actual commencement of operations. Accordingly, we are of the view that the Ld. CIT(A) was not justified in observing that the assessee is in the process of setting up of business, since it has not yet completed recruitment of 25 employees.
We are of the view that the assessee has set up its business during the year under consideration. Accordingly, the expenses incurred by the assessee are allowable as deduction and in the case of loss, it is entitled to carry it forward. Accordingly, we reverse the order passed by Ld. CIT(A) and direct the AO allow the expenses and also carry forward of loss
We are of the view that the assessee has set up its business during the year under consideration. Accordingly, the expenses incurred by the assessee are allowable as deduction and in the case of loss, it is entitled to carry it forward. Accordingly, we reverse the order passed by Ld. CIT(A) and direct the AO allow the expenses and also carry forward of loss. - Decided in favour of assessee.
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2022 (3) TMI 480
Reopening of assessment u/s 147 - amount received under Agricultural Debt Relief and Debt Waiver Scheme is taxable or not? - ITAT opined that the AO has correctly recorded the reasons and reopened the assessment and completed the assessment u/s. 147 of the Act thus, the reopening is valid and for amout received under scheme direct the AO to re-examine the issue afresh in accordance with law - HELD THAT:- Though the appellant challenged the aforesaid order of the Tribunal in respect of both the issues, by raising various grounds and also placing reliance on case laws, we are of the view that the Income-tax Act is a self-contained Act and this court under section 260A of the Act in its appellate jurisdiction, is not the proper forum for deciding such mixed questions. Therefore, we remand the matter to the Assessing Officer as done by the Tribunal, however, with a direction to consider all the issues raised by the appellant, without being influenced by any of the observations made by the Tribunal, and pass orders afresh, after providing reasonable opportunity to the appellant. Such an exercise shall be completed within a period of three months from the date of receipt of a copy of this judgment.
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2022 (3) TMI 461
Late payments towards ESI and EPF u/s 36(1)(va) - Payment before furnishing the return of income under section 139(1) - HELD THAT:- In the present case, it is not in dispute that the assessee deposited the contribution of PF & ESI belatedly in terms of section 36(1)(va) of the Act. However, the said deposits were made prior to filing of return of income u/s. 139(1) of the Act. It is noticed that an identical issue having similar facts has already been adjudicated in RAJA RAM [2021 (11) TMI 370 - ITAT CHANDIGARH] wherein addition on account of deposits of employees contribution of ESI & PF prior to filing of the return of income u/s. 139(1) of the Act, in both the years under consideration prior to the amendment made by the Finance Act, 2021 w.e.f. 1.4.2021 vide Explanation 5, are deleted. - Decided in favour of assessee.
Addition on account of employer share of ESI PF for AY 2017-18 paid during the year which was disallowed in AY 2017-18 and is otherwise allowable in terms of u/s. 43B of the I.T. Act on payment basis - HELD THAT:- There is no dispute regarding the facts and we are in complete agreement with the Ld. AR that disallowing the same amount in two assessment years i.e. 2017-18 and 2018-19 has resulted in taxing the impugned amount twice. Since this amount has already been disallowed and taxes paid on the same in assessment year 2017-18, the same should not have been disallowed in the year under consideration in the present appeal. Accordingly, we direct the deletion of this amount also.
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2022 (3) TMI 447
Royalty receipt - payments received by MOL from MO for grant of licence for use of software - AO was of the opinion that the term ‘Royalty’ takes into its ambit industrial and copyright royalties. Transfer of the ‘right in the property’ is not subject matter - India - US DTAA - HELD THAT:- As decided in own case [2013 (11) TMI 1382 - DELHI HIGH COURT] stating that there is no transfer of any right in respect of copyright by the assessee and it is the case of mere transfer of copyrighted article and the payment was for a copyrighted article and represents the purchase price of an article and cannot be considered as royalty even under the Income Tax Act, 1961 or under the DTAA. When once we reach such a conclusion, we do not find any need for further verification of any fact at the end of the Assessing Officer. Insofar as the law laid down by the Hon'ble High Court is concerned, whether or not this particular judgement was available before the Assessing Officer at the time of framing of the assessment, it makes little difference because the decision of the Hon'ble High Court binds the learned Assessing Officer in the same way as it binds this Tribunal also. We, therefore, do not find any need to remand the matter back to the file of the learned Assessing Officer - issue decided in favour of assessee. - Decided in favour of assessee.
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2022 (3) TMI 460
Undisclosed income - gross profit margin on unaccounted sales - HELD THAT:- Assessee has not maintained day to day material wise stock register. It is also an admitted fact that the closing stock at the year end is arrived at on estimated basis by applying gross profit rate on sales, i.e., under reverse methodology.
It is a fact that such kind of defective stock would command lesser price. Hence it was submitted that the value of stock is arrived on average basis. We also notice that the alleged shortage of stock was arrived at by the search officials by adopting gross profit methodology only. The Ld A.R submitted that the assessee has also agreed to the proposal of the search officials to treat the alleged shortage of stock as “unaccounted sales” in order to avoid protracted litigation and to buy peace from the department. Thus, we notice that the whole exercise of arriving at the shortage of stock has been done on estimation and presumption.
It is a fact that such kind of defective stock would command lesser price. Hence it was submitted that the value of stock is arrived on average basis. We also notice that the alleged shortage of stock was arrived at by the search officials by adopting gross profit methodology only. The Ld A.R submitted that the assessee has also agreed to the proposal of the search officials to treat the alleged shortage of stock as “unaccounted sales” in order to avoid protracted litigation and to buy peace from the department. Thus, we notice that the whole exercise of arriving at the shortage of stock has been done on estimation and presumption.
We notice that the gross profit margin on the unaccounted sales has been arrived at on the basis of facts and figures available on the date of search. However, the AO has proceeded to arrive at the gross profit margin on the unaccounted sales by considering the financials relating to FY 2014-15 covering post search period. It is in the common knowledge of everyone that the quality of marble slabs and granite slabs are not static. Further their selling price and profit margin would differ on the basis of quality. It is quite possible that the assessee was able to generate more profit post search period depending upon the quality of blocks. Hence it may not be correct on the part of the AO to consider the post search period results for determining the gross profit margin of unaccounted sales despite the fact that the gross profit margin worked out by the assessee has been accepted by the search officials, i.e., another wing of the income tax department. Hence, what the AO has done is to substitute one estimation with another one, which is not warranted in the facts of the present case.
Addition made by the AO should be telescoped against the income surrendered by the assessee - The additional income was surrendered considering the status of sundry creditors, meaning thereby, the unaccounted income generated has been ploughed back into the business in the form of sundry creditors. Hence we are of the view that the addition resulting from variation of gross profit margin, in the facts and circumstances of the case, requires to be telescoped against the above said surrender. Hence, the alternative ground of the assessee also requires to be upheld. - Decided in favour of assessee.
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2022 (3) TMI 459
Disallowance of depreciation on electric installation - whether the items of electrical installation listed are eligible as plant and machinery? - HELD THAT:- Onus is on the assessee to explain whether each item perform the function of manufacturing. On perusal of the list of the items, we find that items include transformer, panel switchgear, cable, electric Control Panel etc. Item at serial No. 25, 26, 30, 31, 32 and 33 of the list for assessment year 2007-08 has been mentioned as “supply of electrical items”. There is no detail of such items available on record. Item at serial No. 34 is transformer oil and item at 36, 37 and 44 is diesel for DG set. The assessee has not explained how these items are qualified as capital expenditure. Further, item at serial No. 40 to 43 is rent for DG set.
No specific explanation for qualifying the same as capital expenditure, has not been provided by the assessee. Similarly, in the list for assessment year 2008-09 items are mainly transformer, electrical capacitor panel, DG set, split AC, pumphouse panel, window AC etc and the assessee has not provided function performed by these items in the process of manufacturing. No details of their place or location of installation has been provided before us. No doubt, if any split AC is integral part of machinery itself, the assessee may be entitled for depreciation at the rate of the plant and machinery, however, if a split AC is provided in the chamber of a person in the factory as ancillary item, same will not be entitled for rate of depreciation applicable in the case of plant and machinery.
Assessee has not complied the direction of the Hon’ble High Court and not furnished function performed by each item separately. Further, no such information is available on record. Though the appeal is very old, but in the facts and circumstances and in the interest of the substantial justice, we feel it appropriate to restore this issue to the file of the Assessing Officer for deciding in the light of the direction of the Hon’ble Delhi High Court with the direction to the assessee to provide functions performed by each and every item of the list provided in para 4 and para 5 of the Hon’ble High Court and then the AO shall decide the issue in accordance with law. Accordingly, the grounds of disallowance of depreciation on electric installation in both the assessment years are allowed for statistical purposes.
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Customs
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2022 (3) TMI 458
Non-compliance with the pre-deposit - section 129E of the Customs Act 1962 - HELD THAT:- Section 129E of the Customs Act provides that the Tribunal shall not entertain any appeal unless the appellant has deposited 7.5 per cent of duty/penalty. The Customs Act does not provide for waiver of this mandatory deposit before filing appeal.
The Supreme Court in NARAYAN CHANDRA GHOSH VERSUS UCO BANK [2011 (3) TMI 1478 - SUPREME COURT], examined the provisions contained in section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 relating to pre deposit in order to avail the remedy of appeal. The provisions are similar to the provisions of section 129E of the Customs Act. The Supreme Court emphasised that when a Statue confers a right to appeal, conditions can be imposed for exercising of such a right and unless the condition precedent for filing appeal is fulfilled, the appeal cannot be entertained. The Supreme Court, therefore, held that deposit under the second proviso to section 18(1) of the Act, being a condition precedent for preferring an appeal, the Appellate Tribunal erred in law in entertaining the appeal.
It will also be appropriate to refer to a decision of the Delhi High Court in DISH TV INDIA LIMITED VERSUS UNION OF INDIA AND ORS. [2020 (8) TMI 183 - DELHI HIGH COURT], wherein the requirement of pre-deposit under section 129E of the Customs Act came up for consideration. The High Court held that when the Statue itself has provided wavier of pre-deposit to the extent of 90% or 92.5% of the duty amount and has made it mandatory to deposit 7.5% or 10% of duty amount, as the case may be, the Courts cannot waive this requirement of deposit.
As the statutory requirement stipulated under section 129E of the Customs Act has not been satisfied and the application for waiver of deposit has been rejected, the appeal stands dismissed.
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Insolvency & Bankruptcy
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2022 (3) TMI 457
Removal of R3 to R7 form CoC - there is no debt own to them by the Corporate Debtor company - infusion of funds by each of these Respondent were retuned back to them through their related parties - transactions of purported creditors are vitiated by fraud - reconstitution of CoC after cancelling the entire voting rights - HELD THAT:- It is clear that Adjudicating Authority has made observations against the Appellants and one of the premise on basis of which the order has passed recording finding against the Respondents (Appellants herein) that they have not filed any reply - the Adjudicating Authority from the observations in the impugned order noted in Para 22 indicate that Adjudicating Authority was under impression that the entire money invested by the Home Buyers have been rooted back to the relatives of Respondent No. 3 to 7, which is obviously not the position and the same ought to have been cleared by the Resolution Professional before the Adjudicating Authority.
It is clear that we have not entered into the merits of the allegations made or claim made in the application of the Resolution Professional or Reply which was submitted by the Appellants before the Adjudicating Authority. At this stage, the Adjudicating Authority should reconsider the application after considering the reply submitted by the Appellants and after hearing them afresh. The order passed by the Adjudicating Authority which is also passed on the ground that no replies have been submitted by the Appellants deserves to be set aside and is hereby set aside.
The matter is remitted to the Adjudicating Authority to pass fresh order after considering the replies filed by the Appellants as well as after giving fresh opportunity of hearing to both the parties - appeal allowed by way of remand.
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2022 (3) TMI 456
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- The respondent corporate debtor has admitted its liability to pay the operational debt via letter dated 16.08.2018. The applicant has placed various communications on record showing that the respondent has never raised any compliant regarding claim of applicant. No dispute has ever been raised by the respondent apart from a debit note for a very small amount - the applicant has placed sufficient documents to establish its claim against the corporate debtor. The respondent corporate debtor has not placed any record to show that any dispute was ever pending between the parties before issuance of demand notice under section 8 of IBC.
Since the corporate debtor already admitted its liability to clear its debt which is evident from note dated 16.08.2018, the present application is admitted - Application admitted - moratorium declared.
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2022 (3) TMI 455
Liquidation of the Corporate Debtor - Section 33(1)(a) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The liquidation has to follow as recommended by the Committee of Creditors in terms of provisions of Section 33(1) of the Code. Adherence to statutory requirement has to be in toto. When the language of the Code is clear and explicit the Adjudicating Authority must give effect to it whatever may be the consequences and in present case the consequence is liquidation of Corporate Debtor.
In the factual background, since there is no resolution plan, period of CIRP has since been ended without any approved resolution plan, the payer for liquidation of the corporate debtor under Section 33 of the Code is hereby allowed.
It is ordered that liquidation of the corporate debtor, namely M/s. R.K. Silk Mills Pvt. Ltd. shall be commenced in the manner laid down in the Chapter III of Part II of the Insolvency and Bankruptcy Code, 2016 - Application allowed.
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Service Tax
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2022 (3) TMI 454
Rejection of declaration made on the grounds of ineligibility, as illegal, unconstitutional - seeking declaration to first respondent to consider and accept the declaration filed by him against the Audit Qualification of admitted duty - HELD THAT:- This court finds that there are no merits in this writ appeal for the simple reason that on 28.05.2019, a search was conducted in the premises of the appellant, pursuant to which, the appellant submitted a letter dated 13.06.2019 admitting such investigation and produced certain documents in continuance of the same. When such being the case, the appeal is hit by the provisions of Clause 121 (r) and 125 (1) (e) of the Scheme, thereby making himself ineligible to invoke section 127 (2) of the scheme.
Thus, it is evident that for availing the benefits of the scheme, one of the conditions precedent is that the tax liability of the tax payer ought to have been quantified. Even though the appellant had submitted a letter dated 13.06.2019, much before the date of closure of the scheme, the fact remains that his tax liability has not been quantified and therefore he cannot avail the benefits of the scheme. In fact, the letter dated 13.06.2019 has been given by the appellant for the purpose of quantification of service tax liability in the ongoing investigation pending against him, which itself is a disqualification for the appellant to avail the benefits of the scheme. The appellant, in the letter dated 13.06.2019, did not claim the benefits of the scheme, but only requested the respondents to quantify the tax liability payable by him - the letter dated 13.06.2019 would clearly indicate that the appellant furnished certain documents only for quantification of the service tax liability and there is no whisper that he intended to avail the benefits of the scheme. Secondly, the letter also indicates that as on 13.06.2019, the service tax liability of the appellant has not been quantified, which is one of the pre-conditions to avail the benefits of the scheme. Therefore, the rejection of the application of the appellant by the first respondent herein is proper.
Appeal dismissed.
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2022 (3) TMI 453
Commercial or Industrial Constructions Services - Lying of electrical cables under or alongside road/railway track - validity of proceedings on the basis of CBEC Circular No. 123/5/2010-TRU dated 24.05.2010 - Service Tax in relation to the same but never deposited the Service Tax so collected to the Government Ex-chequer - Hon'ble CESTAT, Allahabad was justified in not appreciating that apart from lying of cables, the assessee was involved in other host of various activities of non exempted category or not - HELD THAT:- Undisputedly, the show cause notice was issued seeking to confirm the demand of service tax on the assessee for the work of laying cables alongside roads and railway tracks. The show cause notice does not appear to confirm or enforce any service tax liability on any other activity or on any other ground.
With respect to activity conducted by the assessee, CBEC circular referred to and relied upon by the Tribunal is specific. By virtue of Clause 2 and 8 of the paragraph 3 of the said circular, the activity of laying cables under or alongside roads and alongside railway tracks was clearly opined to be not taxable under the Finance Act, 1994. That view had been formed by the highest administrative authority under the Finance Act, 1994, namely - Central Board of Indirect Taxes and Customs. The Tribunal has not erred in applying that Circular and deleting the proposed demand of service tax liability.
As to the other issues sought be raised by learned counsel for the revenue pertaining to other activities that the assessee may have performed and the amount that may have been realized by the assessee against the proposed service tax liability but not deposited, are not issues as may give rise to a substantial question of law in the present appeal - the show cause notice that formed the basis of the adjudication order did not propose to create any demand of service tax.
The fact that the adjudication order may have considered those issues outside the scope of the show cause notice would be of no benefit to the revenue in light of what was urged before the Tribunal - petition dismissed.
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Central Excise
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2022 (3) TMI 452
Recovery of CENVAT Credit - capital goods though received and installed before the manufacture of a product earlier was exempted - availability of credit when the production started become dutiable - case of the department is that since the capital goods were received before 01.03.2011 and at that time the product “Maaza” was exempted - HELD THAT:- From Rule 6(4) of Cenvat Credit Rules, 2004, it is clear that Cenvat Credit shall not be allowed on capital goods which are used exclusively in the manufacture of exempted said goods. As per the facts of the present case, though the capital goods were received during the period 13.10.2010 to 28.02.2011 but as per submission of the appellant the trial production on said capital goods for manufacture of goods namely “Maaza” was undertaken on 14.03.2011 and commercial production of the said goods was commenced on 29.03.2011 with this fact it clear that since this machine was not used prior to 14.03.2011 for manufacture of any goods, it cannot be said that the said machine was used exclusively for manufacture of exempted goods.
It is the contention in the show cause notice as well as in the impugned order that when the capital goods in question was received, the appellant was engaged in the manufacture of exempted goods however it is not clear whether the said capital goods were used in the manufacture of exempted goods - even if the goods per se were exempted during the receipt and installation of the capital goods but if the said capital goods were not put to use for manufacture of any exempted goods it cannot be said that the said capital goods were used exclusively for manufacture of exempted goods in terms of Rule 6(4) of Cenvat Credit Rules, 2004.
In the fact of the present case the capital goods even though receipt earlier but when it started manufacturing the goods were dutiable i.e. from 01.03.2011. In this position, it appears that the capital goods on which the cenvat was claimed by the appellant was never used exclusively for manufacture of exempted goods. However, since the adjudicating authority has decided the case only on the basis that at the time of receipt of capital goods the product was exempted, therefore, the fact regarding commencement of such capital goods and the status of finished goods manufactured from that capital goods whether the same was dutiable or exempted needs to be verified.
Penalty on Shri Amit Radheshyam Gupta in terms of Rule 26 of Central Excise Rules, 2002 - HELD THAT:- The issue involved is of interpretation of Cenvat Credit Rules, 2004 hence there is no malafide involved. Therefore, the personal penalty in this case cannot be imposed on the employee of the appellant's company.
The impugned order is set aside and the matter remanded to the adjudicating authority for passing a fresh order after giving sufficient opportunities to the appellant. - Appeal allowed by way of remand.
The matter deserves to be re-considered
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2022 (3) TMI 451
CENVAT Credit - Technical Testing and Analysis - Consulting Engineering - period 01/06/2008 to 31/01/2010 - extended period of limitation - HELD THAT:- It is clear that factually the auditor as well as the authorities below started the entire matter on a wrong premise and mis-guided themselves by this fact that the Appellant availed the services in issue for the purpose of establishing new plant which was dropped later on. Whereas the correct fact is that it was used for new mines at the existing plant at Rabariyawas only. Since, the Appellants are into the business of manufacturing Cement, therefore lime stone is mandatory for that business and to check the quality of lime stone availment of input services like Technical Testing and Analysis as well as Consulting Engineer Services are must.
The definition of “input service” is very wide and covers not only services, which are directly or indirectly used in or in relation to the manufacture of final products but also includes various services used in relation to the business of manufacture of final products, whether, prior to the manufacture of final products or after the manufacture of final products. To put it differently, the definition of input service is not restricted to services used in or in relation to manufacture of final products, but extends to all services used in relation to the business of manufacturing the final product.
Extended period of limitation - HELD THAT:- The record that the demand is for the period from June, 2008 to 31/01/2010, whereas the show cause notice was issued only on 27/01/2011, i.e. after almost beyond one year, by invoking the extended period on the ground of willful suppression on the part of the Appellant. Whereas from the records, there is nothing found which can substantiate the allegation of the department about wilful suppression. Learned Counsel have taken me through various invoices during the period in issue, which have been placed on record. From the perusal of the said invoices also it is clear that the services were availed for the existing plant at Rajariyawas and not for any new or proposed plant. Therefore, Revenue is not justified in denying the benefit of Credit to the Appellant.
The issue involved herein is answered in favour of the Appellant - Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2022 (3) TMI 450
Maintainability of petition - alternative remedy of appeal - Validity of Reassessment-cum-penalty Order - non-existing audit objection, which was raised against the original assessment order - whether reassessment order passed u/s 42(3) of the JVAT Act, 2005 could not have been passed by the Assistant Commissioner of Commercial Taxes, Bokaro Circle, Bokaro because there was no existing assessment order passed u/s 35 of the said Act - fresh assessment order u/s 35(6) of the JVAT Act - validity of initiation of reassessment proceeding u/s 40(1) of the JVAT Act on the basis of audit objection - HELD THAT:- On consideration of the submission of learned counsel for the petitioner, we are of the view that since the matters involve questions on facts and law as well, the petitioners should avail of the alternative remedy of appeal or revision under Sections 79 and 80 under Chapter-IX of JVAT Act, 2005. Learned counsel for the petitioner therefore seeks liberty to avail of alternative remedy. It is open for him to do so, if permissible in law.
Writ petitions are disposed off.
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2022 (3) TMI 449
Revision of assessment - stock difference in respect of groundnut and groundnut kernal - alleged suppression, existing or not - addition of suppression - levy of penalty - section 16(2) of the TNGST Act - HELD THAT:- Admittedly, based on the inspection report submitted by the Enforcement Wing Officials, the assessment of the petitioner was revised by the assessing officer. During the course of inspection, 86 slips relating to business transactions of the petitioner were recovered by the Enforcement Wing Officials and out of the same, 13 slips revealed suppression of purchase of groundnut and groundnut kernel, which was valued at ₹ 7,63,500/- by the assessing officer.
Taking note of the contentions raised by the petitioner that the transactions covered under the slips were brought to accounts in the month of July and the same were reported in the return and that, the petitioner paid tax for the same, the Appellate Authority deleted the said turnover. On the other hand, the Tribunal did not accept the same, upon verifying the records and was of the view that there is no correlation between the suppression that was culled out from the D7 slips and the turnover that was taken for assessment. Accordingly, the Tribunal held that the deletion of the turnover of ₹ 7,63,500/- by the appellate authority is wrong and the assessment made by the assessing officer on the turnover of ₹ 7,63,500/- is restored.
Issue relating to addition - assessing officer made two times addition on the suppression - HELD THAT:- The appellate authority deleted the said addition. Whereas the Tribunal after having found that the period covered in the slips for one month i.e., from 12.04.1999 to 16.05.1999 and the inspection took place in the month of June i.e., on 29.06.1999, observed that the left out months are only May and June, for which two times additions had been made. Considering the gravity of suppression, the Tribunal restricted the addition to equal time, which in the opinion of this court, appears to be correct and the same warrants no interference.
Levy of penalty - HELD THAT:- The Tribunal was of the view that inasmuch as the suppression is proved by the recorded evidence, the same is warranted, however, restricted to the actual suppression and is accordingly, modified. There are no fault with the finding of the Tribunal in this regard.
Petition dismissed.
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Indian Laws
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2022 (3) TMI 448
Dishonor of cheque - legally enforceable debt or not - acquittal of the accused - rebuttal of presumption - Whether the judgment of acquittal passed by the trial Court is perverse, capricious and arbitrary so as to call for interference by this Court? - HELD THAT:- It is mandatory for drawing presumption under Section 139 of N.I. Act regarding existence of legally enforceable debt and onus to rebut the same is on the accused. But, admittedly, in the instant case, except giving some explanation, no attempt has been made by accused to rebut the said presumption. Further, admittedly accused has admitted his signature on the cheque and that the cheque belongs to him. His defence regarding cheque issued towards security to one Balu is not established. Under these circumstances, the ingredients of Section 138 of N.I. Act have been established by the complainant.
The learned Magistrate was carried-away by making unnecessary observation without there being any specific defence and hence approach of the learned Magistrate is perverse, erroneous and arbitrary, and it has led to miscarriage of justice. The learned Magistrate has not considered the materials placed before the Court properly, while acquitting the accused and has also not considered the statutory presumption in favour of the complainant under Sections 118 and 139 of N.I. Act. As such, the trial Court has erred in acquitting the accused and the same requires to be interfered by this Court.
This is a fit case to reverse the finding of the trial Court - the point under consideration is answered in the affirmative - Appeal allowed.
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