TMI Tax Updates - e-Newsletter
March 13, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Seeking grant of bail - creation and operation of 294 fake firms and has evaded a tax - The court noted the serious nature of economic offences and the substantial loss to the public exchequer. It emphasized the need for a different approach in bail matters concerning economic crimes. - The court considered the rejection of bail for a co-accused in a similar case and upheld the decision, highlighting the substantial loss caused by the petitioner's actions. - Considering the evidence and seriousness of the offence, the court denied bail to the petitioner and instructed the trial court to expedite proceedings.
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Income Tax:
Assessment u/s 153C - Undisclosed investment u/s 69 r.w.s 115BBE - Whether incriminating material belonging to Assessee found during the course of search on the basis of which addition is made? - The Tribunal dissected the allegations and defenses, scrutinizing the legitimacy of the seized documents, their relation to the assessee, and the actual value of the property in question. The tribunal was tasked with determining whether the documents held any credence in proving undisclosed investments by the assessee and if the procedural aspects under the IT Act were duly followed. - The Tribunal favored the assessee's arguments, highlighting the lack of concrete evidence linking the seized documents to undisclosed investments directly attributable to the assessee. It questioned the AO's reliance on circumstantial evidence without substantiating the actual transaction amount or proving the assessee's involvement beyond reasonable doubt.
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Income Tax:
Reopening of assessment - income arising from the revocable transfer of assets - taxability in the hands of trust or transferor/settler - The Appellate Tribunal observed that the trust was indeed revocable. - It was noted that the income from the purchase of mutual funds had already been offered to tax in the return of income filed by the settlor, as per Section 61 of the Act. - The Tribunal reiterated the provision of Section 61, stating that income arising from a revocable transfer of assets is taxable in the hands of the transferor, i.e., the settlor of the trust. The trust deed itself indicated that any income or source of investment in mutual funds was to be taxable in the hands of the settlor. - The ITAT found the actions of the authorities arbitrary and emphasized that the income had already been offered by the settlor, hence taxing it again in the hands of the trust was unjustified.
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Income Tax:
TDS u/s 195 - non deduction of TDS - demurrage charges paid by the respondent-assessee to the foreign companies - The ITAT upheld the decision of the CIT(A) to delete the addition of demurrage charges, citing the precedent set by the Full Bench of the Bombay High Court.
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Income Tax:
30% ad-hoc disallowance of travelling expenses being car charges, foreign travelling expenses and domestic travelling expenses - The Assessee argued that the expenses were essential for business expansion and were supported by legal justifications, including past judicial decisions. - The Tribunal concluded that the Lower Authorities erred in making ad-hoc disallowance without disputing the genuineness of the expenses.
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Income Tax:
Revision u/s 263 - error noted by the CIT that sale of properties by the assessee during the year was not examined by the AO vis-ŕ-vis its stamp duty value for the purpose of invoking section 43CA - The appellant challenges the validity of the PCIT's directions, particularly regarding property transactions and stamp duty valuations under section 43CA. The ITAT ultimately rules in favor of the appellant, finding no error in the AO's assessment order and determining that the PCIT's directions were beyond the scope of revenue authorities' powers. Additionally, it clarifies the limited role of revenue authorities in questioning stamp duty valuations under section 43CA.
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Income Tax:
Revision u/s 263 - Classification of rental income - House property v/s business income - The Appellate Tribunal observed that the Assessee is primarily engaged in providing BPO and IT-related services, and the property in Thane was disclosed as "non-current investment" in the financial statements. The rental income was reflected as "non-operational income" in the financial statements, indicating it was not business income. Various judicial precedents were cited to distinguish between business income and income from house property. The Tribunal found no infirmity in the assessment order and upheld the Assessee's claim that the rental income qualifies as "income from house property." - Consequently, the order passed under Section 263 of the Income Tax Act was set aside.
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Income Tax:
LTCG OR business income - entitlement to exemption u/s 54F - Disallowance u/s 14A r.w.r. 8D - Tribunal decided in favor of the assessee for the treatment of income as capital gains, citing past precedents and evidence supporting the nature of investments. However, they partly allowed the appeal concerning disallowance of administrative expenses due to lack of justification.
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Income Tax:
TDS u/s 195 - TDS on overseas payment - Annual Payment made to the international boards through affiliation with IBO, Cambridge etc. under the head authorization fee, fee for enrolment, license fee, registration fee - assessee in default u/s 201/201(1A) - ITAT observed that the assessee failed to provide a basis for lump sum payments made to overseas institutions. Emphasized the importance of analyzing the basis of invoices raised by overseas institutions. Matter was remanded back to the Assessing Officer to understand the basis of lump sum fees and discounts offered to the assessee.
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Income Tax:
Addition u/s 56(2) - “Property” as defined in explanation (d) (ii) of section 56(2)(vii) makes distinction between the existing shares i.e. the shares already allotted by the company and those share which are pending allotment or not? - application of admission of additional evidence - The Tribunal observed that the issues raised were decided on merits, considering facts and applicable laws. However, due to additional information and grounds presented by the assessee, which were not available to the lower authorities, the Tribunal found it just to restore the matter to the file of the CIT(A) for fresh adjudication.
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Income Tax:
Dismissal of the appeal by CIT(Appeals) for non-prosecution - The CIT(A) upheld the AO's decision due to the assessee's failure to respond to multiple hearing notices and provide necessary documents or submissions. The Tribunal, however, disagreed with the CIT(A)'s approach, emphasizing the obligation to dispose of the appeal on its merits rather than summarily dismissing it for non-prosecution. - The Tribunal set aside the CIT(A)'s order and directed a re-hearing on the merits of the appeal.
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Income Tax:
Registration u/s 80G(5) - The rejection was based on allegations of discrepancy in the organization's name, violation of FCRA provisions, and involvement in religious conversion activities. - Providing benefit to any particular religion, caste or community - The Assessee contested these allegations, citing clerical errors, lack of evidence, and violation of natural justice principles. - The Tribunal criticized the lack of confrontation of allegations with the Assessee. They deemed it a violation of natural justice and directed the CIT(E) to provide the Assessee with all relevant information and explanations before reaching a conclusion.
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Income Tax:
Validity of reopening notice - Absence of the manual/digital signature of the A.O in the copy of the Reopening notice - Elaborating on the term "signed", it was observed that that same was to be construed as giving one's name to signify assent or adhesion to by signing one's name; to attest by signing or when a person is unable to write his name then affixation of "mark" by such person. - The Tribunal highlighted significant procedural lapses, notably the absence of the Assessing Officer's signature on the notice under section 148, leading to the quashing of the assessment order. The Tribunal's decision underscores the importance of adhering to procedural requirements, emphasizing that such lapses can invalidate otherwise substantive assessments.
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Income Tax:
Addition of opening capital as unexplained investment u/s 69 - income from undisclosed sources - The Tribunal held that for such an addition to be justified, the Assessing Officer must provide a concrete rationale for not accepting the disclosed sources of income, which was not done in this case. This decision reinforces the principle that tax authorities must adhere to strict standards of evidence and rationale when alleging undisclosed income.
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Income Tax:
Levy of penalty u/s 272A(1)(d) - Non compliance to the notice(s) issued during the course of assessment proceedings - The ITAT noted that the assessee did respond to notices during assessment proceedings, indicating compliance. - Notices issued on a public holiday with short response times (i.e. two hours) were deemed unreasonable by the Tribunal. - The Tribunal found no justifiable basis for the penalty under section 272A(1)(d) of the Act. - Consequently, the penalty was directed to be deleted, and the appeal of the assessee was allowed.
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Income Tax:
Revision u/s 263 - Bogus expenditure towards sub-contract payments made to persons who were previously employed in the assessee’s company as supervisors / garage in-charge for monthly salaries - The Tribunal observed that the AO did not examine payments to subcontractors during assessment proceedings. - The details of sub-contracts were not verified, and claims by the assessee were accepted without inquiry. - The ITAT found the AO's actions to be erroneous and prejudicial to revenue. - Hence, the proceedings under section 263 were rightly initiated.
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Income Tax:
The appeal pertains to the Assessment Year 2017-18, with the appellant contesting the rejection of agricultural income and the addition of cash deposits during demonetization. The appellant provides comprehensive documentation supporting both claims, while the department fails to furnish conclusive evidence against them. The ITAT finds in favor of the appellant, deleting the additions made by the Assessing Officer.
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Income Tax:
Addition u/s 68 - share application money received as unaccounted cash credit - identity and creditworthiness of the share subscribers and genuineness of the transaction - The case involved an appeal filed by the Revenue against the deletion of an addition made under section 68 of the Income Tax Act regarding share capital and premium received by the Assessee. The Revenue argued that the transaction was not adequately explained and deemed to be bogus. However, the Tribunal upheld the decision to delete the addition, as the Assessee provided sufficient evidence to prove the genuineness of the transaction and the credibility of the share applicants.
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Income Tax:
Rejection of books of accounts - estimation of income from business - The Tribunal upheld the decision of the CIT(A)-NFAC, stating that substantial relief was already granted to the assessee. The Tribunal consistently held that profits should be estimated at 8% on main contracts and 5% on sub-contracts. The decision was based on precedent.
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Income Tax:
Revision u/s 263 - availing exemption u/s. 10(37) on account of compulsory acquisition of agricultural land - The case involved an appeal by the assessee against the order passed by the ld. PCIT under section 263 of the Income Tax Act, 1961. The appellant contended that the assessment order passed by the AO was not erroneous or prejudicial to the interests of revenue. After reviewing the submissions and assessment proceedings, the Tribunal found that the AO had adequately addressed the issues raised by the appellant and had correctly allowed the exemption under section 10(37) of the Act. The ITAT concluded that the invocation of section 263 by the ld. PCIT was unjustified, as there was no evidence of error or prejudice in the assessment order. Therefore, the appeal of the assessee was allowed.
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Customs:
Sustainability of supplementary Show Cause Notice, prior to insertion of second proviso to Section 124 of the Customs Act, 1962 w.e.f 29.03.2018 - The High Court observed that prior to the insertion of the second proviso to Section 124 of the Customs Act, the authority to issue supplementary show cause notices was implicit and inbuilt in the act. The second proviso, added in 2018, was declaratory of the existing law, suggesting its retrospective application. - The court concluded that the supplementary show cause notice issued on 18.05.2017, despite being termed "supplementary," should be treated as an independent notice due to the emergence of new facts during the investigation. - The court decided in favor of the appellant (Revenue), setting aside the order of the tribunal and restoring the order of the adjudicating authority.
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Customs:
Refund claim for the amount of CVD paid - time limitation - Duty was paid under protest or not - The appellant, an importer of silk yarn and silk fabrics, filed a refund claim for CVD paid under protest. The claim was rejected on merits without considering the aspect of finalization of assessment where duty was paid under protest. The Tribunal directed the department to reevaluate the protest lodged by the importer and complete the assessment process within four months, after which the refund claim would be considered.
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Customs:
Prayer of Out-of-turn disposal of appeal due to indefinite deferment of proceedings - Piecemeal adjudication - The appellant sought urgent disposal of the appeal, arguing that the delay was jeopardizing their interests, while the respondent argued that the delay was not detrimental as liability was yet to be determined. The Tribunal ruled in favor of the appellant, directing the adjudicating authority to dispose of the notice within four weeks, considering the impending liquidation of the appellant-company and the limited scope of the stay order issued by the Bombay High Court.
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Customs:
Amendment to bill of entry - Violation of principles of natural justice - price variation clause - volume discount - request for provisional assessment not considered - amendment of the Bills of Entry under Section 149 of the Customs Act, 1962 not considered by the proper officer - The Tribunal ruled in favor of the appellant, emphasizing that the price variation clause should have been considered as documentary evidence.As a result, the impugned order was overturned, and the matter was remanded for proper assessment.
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Customs:
Liability to pay interest upon finalization of provisional assessment prior to insertion of sub-section (3) in Section 18 of the Customs Act, 1962 - The CESTAT analyzed Section 18(3) of the Customs Act, which imposes interest liability on the importer or exporter upon final assessment order. However, this provision was inserted after the provisional assessment in question.The Tribunal cited legal principles stating that legislation is prospective unless expressly made retrospective. Previous cases and statutory interpretations affirmed this principle.It was concluded that the amendment to Section 18 was substantive and not clarificatory, thus lacking retrospective applicability.
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Customs:
Classification of goods proposed to be imported - Optoma Creative Touch 5-series Interactive Flat Panel (IFP) - While the applicant argues for classification as an ADP machine under sub-heading 8471 41 90, emphasizing its computer system capabilities, the Commissionerate favors classification under Heading 8528 for monitors due to its interactive display function. After thorough analysis and consideration of precedents, the AAR rules in favor of classification under sub-heading 8471 41 90, affirming the applicant's position.
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FEMA:
Violation under FERA - export proceeds were not realized - The case involved allegations of violations of the FERA Act, 1973 related to the failure to realize export proceeds. A1, A2, and A3 were implicated in export transactions, with evidence suggesting their involvement in facilitating exports and receiving funds. The court dismissed the revision cases, affirming the lower courts' findings of the petitioners' culpability under FERA provisions.
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Indian Laws:
Dishonour of Cheque - civil nature dispute - The case revolves around allegations of fraudulent representation in a land transaction. The complainant asserts that the petitioner misrepresented ownership, leading to financial loss. - The High Court held that the scope of a civil proceeding is different from a criminal proceeding and the mere fact that the allegations relate to a commercial transaction or breach of contract for which a civil remedy is available, is not by itself a ground to quash the criminal proceedings. The court rejects jurisdictional challenges and affirms the criminal nature of the transaction. It refuses to quash proceedings, stating that the allegations warrant further investigation.
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IBC:
CIRP - Calculation of the interest - admission of the claim by the Resolution Professional - The Adjudicating Authority directed to examine the exorbitantly high interest and charges admitted by the Resolution Professional. It was deemed appropriate to grant interim relief restraining the COC from considering and approving the resolution plans during the pendency of the case.The NCLAT held that the matter of interest and charges does not fall within the ambit of the COC. The responsibility of verifying claims submitted by parties lies with the Resolution Professional.
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Service Tax:
Refund of Service Tax - time limitation - Exercise of power u/s 142(3) of GST Act for refund of service tax - The case involves the rejection of a refund claim by the Appellant based on limitation, which was upheld by the Commissioner (Appeals). The Appellant argues that the cause of action for refund arose upon refunding the service tax amount, not the payment date. Additionally, the Appellant contends that GST laws do not provide for the refund of service tax. The jurisdiction of the Tribunal over refund claims is also questioned, but it is established that the Tribunal has jurisdiction under Section 142 of the CGST Act. The validity of refund applications is upheld by citing past decisions of the Tribunal.
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Service Tax:
Scope of SCN - vague SCN - absence of specific demand of service tax under a particular service - The Tribunal held that the defect in the notice cannot be cured by the observations of the adjudicating authority or appellate authority. Accordingly, the demand of service tax along with interest and penalty confirmed in the impugned order is not sustainable as the SCN fails to specify the category of service under which the demand has been raised.
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Service Tax:
Levy of servicetax - (1) MDC for Gas Transportation: The CESTAT ruled that the MDC collected by the appellant cannot be considered as payment for a service provided, especially when gas consumption falls below a certain threshold. Therefore, they held that the appellant is not liable to pay service tax on MDC. - (2) Realization of Sale Value of Gas: Citing a precedent involving GAIL India Limited, the Tribunal found that the marketing margin received by the appellant, which is part of the sale value of gas, does not attract service tax. They emphasized that the nature of the consideration received as marketing margin does not involve a separate service element and is already subject to VAT.
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Central Excise:
Liability to pay interest on the goods cleared to their sister unit in terms of proviso to Rule 9 read with Rule 8 of the Valuation Rules, 2000 - The appellant calculated the cost of production based on annual cost audit reports and compared it with CAS-4 certificates to pay differential duty. They also raised supplementary invoices for duty differences.The department demanded interest on the differential duty paid by the appellant, threatening coercive measures. - The appellant's method of duty payment, based on cost audit reports and CAS-4 certificates, was deemed compliant with the law. The Tribunal ruled that interest is not payable in revenue-neutral situations and set aside the department's demand for interest.
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Central Excise:
Activity amounting to manufacture or not - work of printed labels and printed cartons for corrugated boxes falling under Tariff Heading 48211020 and 48191010 of Central Excise Tariff Act, 1985 - The Tribunal examines various legal precedents and observes that printing, without changing the fundamental character of the material, does not constitute manufacture. - The Tribunal concludes that the process of printing undertaken by the appellant does not meet the criteria for manufacture, as established by legal precedents and Chapter notes. Therefore, the demand for excise duty, interest, and penalties is set aside.
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Central Excise:
Method of valuation - section 4 or 4A of CEA - Packaged Drinking Water - MRP based valuation - The CESTAT determined that packaged drinking water should not be classified as "mineral water" for the purpose of valuation under Section 4A. Despite confusion in the notifications, the court emphasized that taxation statutes cannot be interpreted based on presumptions or assumptions. It held that any ambiguity should be interpreted in favor of the assessee. Therefore, the duty demand under Section 4A could not sustain
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VAT:
Levy of interest on delayed payment of profession tax - The High Court found that the Act and the Rules clearly indicated that the profession tax should be deducted and paid on a monthly basis. Even in the absence of a specific date men tioned before the 2011 amendment, the payment and filing of returns were to be done by the last day of the succeeding month. - The Court dismissed the petitioner's argument that there was no prescribed time limit for payment of tax and filing of returns. The Court upheld the revisional authority's order, confirming that there was a liability to pay interest for delayed payment of profession tax.
Articles
Notifications
Customs-
20-2024 - dated
11-3-2024
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Cus (NT)
Amendment to Notification No. 24/2023-Customs (N.T.) dated 01.04.2023 - Extension of RoDTEP support to exports by AA/EOU.
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01/2024 - dated
11-3-2024
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CVD
Seeks to amend No. 1/2019-Customs (CVD) in order to extend the levy on Pnumatic radial tyres from China PR upto 23rd July, 2024.
DGFT-
74/2023 - dated
11-3-2024
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FTP
RODTEP implementation for exports of products manufactured by AA holders (except Deemed Exports) and EOU for 166 Tariff lines
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73/2023 - dated
11-3-2024
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FTP
Incorporation of Policy condition for export of Chitin, Chitosan, Chitosan Salts, Chitosan Salts (Chitosan Hydrochloride, Chitosan Acetate, Chitosan Lactate) and Chitosan Derivatives (Chitosan Succinamide)
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72/2023 - dated
11-3-2024
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FTP
Amendment in export Policy of Human Biological Samples under Chapter-30 of ITC HS schedule-2 of export policy.
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71/2023 - dated
11-3-2024
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FTP
Enabling provisions for import of inputs that are subjected to mandatory Quality Control Orders (QCOs) by Advance Authorisation holders, EOU and SEZ
GST - States-
18/2023-State Tax (Rate) - dated
7-3-2024
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Delhi SGST
Amendment in Notification No. 02/2017- State Tax (Rate), dated 30th June, 2017
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03/2024-State Tax - dated
5-3-2024
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Gujarat SGST
Rescinds the Notification No. 30/2023-State Tax dated 14th September, 2023
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2024 (3) TMI 541
Seeking grant of bail - creation and operation of 294 fake firms and has evaded a tax - impleadment on the basis of confessional statement recorded under Section 70 of the Goods and Services Tax Act, 2017 - maximum punishment for the offence - offence triable by the Court of Magistrate (First Class) - HELD THAT:- This Court finds no substance in the arguments of the counsel for the petitioner that the petitioner is entitled to get bail merely because the alleged offence under Section 132 of the CGST Act, 2017 is punishable with an imprisonment of five years and the same is triable by the Court of Magistrate First Class. There cannot be any straight jacket formula to decide the bail applications in favour to the accused merely because the alleged offence is triable by the Court of Judicial Magistrate First Class and the same is punishable with an imprisonment of five years only. Every bail application is required to be decided on its own facts and circumstances and the merits of the case. Every case has different facts and allegations and while deciding the bail applications, the Court has to keep the nature of evidence and accusation in mind and then decide the bail applications accordingly. Hon ble Apex Court in the case of Nimmagadda Prasad vs. Central Bureau of Investigation [ 2013 (5) TMI 920 - SUPREME COURT] has held While granting bail, the court has to keep in mind the nature of accusations, the nature of evidence in support thereof, the severity of the punishment which conviction will entail, the character of the accused, circumstances which are peculiar to the accused, reasonable possibility of securing the presence of the accused at the trial, reasonable apprehension of the witnesses being tampered with, the larger interests of the public/State and other similar considerations. Considering the facts and circumstances of the case, the nature of allegations levelled against the petitioner and evidence collected by DGGI, seriousness of the offence and further considering the fact that the bail application of the similarly placed accused Anil Kumar has been rejected by the Co-ordinate Bench of this Court, this Court is not inclined to release the petitioner on bail. Bail application dismissed.
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Income Tax
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2024 (3) TMI 542
Disallowance u/s 14A - mandation of recording satisfaction - Assessee earned a dividend income from domestic companies/mutual funds and also on interest on tax-free bonds - suo-moto disallowance is based on the report obtained from the accountant, who after verifying assessee s books of accounts and relevant records has estimated the amount of disallowance - HELD THAT:- In the present case, it is evident from the record that the AO without recording any satisfaction regarding the claim of the assessee in respect of expenditure incurred in relation to exempt income proceeded to compute the disallowance under section 14A read with Rule 8D of the Rules. Therefore, no reason for upholding the disallowance made by the AO under section 14A read with Rule 8D of the Rules. Accordingly, the same is directed to be deleted. As a result, ground no.1 raised in assessee s appeal is allowed. Nature of expenses - expenditure incurred for the evaluation of various business opportunities - HELD THAT:- We, at the outset, find that while examining the allowability of expenditure incurred by the assessee for obtaining feasibility report in respect of home improvement and home decor business, the coordinate bench of the Tribunal in assessee s own case in the assessment year 2012-13 cited supra, vide order dated 01/03/2024, held that home improvement and home decor business is completely a new line of business, which is different from the existing business of manufacturing paints and enamels and therefore the expenditure incurred for obtaining feasibility study report is capital in nature. Thus we find no merits in the submission of the assessee in respect of expenditure incurred for obtaining a feasibility report in respect of home improvement/decor and kitchen space business and accordingly, the aforesaid expenditure is held to be capital in nature. Expenditure incurred by the assessee on exploring business opportunities in furniture and furnishings - From the perusal of the description of the furniture and furnishings, in respect of which the assessee explored business opportunity with the help of the consultant, we are of the considered view that same constitutes a completely new line of business and the same is not an extension of the existing business of manufacturing of paints and enamels by the assessee. Accordingly, the expenditure incurred on exploring business opportunities in furniture and furnishings is held to be capital in nature. We find that the assessee also incurred expenditure on exploring business opportunities in bathroom space, which includes tiles, sanitary ware, bath fittings, and accessories like sliding glass partitions, glass doors, shower stalls, etc. In view of our aforesaid findings, the same cannot be said to be an extension of the existing line of business of the assessee of manufacturing paints and enamels. Accordingly, this expenditure is held to be capital in nature. Expenditure on exploring the decorative paints market in Turkey and Indonesiathe - Scope of the market survey is in line with the existing business of the assessee of manufacturing paints and enamels. Therefore, we are of the considered view that the expenditure incurred on exploring the decorative paints market in Turkey and Indonesia is for the extension of the existing line of business of the assessee and thus is in the nature of revenue expenditure. Accordingly, the AO is directed to delete the addition in respect of this expenditure. Expenditure on pre-acquisition due diligence of the paint manufacturing company in Ethiopia - From the documents available on record, it is evident that the impugned expenditure was incurred towards the process of acquisition of majority shareholding in Kadisco Chemical Industry PLC., Ethiopia, which is a capital transaction. In any case, the expenditure cannot be said to be in line with the existing business of the assessee of manufacturing paints and enamels or an extension of the existing line of business of the assessee, as the expenditure was incurred on pre-acquisition due diligence of the company which cannot be equated with market survey or preparing feasibility report for extension of the business. Accordingly, this expenditure is held to be capital in nature. Allowability of expenditure incurred u/s 35(2AB) - expenditure was disallowed by DSIR (as per Certificate in Form No. 3CL) as the same was not incurred for R D purpose - HELD THAT:- We find that while deciding a similar issue the coordinate bench of the Tribunal in assessee s own case in Asian Paints Ltd [ 2014 (1) TMI 16 - ITAT MUMBAI] for the assessment year 2007-08, restored the issue to the file of the AO with a direction to decide the same afresh after verifying whether the expenditure in question has been incurred by the assessee on research and development, which is eligible for deduction under section 35(2AB). Allowance of balance additional depreciation - assets are put to use for less than 180 days in the previous year - AO held that there is no such provision in the Act to claim a balance 10% additional depreciation in the year under consideration for additions made in the earlier year - HELD THAT:- We find that the coordinate bench of the Tribunal in assessee s own case [ 2022 (7) TMI 1508 - ITAT MUMBAI] for the assessment year 2011-12, decided the similar issue in favour of the assessee as held assessee had purchased and installed new plant and machinery in the preceding assessment year, which is eligible for additional depreciation @20%. However, since the new assets were put to use for less than 180 days in the preceding assessment year, the claim of additional depreciation allowable at 20% was restricted to half of it, i.e. 50%. Thus, in effect, the assessee was allowed additional depreciation of 10%. Now, it is well settled by a number of judicial precedents that if for use of new plant and machinery for a period of less than 180 days the entire amount of additional depreciation cannot be claimed in the subject assessment year, the balance unclaimed amount can be claimed in the subsequent assessment year. It is also a fact on record, against similar claim allowed by Commissioner Appeals in assessee's own case in Assessment Year 2008- 29, the revenue has not preferred any appeal before the ITAT - Decided against revenue. TDS u/s 194H - Allowance of expenditure incurred on the Trip Scheme - non deduction of TDS - HELD THAT:- We find that while deciding a similar issue in favour of the assessee the coordinate bench of the Tribunal in assessee s own case in ACIT v/s Asian Paints Ltd [ 2022 (2) TMI 1428 - ITAT MUMBAI] held that to expand its business the assessee has devised a trip scheme wherein it organized foreign trips to its dealers and distributors based on achieving a specific target assigned by the assessee. On achieving such target, the dealer/distributor is entitled to undertake the trip organized by the assessee through SOTC. Thus, from the aforesaid facts it is very much clear that the entire trip scheme is for the purpose of expanding assessee's business by encouraging the dealers and distributors to achieve a specific target of purchase. Thus, the scheme is closely linked to assessee's business activity. It is also a fact that the assessee has not paid any amount to the dealers and distributors, but amount spent has been paid to SOTC for organizing the trip. It is also a fact on record that the amounts paid to SOTC has been subjected to TDS as per the relevant provision. Therefore, the allegation of the Assessing Officer that the amount has not been subjected to deduction of tax is without any basis. As regards the applicability of section 194H of the Act, by no means, the Assessing Officer has established on record that dealers/distributors are agents of the assessee. Further, as we find, the trip scheme has been introduced by the assessee from past 20 years and the deduction claimed by the assessee on account of such trip scheme has never been disallowed by the Assessing Officer except for the impugned assessment year. Therefore, even applying the rule of consistency, the expenditure claimed by the assessee has to be allowed. Addition on account of waiver of Royalty received from two subsidiaries - Royalty is calculated @3% of associated enterprises sales as per the agreement duly signed and executed - HELD THAT:- We find that while deciding a similar issue in favour of the assessee, the coordinate bench of the Tribunal in assessee s own case for the assessment year 2012-13 [ 2024 (3) TMI 484 - ITAT MUMBAI] held that the net sale price of the products sold can only be determined at the end of the financial year and accordingly, the amount of Royalty payable to the assessee can only be computed thereafter. Therefore, prior to the end of the financial year, no amount accrues or arises to the assessee outside India. In the present case, prior to the determination of the net sale price of the products sold, the assessee had decided to waive Royalty by 2%. No material has been brought on record to show that there is no understanding between the assessee and its overseas subsidiaries to waive the Royalty. Such being the facts, we are of the considered view when only 1% Royalty is payable by the overseas subsidiaries, therefore the AO has no authority to make an addition of the balance 2% Royalty waived by the parties, which is nothing but a notional income considered taxable by the AO in assessee s hands. Before concluding, it is pertinent to note that in the assessment year 2011-12, the coordinate bench of the Tribunal decided a similar issue in favour of the assessee. Sundry balances written off - HELD THAT:- Since a similar issue has already been restored to the file of the AO in similar factual matrix, therefore, we deem it appropriate to restore this issue to the file of the AO with similar directions as rendered by the coordinate bench in the preceding year [ 2024 (3) TMI 484 - ITAT MUMBAI] assessment year 2012-13. As a result, ground no.6 raised in Revenue s appeal is allowed for statistical purposes. Nature of receipt - Addition of subsidy received from the Government of Maharashtra under Package Scheme of Incentives, 2007 - HELD THAT:- We find that while deciding a similar issue pertaining to the taxability of subsidy received by the assessee under Package Scheme of Incentives, 2007 of the Government of Maharashtra, the coordinate bench of the Tribunal vide order dated 05/03/2024 passed in assessee s own case in ACIT v/s Asian Paints Ltd [ 2024 (3) TMI 485 - ITAT MUMBAI] for the assessment year 2013-14 held that the subsidy received by the assessee is capital in nature as the incentives/subsidy granted was only to encourage the setting up of industries in the less developed areas of the State and the same was not for the purpose of running the business more profitably. Since in the year under consideration, the assessee received the impugned subsidy under under Package Scheme of Incentives, 2007 of the Government of Maharashtra, therefore, respectfully following the decision rendered in assessee s own case cited supra, we find no infirmity in the impugned order on this issue in treating the subsidies as capital in nature. Addition of the electricity grant received from the Government of Haryana - Whether the 100% exemption from electricity duty received by the assessee is capital or revenue in nature? - HELD THAT:- We noted that the Hon ble Supreme Court in Ponni Sugars and Chemicals Ltd. [ 2008 (9) TMI 14 - SUPREME COURT] and Sahney Steel Press Works Ltd [ 1997 (9) TMI 3 - SUPREME COURT] laid down the purpose test. Thus, if the purpose of the subsidy is to set up a new unit or substantial expansion of the existing unit then the subsidy is treated as capital in nature. However, if the purpose of the subsidy is to enable the assessee to run the business more profitably then the receipt is revenue in nature. Analysing the incentives/subsidy received by the assessee under the Industrial Policy, 2005 of the Government of Haryana, it is sufficiently evident that the incentives/subsidy was received for setting up a project at Industrial Model Township, Rohtak for the manufacturing of paints and the same was not to enable the assessee to run its business more profitably. Accordingly, we find no infirmity in the impugned order in treating the electricity grant received by the assessee as capital in nature. As a result, ground no.8 raised in Revenue s appeal is dismissed.
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2024 (3) TMI 540
Assessment u/s 153C - Undisclosed investment u/s 69 r.w.s 115BBE - AO concluded that the sale consideration of the impugned property cannot be less than Rs. 40.06 crores and treated the consideration of the impugned property at Rs. 40.06 crores - Whether incriminating material belonging to Assessee found during the course of search on the basis of which addition is made? - HELD THAT:- As the agreement found and seized and the payments made thereon are no way connected to the assessee. AO clearly accepted that the agreement was cancelled and not executed. Assessment u/s 153C concluded in the assessment of one of the buyer in the agreement mentioned being taxed as per the cash transactions mentioned in the agreement. Assessee cannot be held responsible to contents of the agreement for which he is neither signatory nor executor. The property was registered by the assessee and no evidence of payment by the assessee is mentioned neither in the agreement nor on any material gathered during the search or post search enquiries. Even the cheque payments made by the alleged buyer in the agreement have been returned back to the buyer. Hence, the assessee cannot be tied up with the agreement which is executed between four unrelated parties to the assessee. CIT(A) has duly examined the evidences on record and the confirmative evidence of the seller and came to a conclusion that assessee cannot be taxed for the money which has not paid. CIT(A) has also examined the comparable instances of the sale of property in the same area which is at parity with the value adopted and purchased by the assessee. Hence, in view of the tangible material on record duly examined by the CIT(A), we hereby affirm the decision of the ld. CIT(A). Decided against revenue.
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2024 (3) TMI 539
Addition of interest expenses on the loan taken from various parties - sufficiency of own funds to lend advance free loans or not? - loans received have been used for income earning purpose - AO observed that the assessee has advanced large amount of loans to its firm and his related concern, thus since the loans received on which the interest paid was utilized for advancing loans for which no interest has been received, the total interest paid has been disallowed - as per CIT(A) disallowance has to be worked out by taking the ratio of average interest bearing funds and the average total funds - HELD THAT:- The assessee has returned income Rs. 4.58 Cr. and had a capital of Rs. 25.69 Cr. and is also on fact that Rs. 7.96 Cr. has been invested in the partnership firm on which the assessee has earned income which has been duly offered to tax. Capital account of the assessee in the books of M/s B. K. Sales Corporation have been examined. After examination and verification, it is observed that the assessee had sufficient own funds to lend advance free loans and the loans received have been used for income earning purpose and such income earned has been offered to tax. Hence, we hold that no disallowance on account of interest is called for. Appeal of assessee allowed.
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2024 (3) TMI 538
Reopening of assessment - income arising from the revocable transfer of assets - taxability in the hands of trust or transferor/settler - HELD THAT:- We find that there is no dispute that assessee is a revocable trust - The assessee had purchased units of mutual funds during the A.Y. 2010-11 and the same has already been offered to tax in the income tax return of the settler for the A.Y. 2010-11 in the return of income filed on 31/07/2010. In the said return of income, the settler had offered the capital gain on mutual funds of the revocable family private trust. The copies of the returns have been filed before us in the paper book which was also filed before the ld. CIT(A). Once, these facts were brought on record, we do not find any reasons as to how the appellate authority can brush aside all those documents and simply endorse the exparte assessment order that the ld. AO has reopened the assessment to ascertain the sources and not the income earned out of those mutual funds. First of all he has to ascertain as to in whose case such income should be taxable whether in the hands of the revocable trust or in the hands of the transferor / settler. From the plain reading of Section 61 r.w.s. 63 of the Act, the income arising from revocable transfer of assets is taxable in the hands of the transferor, i.e., the settler of the revocable trust and it is to be clubbed in the total income of the transferor and not in the total income of the transferee of the assets. As already noted that clause 1.2.4 of the trust deed which provides that settler may revoke this trust deed and the entire trust fund shall be reinvested in the settler absolutely. Thus, even as per the terms of the trust deed, the income or any source of investment in the mutual funds was ought to be taxable in the hands of the settler. Thus, even as per law, the income could not have been taxed in the hands of the assessee trust. That apart, if it has been brought on record that already income has been offered in the hands of the settler, then taxing the same amount again in the hands of the trust is wholly arbitrary. If the ld. CIT (A) intended to ask the source, then at least same should have been confronted to the settler before stating that ld. AO reopened the case to ascertain the sources and not the income earned out of those mutual funds. Nowhere in the assessment order, the ld. AO had stated that he is questioning the source of mutual funds. Nowhere in the assessment order, the ld. AO had stated that he is questioning the source of mutual funds.National Faceless Appeal Centre should have at least perused the documents which was filed and also have been incorporated in the impugned order and if there was any query or doubt about the taxability of the income in the hands of the assessee-trust should have been confronted to the assessee. Such a casual way of ignoring of facts and materials placed on record and law vitiates the whole system of justice. It has been further brought on record before us that on similar issue, assessee s case was selected for scrutiny for A.Y. 2011-12 to 2013-14 wherein the notices were served on the correct address. Assessee had brought all these facts on record and ld. AO thereafter had accepted the assessee s contention and no addition was made on account of any income / purchase of investment of mutual funds - Assessee appeal allowed.
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2024 (3) TMI 537
Revision u/s 263 - disallowance u/s 14A not made by AO - as per assessee disallowance u/s. 14A cannot exceed the amount of exempt income and also the fact that the appellant has actually not incurred any expenses towards earning exempt income and hence the provisions of Section 14A r.w.r. 8D have no application - HELD THAT:- We observe that various Courts have consistently taken a position that no disallowance can be made u/s 14A in case the assessee has not earned any exempt income. The Hon ble Supreme Court in the case of State Bank of Patiala [ 2018 (11) TMI 1565 - SC ORDER] held that where High Court took a view that amount of disallowance under Section 14A could be restricted to amount of exempt income only, SLP filed against said order was to be dismissed. Also in the case of Corrtech Energy (P.) Ltd. [ 2014 (3) TMI 856 - GUJARAT HIGH COURT] held that where assessee did not make any claim for exemption of any income from payment of tax, disallowance under Section 14A could not be made. Disallowance under Section 14A cannot exceed exempt income earned by assessee; thus where assessee had suo motu disallowed total exempt income under Section 14A, no further disallowance could be made by invoking Section 14A of the Act. See ABCI Infrastructure (P.) Ltd.[ 2023 (4) TMI 527 - ITAT GUWAHATI] Accordingly, in light of the aforesaid decisions, and the plain language of the Finance Act, 2022, which has held that the amendment shall apply from 01.04.2022, in our view, it cannot be held that while passing the assessment order, the Assessing Officer took a view which is contrary to the law thereby making the order erroneous and prejudicial to the interest of the Revenue. Further, notably, the decision of Williamson Financial Services Ltd. [ 2022 (7) TMI 451 - ITAT GAUHATI] on which reliance has sought to be placed by the D.R. had not been passed even on the date of passing of assessment order (30.12.2019) and also on the date passing of 263 order (02.02.2022). Further, the view taken by the Assessing Officer finds direct support from the decisions rendered by Hon ble Supreme Court on this issue and therefore, in our considered view, the assessment order cannot be held to be erroneous and prejudicial to the interest of the Revenue. Accordingly, we direct that the order passed under Section 263 of the Act may be set-aside. Decided in favour of assessee.
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2024 (3) TMI 536
Disallowance of deduction claimed u/s 80P(2)(a)(i) - assessee had received interest income from fixed deposits kept with Nationalized Banks - HELD THAT:- We observed that the issue is covered by ITAT Pune Bench s order in the case of Sumitra Gramin Bigar Sheti Sahakari Pat Sanstha Maryadit Mahaveer Path [ 2019 (1) TMI 1994 - ITAT PUNE] which has decided the same issue in favour of assessee. The Hon'ble Madras High Court in the case of Thorapadi Urban Co-operative Credit Society Ltd. [ 2023 (11) TMI 779 - MADRAS HIGH COURT] held that the assessee was eligible for deduction under section 80P(2)(d) of the Act on the Interest Received from Co-operative Banks. No direct decision of the Hon'ble Jurisdictional High Court has been brought to our notice. Therefore, respectfully following the above precedent and adopting the detailed reasoning above, we direct the Assessing Officer to allow deduction under section 80P(2) of the Act for the impugned income - Decided in favour of assessee.
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2024 (3) TMI 535
TDS u/s 195 - non deduction of TDS - demurrage charges paid by the respondent-assessee to the foreign companies - HELD THAT:- AO made the disallowance of demurrage charges paid to various shipping companies on the ground that the appellant had failed to deduct tax at source on such payment following the decision of Hon ble Bombay High Court in the case of CIT Vs. Orient Goa Co. Pvt. Ltd. [ 2009 (10) TMI 575 - BOMBAY HIGH COURT] . The said decision has been overruled by the Full Bench of Hon ble Bombay High Court subsequently in the case of CIT Vs. V.S. Dempo Co. Pvt. Ltd. [ 2016 (2) TMI 308 - BOMBAY HIGH COURT] . The order passed by the ld. CIT(A) is in consonance with the law laid down by the Hon ble Jurisdictional High Court supra. Therefore, we do not find any reason to interfere with the order passed by the CIT(A). Appeal of the Revenue is dismissed.
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2024 (3) TMI 534
30% ad-hoc disallowance of travelling expenses being car charges, foreign travelling expenses and domestic travelling expenses - assessee submitted that the expenses claimed by the assessee are bound to be more in the initial year of set up, as it involves extra travelling setting up of new business unit which does not correlate to transaction and business of the company - HELD THAT:- It is not in dispute that the assessment was pertaining to first year of incorporation/business establishment of the assessee. It is the case of the assessee that the expenses on car charges, foreign traveling and domestic traveling are bound to be more in the initial year of set up, as it involves much extra travelling in setting up a new business unit and does not correlate to transaction and business of the Company. The said fact has been not considered by the Lower Authorities. It is not the case of the Revenue that the assessee has not incurred any expenditure, on the contrary, the A.O. himself observed that it would not be proper to completely disallow the expenses and made ad-hoc disallowance. The assessee on 29/11/2018 provided detailed submission on the questionnaire raised along with all the invoices, vouchers and other documentary evidence supporting the expenses incurred by the assessee. Further, on 04/12/2018 once again provided detailed submission with respect to all travel made by the employees along with the agenda of the meetings and other relevant details corroborating the business purposes of the travelling and car hire charges. Hon ble Supreme Court in the case of CIT Vs. Delhi Safe Deposit Co. Ltd. [ 1982 (1) TMI 2 - SUPREME COURT] held that the true test of an expenditure laid out wholly and exclusively for the purposes of business is that it is incurred by the assessee as incidental to his trade for the purpose of keeping the trade going. The expenditure incurred must be for commercial expediency. In the circumstances, the Ld. A.O. has been totally wrong in considering the fact that the discharge of the burden has to be effective and meaningful and not to cover up merely by book entries and paper work. The present case, at no point of time, the Lower Authorities have disputed the genuineness of the vouchers, payments, approvals, travel dates etc. but without their being any contrary evidence and without any material in hand erroneously made ad-hoc disallowance of Rs. 30% of the expenses claimed by the assessee. In our opinion, the Lower Authorities have committed error in making ad-hoc 30% disallowance - Appeal of assessee allowed.
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2024 (3) TMI 533
Revision u/s 263 - error noted by the CIT that sale of properties by the assessee during the year was not examined by the AO vis- -vis its stamp duty value for the purpose of invoking section 43CA which requires the sale consideration to be substituted with the stamp duty value when the same exceeds the actual sale consideration - HELD THAT:- We have noted that the CIT has not pointed out any instance where actual sale consideration of the property sold needed to be substituted with the stamp duty value in terms of section 43CA despite the fact that details of all 27 properties were filed by the assessee to him clearly pointing out that in no case the stamp duty value exceeded actual sale consideration and all documents to evidence the same were also filed to the PCIT. PCIT clearly has been unable to demonstrate even a single instance of sale of property inviting invocation of section 43CA of the Act. Therefore, clearly the PCIT has failed to make out a case of any error having crept in the order of the AO for having accepted the actual sale consideration of properties sold as opposed to their stamp duty value in terms of section 43CA of the Act. His finding of the error, we find, is restricted to the fact that the stamp duty valuation of the property has not been done correctly. As pointed out by the assessee and as noted by us from the impugned order, the CIT has picked up one instance of the sale of the property and noted that stamp duty valuation of the same was done by adopting incorrect figure of area of the property sold. Assessee has demonstrated before us that this finding of the ld.Pr.CIT was incorrect, because he had not appreciated all the documents placed before him, which clearly revealed that the stamp duty authority had valued entire area of the property sold. Assessee has demonstrated by way of certificate of stamp duty authority that there were separate certificates, one pertaining to the second floor and the floor above it, and other pertaining to the ground floor and the cellar, and the ld.Pr.CIT had considered only first certificate and missed out on taking note of other certificate pertaining to the ground floor and cellar, and therefore, the fallacy in his finding that the stamp duty valuation authority had considered incorrect figure of the properties sold for valuation. DR was unable to controvert the aforestated facts. Therefore, we agree with assessee that the basis with the CIT for finding error in the order of the AO was on incorrect appreciation of the facts, and therefore also we hold that the finding of the error by the Ld.PCIT in the order of the AO is not sustainable. We are in complete agreement with assessee that in any case his finding of error vis a vis incorrect valuation by stamp duty authority is beyond the scope of powers of the Revenue authorities - As gone through the provisions of section 43CA and find that the only authority given under the said section is to substitute actual consideration with the stamp duty valuation where the later exceeds the former, and there is no scope for questioning the stamp authorities valuation of the property. Even the Ld.DR was unable to controvert this position of law - once competent authority has determined jantri value. AO/CIT cannot find any fault in the same, AO s cannot go beyond competent authority concerned for making addition. In the present case, this is exactly the error which has been noted by the CIT that the AO has not looked into the mistake in the valuation of the properties sold by the assessee by the stamp duty authorities. When this aspect is clearly beyond the scope of the powers of Revenue authorities, there is no question of the AO being in error for not having examined the same. We hold that the ld.Pr.CIT has failed to point out any error in the order of the AO, and his finding of the error if any is beyond the scope of powers of Revenue authorities and on complete mis-appreciation of the facts on the issue of invocation of section 43CA of the Act. Appeal of the assessee is allowed.
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2024 (3) TMI 532
Revision u/s 263 - Classification of rental income - House property v/s business income - as per CIT AO has not made any inquiries as to why such rental income should not be classified as income from business and failed to make detailed inquiries on certain aspects like why the property was classified as investment, whether the assessee has claimed depreciation on such property for income tax purposes and once AO has already held such income as income from business in earlier years, such treatment ought to have been followed HELD THAT:- Assessee is not engaged in the business of earning rental income, but is engaged in providing IT Services, it cannot be inferred that the rental income earned by the assessee on such house property held as non-current investment , would qualify as it s business income - also seen from the financial statements of the assessee that the aforesaid rental income has been reflected as non-operational income and not as the business income of the assessee. Accordingly, from the instant facts assessee has not taken an incorrect position by offering the rental income earned by the assessee on aforesaid property income from house property . In various judicial precedents, a distinction has been drawn as to when the rental income earned by an assessee can be classified as it s business income and under what circumstances, such rental income would qualify as income from house property . The Courts have held that whether the income earned from property would qualify as business income or income from house property would primarily depend upon the objects / main business of the assessee company. If the assessee company is primarily engaged in the business of real estate / construction of which letting out properties on rent, alongwith facilities part of its regular business, then the income from letting out would qualify as business income , however, in case the assessee is engaged at other business activities and the rental income has been earned by the assessee, not on it s business assets but on other investments, then such rental income should normally qualify as income from house property. In the case of Raj Dadarkar Associates ( 2017 (5) TMI 586 - SUPREME COURT] held that where assessee having obtained a property on lease, constructed various shops and stalls on it and gave the same to various persons on sub-licencing basis, since assessee was not engaged in systematic or organized activity of providing service to occupiers of shops/stalls, income from sub-licensing was to be taxed as income from house property and not as business income . Also held in M/S MEERAJ ESTATE AND DEVELOPERS [ 2019 (10) TMI 1002 - ALLAHABAD HIGH COURT] since assessee did not indulge in any kind of recurring, systematic and organized business activity and, moreover, in respect of maintenance and upkeeping of let out premises, it appointed only one person, Assessing Officer was justified in treating rental income assessable as income from house property . Thus claim of the assessee that such rental income qualifies as income from house property has been accepted, looking into the instant facts - order passed u/s 263 of the Act is directed to be set-aside. Decided in favour of assessee.
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2024 (3) TMI 531
LTCG OR business income - entitlement to exemption u/s 54F - gains arising on sale of land and other properties by the assessee in the relevant assessment years - AO was of the view that the assessee has carried out activities of land selling which is adventure in the nature of trade - HELD THAT:- We note that the identical issue arose in the assessment year 2012-13 [ 2016 (10) TMI 1319 - ITAT AHMEDABAD ] as held that land/properties were held by the assessee as capital asset before its sale and consequential gains arising on sale thereto is chargeable under the head of capital gains . Accordingly, the AO is directed to consider the gains arising on sale of land/properties under the head capital gains . In the light of the facts noted above, the AO is further directed to de novo consider the relief as and where claimed by the assessee u/s. 54B relevant to assessment years under appeals in accordance with law after affording requisite opportunity to the assessee. Decided against revenue. Disallowance u/s 14A r.w.r. 8D - disallowance of interest and administrative expenses - HELD THAT:- Undeniably, the interest income shown by the assessee exceeds the total amount of interest expenses therefore, no disallowance of interest expense is warranted. Regarding the administrative expense we note that the assessee has not given any explanation why such expenses should not be disallowed. Admittedly, assessee earned exempted income not chargeable to tax and therefore the expenses incurred by the assessee against such exempt income cannot be allowed while calculating the income chargeable to tax. The primary onus lies with the assessee to demonstrate that no administrative expense has been incurred by the assessee. However, from the order of the authorities below, we find that such an onus has not been discharged by the assessee. Therefore, administrative expense against the exempted income needs to be worked out under the provisions of rule 8D of Income Tax Rules in the absence of any justification from the assessee. Accordingly, we confirmed the disallowance only representing the disallowance of administrative expense as made by the AO. Hence, ground of appeal of the revenue is hereby partly allowed.
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2024 (3) TMI 530
TDS u/s 195 - TDS on overseas payment - Annual Payment made to the international boards through affiliation with IBO, Cambridge etc. under the head authorization fee, fee for enrolment, license fee, registration fee - assessee in default u/s 201/201(1A) for non-deduction of tax at source - assessee submitted that it is not using any trademark of the overseas universities, as none of the Universities are registered in India. The payment made to IBO and to Cambridge towards annual fees is not for use of trademark and assessee acts as a facilitator between the student and international education institutions like IBO and Cambridge. HELD THAT:- It is important to analyze the basis of making payment by the assessee to overseas educational institutions and the basis on which invoice has been raised by overseas educational institutions for lump sum / annual payments, in absence of which the nature of payment cannot be ascertained, much less came to the conclusion that payments do not qualify as royalty . As observed that in the instant facts, no royalty payments have been made by the assessee for the use of brand name of Cambridge/IBO for the purpose of attracting students to enroll for the courses offered by overseas International educational Institutions. In our view, the students are attracted to enroll for the courses offered by overseas educational institutions on the basis of reputation carried by these overseas institutions and therefore, it cannot simply be said that the use of brand name of the educational institutions is only incidental to the payments made by the assessee to overseas education institutions and such payment is only for authorization granted by the overseas institutions to attract students to enroll with the courses offered by them via the medium of the assessee. Also the overseas education institutions have applied for registration under Trademarks Act, 1999, which is ostensibly with a view to ensure that their brand name/trademark is not exploited by any other entity/person in India and with a view to protect their trademark / brand name in India. It is important for the Tax Authorities to analyze the basis of payment made by the assessee to the overseas institutions on an annual/lump sum basis. We also observe that in the invoice which has been issued by the overseas education institution on the assessee, a certain discount has also been offered to the assessee. However, no explanation was offered to us regarding the basis for raising the invoice on the assessee and also on what basis discount has been offered to the assessee by the overseas education institutions as such annual payment. We are unable to accept that even without understanding / analyzing the basis of raising invoice by the overseas International educational Institutions on the assessee, it can be concluded that the nature of payments do not qualify as royalty under the Act read with the DTAA. The argument put forth by assessee that as per the agreement, the payments do not qualify for use of trademarks also cannot be accepted for the simple reason that the students are attracted to enroll for the courses offered by overseas educational institutions based on the reputation they carry. Accordingly, we are unable to accept the argument that even without analyzing the basis of invoice raised by such overseas educational institutions on the assessee, one can come to the conclusion that these payments do not qualify as a royalty payments. In absence of clarity on the basis of invoices which have been raised on the assessee, it would only be an academic exercise to discuss the judicial precedents cited by the Ld. Counsel for the assessee - matter is being restored to the file of AO to understand the basis on which lump sum fee has been charged by the overseas entities from the assessee and also the basis for allowing/affording discount to the assessee. In our view, unless and until the nature and the basis of raising invoices by the overseas education institutions is not clear to the tax authorities, it is not possible to come to the conclusion that no payments were made for use of trade name/brand of the national education institutions and the payment is only for authorizing the assessee to act as a mediator between these students and the educational institutions outside of India. The issue is restored to the file of Assessing Officer with the aforesaid and directions.
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2024 (3) TMI 529
Addition u/s 56(2) - Property as defined in explanation (d) (ii) of section 56(2)(vii) makes distinction between the existing shares i.e. the shares already allotted by the company and those share which are pending allotment or not? - application of admission of additional evidence - HELD THAT:- As proper working of the addition u/s 56(2)(viia) were drawn and correct figures of the additions were arrived at. Such calculations have not been dislodged by the assessee before the revenue authorities. Ld. CIT(A) has decided the issue against the assessee stating that the term Property as defined in explanation (d) (ii) of section 56(2)(vii) does not makes distinction between the existing shares i.e. the shares already allotted by the company and those share which are pending allotment. Since there were certain additional information submitted by the assessee which could not be submitted before the revenue authorities for the reasons refer to in the application of admission of additional evidence, also additional grounds have been submitted for admission taking shelter of settled principle of law as laid down in the case of NTPC [ 1996 (12) TMI 7 - SUPREME COURT ] therefore, in the interest of justice the matter requires to be restored back to the files of Ld. CIT(A) for fresh adjudication. Herein, it would be pertinent to mention that on similar aspect and issues under the identical circumstances in the case of group concern of the assessee M/s Riya Real Estate Private Limited for the AY 2012-13 2013-14, coordinate bench of the ITAT Raipur [ 2023 (11) TMI 198 - ITAT RAIPUR ] had set aside the matter to the files of Ld. CIT(A) - Appeal of assesee allowed for statistical purposes.
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2024 (3) TMI 528
Dismissal of the appeal by CIT(Appeals) for non-prosecution - assessee despite having been afforded sufficient opportunity on four occasions had failed to put up an appearance before him, therefore, the CIT(Appeals) dismissed the appeal of the assessee without adverting to the merits of the case - HELD THAT:- CIT(A) had failed to apply his mind to the issues which did arise from the impugned order and was assailed by the assessee before him. We are unable to persuade to accept the manner in which the appeal of the assessee society has been disposed off by the CIT(Appeals). Once an appeal is preferred before the CIT(Appeals), it becomes obligatory on his part to dispose off the same on merit and it is not open for him to summarily dismiss the appeal on account of non-prosecution of the same by the assessee. A perusal of Sec.251(1)(a) and (b), as well as the Explanation to Sec.251(2) of the Act reveals that the CIT(Appeals) remains under a statutory obligation to apply his mind to all the issues which arises from the impugned order before him. As per mandate of law the CIT(Appeals) is not vested with any power to summarily dismiss the appeal for non-prosecution. The aforesaid view is fortified by the judgment of Premkumar Arjundas Luthra (HUF) ( 2016 (5) TMI 290 - BOMBAY HIGH COURT] . As we set-aside this order with a direction to dispose off the same on merits - Appeal filed by the assessee society is allowed for statistical purposes.
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2024 (3) TMI 527
Registration u/s 80G(5) - application rejected on the ground that the assessee trust is involved in providing benefit to any particular religion, caste or community - argument of the Ld. AR was that the assessee society was granted with 12A registration which remains continue even after denial of assessee's request for 80G registration, same has not been withdrawn even after the various allegations - Name of the assessee is not matching with the other documents of the society - HELD THAT:- As pointed out by the Ld. CIT(E) qua the name of the assessee association for which the assessee association has already taken necessary suo moto steps for correction in the name of the assessee association in the PAN data vide their application i.e. before the date of their application for registration u/s 80G(5) therefore, the bonafide of the assessee association cannot be doubted and the difference in name of the association shall be treated as only inadvertent mistake on the part of the assessee. Violation of FCRA provisions - As per order of Ld. CIT(E) certain documents regarding funds received by the assessee, which were not provided by the assessee before the Ld. CIT(E), the assessee was found to be on default and society is indulged in convincing illiterate and Economically Weaker Section for conversion of their religion in the nearby villages - Rejection on the basis of the report of the inspector and ITO(E), which was apparently not confronted to the assessee however, the same was one of the basis for rejection of the application of the assessee. Anything relied upon by the revenue authorities in order to arrive at any adverse inference against the assessee and the same is not even confronted to the assessee to show cause or to explain about, such action of the revenue authorities is not permissible under the settled principle of law which is against the principle of natural justice. Thus as assessee had not submitted certain detail sought by the Ld. CIT(E) and the Ld. CIT(E) also had not show caused the assessee regarding the information pertaining to dubious activities of the assessee association on the basis of inspectors report without confronting the assessee with such report, it shows that there was violation of principle of natural justice. Consequently, we are left with no option but to restore these matter back to the files of Ld. CIT(E) to consider the explanations of the assessee - Appeal of the assessee is partly allowed as stated.
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2024 (3) TMI 526
Validity of reopening notice - Absence of the manual/digital signature of the A.O in the copy of the Reopening notice - contention of the AR that as the notice issued by the A.O u/s. 148 does not bear digital signature or manual signature of the AO, therefore, the same, being violative of Section 282A(1) is non-est in the eyes of law - HELD THAT:- The absence of the signature affixed on the notice, digitally or manually, therein, rendered the same as invalid and divested the A.O of any further jurisdiction to proceed and assess the income of the assessee. My aforesaid conviction is fortified by the judgement of Prakash Krishnavtar Bhardwaj [ 2023 (1) TMI 428 - BOMBAY HIGH COURT] wherein involving identical facts, observed that as the notice u/s. 148 as was there before them did not have the signature affixed on it digitally or manually, the same was invalid and would not vest the A.O with any further jurisdiction to proceed to reassess the income of the assessee. Also in the case of Vikas Gupta and others Vs. UOI ( 2022 (9) TMI 478 - ALLAHABAD HIGH COURT] held that the expression shall be signed used in Section 282A(1) makes the signing of the notice or other document by that authority a mandatory requirement. Signing of the notice was not a ministerial act or an empty formality which can be dispensed with. Elaborating on the term signed , it was observed that that same was to be construed as giving one's name to signify assent or adhesion to by signing one's name; to attest by signing or when a person is unable to write his name then affixation of mark by such person. Thus absence of affixation of signature of the A.O, manually or digitally on the notice u/s. 148 which is discernible from the assessment records and had not been rebutted by the Ld. DR, very basis for assumption of jurisdiction by the A.O for framing of assessment vide his order u/s. 144 r.w.s. 147 falls to ground. Decided in favour of assessee.
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2024 (3) TMI 525
Addition of opening capital as unexplained investment u/s 69 - income from undisclosed sources - HELD THAT:- Once the assessee based on the all the evidence which are not under dispute submit that the same is out of the opening cash in hand no addition can be made in the year under consideration. AO assumed opening cash balance as 'Nil' on the suspicion that whatever the assessee had earned in the preceding years stood utilized towards expenses or in making the investments and also alleged that the assessee failed to prove the existence of cash in hand and accordingly he considered sum as undisclosed income of the current year. What the ld. AO added was the opening balance of cash in hand in this year which is legally impermissible on the face of it. Although the ld. AO has not invoked any particular provision of law yet however, assuming that it was a case of S.68 (or even u/s 69A), the provision speaks of the credit found during the previous year in the books of account maintained by the assessee. Therefore, the law is well settled that credit found on the first day or carried forward from the preceding year cannot be added in this year. As decided in CIT v/s Parmeshwar Bohra [ 2007 (1) TMI 105 - RAJASTHAN HIGH COURT] Opening capital cannot be added as unexplained investment u/s 69 of the Act for the AY 1993-94 - clear finding recorded by the Tribunal that the impugned amount was credited in the books of account of the assessee in the earlier previous year and was shown as closing capital of that year carried forward amount of the previous year does not become an investment or cash credit of the relevant year. Thus we direct to delete the addition - Decided in favour of assessee.
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2024 (3) TMI 524
Addition u/s 68 - Loan obtained during earlier years - assessee has not furnished any explanation to prove the identity, creditworthiness and the genuineness of the transactions - first contention of the ld AR is that the opening balance of loan creditors cannot be added under section 68 holding it as non genuine, since the loan is not obtained during the year under consideration - HELD THAT:- From the plain reading of the provisions of Section 68 it is clear that the AO is required to make addition of unexplained cash credit only in the previous year in which such cash credit has been made and the assessee is not in a position to offer satisfactory explanation relating thereto. The law is well settled in this regard that the addition under section 68 could be made only during the year in which such credit has been received and that if the credit balance appearing in the account of the assessee is not pertaining to the year under consideration, the AO cannot make addition under section 68 in the subsequent previous year i.e. the year under consideration. Accordingly we hold that the AO is not correct in making addition which pertains to the loan obtained during earlier years. Loans taken during the year under consideration - We notice that the assessee has submitted before the CIT(A), the PAN, the statement of accounts of proprietary concern, capital account, personal balance sheet etc in the case of Smt Nikita V Daveand PAN, confirmations, Income Tax returns, statement of income, bank statements etc. for the others. The assessee has also furnished ledger accounts and bank statements to substantiate that all the loans have been repaid subsequently through banking channel. AO it is noticed that, in the remand report has not given any adverse finding with regard to the various documents submitted by the assessee as additional evidence, but has stated that the credit worthiness and genuineness are not substantiated for want of some more documents. It is also relevant to mention that the assessee has repaid the part of the loan during the year under consideration and the balance in subsequent financial years. Considering all AO is not correct in adding the outstanding loan balance as unexplained, without recording any adverse finding with regard to the various documentary evidences submitted by the assessee and without bringing any other material against the claim of the assessee. Accordingly we direct the AO to delete the addition made towards outstanding balance of loans and the interest. Appeal of the assessee is allowed.
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2024 (3) TMI 523
Revision u/s 263 - As per CIT huge shortage of PNG claimed by the assessee @ 49.26% of the total purchases of PNG - CIT primarily held that AO has not made proper inquiry - HELD THAT:- During the hearing, A.R. submitted that the details relating to claim of furnishing of PNG was accepted by the Revenue in the earlier assessment as well as in the subsequent assessment years. The assessee is following this as per his business exigencies and therefore there is a shortage of PNG for the assessee not only has given the explanation during the assessment proceedings but also filed the details such as the billing cycle of each house except any few cases as well as consumption which differs from particular family to any other family. This was also reflected in cost audit report which was allowed by the Revenue in earlier assessment year and subsequent assessment year as well. AO has taken cognizance of the records of the assessee such as the details of the consumption units and its audit report along with the submissions of the assessee during assessment proceedings. Thus, this cannot be called as limited verification of the factual aspect of the assessee s claim. Besides this, the Pr. CIT has not demonstrated in the revisionary power as to how this assessment order is erroneous or prejudicial to the interest of revenue. When the assessee has given all the details which are substantial for the claim of shortage of PNG, the Pr. CIT has observed contrary without giving any specific observation to that effect of the evidences produced during assessment proceedings. Assessee appeal allowed.
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2024 (3) TMI 522
Donation to scientific research institute and weighted deduction u/s 35(l)(ii) - Claim denied as AO found that the said institute no longer had the approval necessary for raising donation for undertaking scientific research, as required by the provisions of the said section - HELD THAT:- CIT(A) upheld the order of the AO, finding no facts brought out by the assessee before it, to contradict what was pointed out by the CBDT regarding fraudulent manner in which the donations were collected by the Research Trust, claiming to be approved u/s 35(1)(ii) of the Act. The ld.CIT(A) also noted that identical issue had come up for consideration before the ITAT, Chennai Bench in the case of DCIT Vs. Sudhakar Natarajan [ 2019 (5) TMI 2005 - ITAT CHENNAI] wherein denial of weighted deduction under section 35(1)(ii) of the Act on identical donation made to the same institute, Shri Arvindo Institute of Applied Scientific Research Trust after the approval had expired, was upheld by the Tribunal vide order dated 24.5.2019. Before us, there was nothing to contradict the adverse findings of the Revenue authorities pertaining to the impugned donation being fraudulently taken in the absence of a valid approval for the same from the prescribed authority. Thus no reason to interfere in the order of the ld.CIT(A) upholding the denial of weighted deduction to the assessee u/s 35(1)(ii) of the Act on the donations made to Shri Arvindo Institute of Applied Scientific Research Trust. Book profit adjustment - The concurrent findings of the Revenue authorities, as noted by us above is that the said donation was a bogus donation, fraudulently made .In the light of the same that there is no scope for allowing bogus claims as deductions for determining the book profits of the assessee under section 115JB of the Act. Book Profits in any case refer to the profits as reflected in the Books of the assessee, for paying taxes thereon u/s 115JB of the Act. By no stretch of logic can a patently bogus and fraudulent claim be considered for arriving at the Book Profits. Assessee appeal dismissed.
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2024 (3) TMI 521
Levy of penalty u/s 272A(1)(d) - non compliance to the notice(s) issued during the course of assessment proceedings - assessee was asked to comply within a period of two hours and that to on a day which was a public holiday - as submitted that in the said penalty notice, there is no mention as to which specific notice issued by the AO during the course of assessment proceedings - HELD THAT:- There were infact three notices which were issued on the same date whereby the assessee was asked to comply within a period of two hours and that to on a day which was a public holiday. Given that AO has to complete the assessment proceedings within the limitation period involving number of cases, the Assessing officer may be working on a public holiday beyond the call of duty and calling for the necessary information/documentation and thus, there is an expectation from the assessees to co-operate and adhere to the notices asking for the necessary information, documentation in order to enable the Assessing officer to complete the assessment proceedings. Expectation must meet the test of reasonableness and the assessee be provided reasonable time to respond to the various notices. In the instant case, it is manifestly clear that the AO for reasons best known to him has issued three notices one after the another on the day which was a public holiday and asking the assessee to respond to the said notices within period of two hours which is clearly not reasonable and in any case, cannot be a basis to press charges as far as the deliberate non-compliance on the part of the assessee. Considering the fact that substantial compliances have been made by the assessee and the assessment has been completed u/s 143(3) of the Act, we find that there is no justifiable basis for levy of penalty u/s 272A(1)(d) of the Act. The penalty so levied is hereby directed to be directed. Appeal of the assessee is allowed.
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2024 (3) TMI 520
Estimation of income - Bogus purchases - non rejection of books of accounts - HELD THAT:- AO has accepted the sale receipts but disallowed the entire purchases. There could not have been any sales without purchases. The books of accounts have not been rejected by the AO, as required u/s 145(3) of the Income Tax Act, 1961, without rejecting the books of accounts and without estimating any gross profit, while accepting the entire sales at the same time disallowing the entire purchases is beyond any rhyme reasons sans logic. Hence, the addition made is liable to be deleted. Appeal of the assessee is allowed.
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2024 (3) TMI 519
Revision u/s 263 - Bogus expenditure towards sub-contract payments made to persons who were previously employed in the assessee s company as supervisors / garage in-charge for monthly salaries - as per CIT no inquiries or verification regarding genuineness of subcontractors made by AO thus making order passed u/s 143(3) erroneous nor prejudicial to the interest of the revenue - HELD THAT:- It is an admitted fact that the AO has not examined the payments made to the sub contractors during the assessment proceedings. PCIT observed that the details of the sub-contracts given by the assessee company have not been called for by the AO to verify the genuineness of the sub-contractors and the claims of the assessee in this regard were accepted by the AO in a perfunctory manner without any inquiry or verification. Therefore, we have no hesitation to come to a conclusion that the Ld.PCIT has rightly initiated the proceedings u/s 263, saying that the assessment order passed by the AO is erroneous and prejudicial to the interest of the revenue. Appeal of the assessee is dismissed.
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2024 (3) TMI 518
Cash deposit into bank during demonetization period u/s 69A - as per revenue documentary evidences furnished by the assessee are not acceptable - As per assessee transaction has recorded in books of accounts with proper source of deposit - HELD THAT:- In our considered view, it was wholly erroneous on the part of the authorities below to sustain the addition whereas the assessee has in his possession all the possible evidences to demonstrate that cash was deposited out of known sources. We note that cash was deposited in the bank account out of the assessee`s opening cash balance available with the assessee and withdrawal from bank. Apart from this certain amount has been deposited out of agricultural income. The return of Income for AY 2016-17 has already been accepted by the Department wherein the assessee has also shown agricultural income. We note that AO has also accepted the books of account maintained by assessee and no defect in the books has been pointed by AO. We note that assessee has practically submitted all possible evidences in support his claim. When the evidence available with the assessee supports the claim of the assessee, the Assessing Officer was not right in suspecting the same on the basis of mere surmises and conjectures. (Om Prakash K Jain and Ors.[ 2009 (1) TMI 453 - BOMBAY HIGH COURT ] AO has not discussed any of the evidences submitted by the assessee in detail. No word as to why these documentary evidences furnished by the assessee are not acceptable to the Assessing Officer. The Assessing Officer has not found any defect / irregularities in the books of accounts. Based on this factual position we delete the addition. Since, we have deleted the entire addition therefore no question arises to tax the income of the assessee u/s 115BBE of the Act. Appeal filed by the assessee is allowed.
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2024 (3) TMI 517
Disallowance of interest expenses u/s 37 - AO noted that assessee has advanced total loans/advances to outside parties at less than 4% of charged interest rate - HELD THAT:- We note that assessee`s own funds are more than the interest free advances, therefore no disallowance should be made in the hands of the assessee, hence, we delete the addition. Addition on account of notional rent - Fair rent determination - HELD THAT:- We have gone through the findings of the AO and noted that assessee has been using these houses for self-purposes and therefore no notional rent has arisen, therefore, based on this factual position, we delete the addition. Appeal filed by the assessee is allowed.
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2024 (3) TMI 516
Addition u/s 68 - share application money received as unaccounted cash credit - identity and creditworthiness of the share subscribers and genuineness of the transaction - CIT(A) deleted the addition - HELD THAT:- We fail to find any infirmity in the finding of ld. CIT(A) who has examined the facts of the case in order to come to a conclusion that a genuine transaction of investment was carried out by the alleged share applicants in the equity of the assessee company and the identity of the share applicants is not in doubt as they are all private limited companies duly registered with Ministry of Corporate Affairs and creditworthiness of the transactions is supported by the fact that they have been routed through banking channel and source of the alleged sum is from the financial liquidity available with the investor companies having sufficient net worth to make the investment in the equity share capital of the assessee company. Thus, the alleged transaction is not fit to be covered under the provisions of Section 68 of the Act. We are inclined to hold that all the necessary documentary evidences have been placed on record which are sufficient enough to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction and the assessee has successfully discharged its onus of explaining the source of alleged sum. Thus, we fail to find any infirmity in the finding of ld. CIT(A) deleting the impugned addition made u/s 68 - Decided in favour of assessee.
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2024 (3) TMI 515
Rejection of books of accounts - estimation of income from business - CIT(A)-NFAC granted relief by reducing the estimated profits to 8% of main contracts and 5% of sub-contracts as against 12.5% of main contracts and 8% of the sub-contract works estimated by the Ld. AO - HELD THAT:- We find that the Ld. CIT(A)-NFAC has granted substantial relief to the assessee and this Bench of the Tribunal has consistently held that while estimating the profits, it shall be 8% on the main contracts and 5% on the sub-contract work. The Ld. CIT (A)-NFAC has relied on the decision of this Bench in the case of M/s. K. Venkata Raju [ 2022 (4) TMI 960 - ITAT VISAKHAPATNAM ] and accordingly estimated the income of the assessee. No merit in the argument of the Ld. AR and we have no hesitation uphold the decision of the Ld. CIT(A)-NFAC and dismiss the grounds raised by the assessee.
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2024 (3) TMI 514
Revision u/s 263 - as per CIT AO without making enquiries and verification reached the finding that the appellant fulfills the condition for availing exemption u/s. 10(37) on account of compulsory acquisition of agricultural land - HELD THAT:- The assessment proceeding is completed by verification capital gain earned by the assessee on alleged sale of land as an exempt income u/s 10(37) - The assessee had provided details during proceeding. In the present case specific issue relating to exemption of capital gain earned by the assessee claiming exemption u/s 10(37) of the Act allowed by the AO. However, mere change of opinion of ld. PCIT in respect of issue cannot be reason to invoke revisionary powers under section 263. As decided in Reliance Payment Solutions Ltd [ 2022 (4) TMI 160 - ITAT MUMBAI] fact remains that the specific issue raised, in the revision order was specifically looked into, detailed submissions were made and these submissions were duly accepted by the Assessing Officer. Merely because the Assessing Officer did not write specific reasons for accepting the explanation of the assessee cannot be reason enough to invoke powers under section 263, and non-mentioning of these reasons do not render the assessment order erroneous and prejudicial to the interest of the revenue - Appeal of the assessee is allowed.
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2024 (3) TMI 513
Addition u/s 68 - unexplained sum credited to the books of account of the assessee - Onus to prove - genuineness of the transaction as well as immediate sources of funds was not proved with cogent evidence - CIT(A) deleted the Addition - HELD THAT:- In so far as identity of Jayant Nanda is concerned there should not be any doubt after considering the passport. The creditworthiness can be gathered from the bank account of Jayant Nanda in HDFC bank wherein the impugned transaction is reflected. The payments have been made out of clear credit balances and there is no evidence whatsoever to show that the Jayant Nanda deposited cash before issuing cheque to the assessee. In our considered opinion the assessee successfully discharged the onus cast upon it by the provisions of section 68 of the Act and, therefore, the findings of the CIT(A) cannot be faulted. Ground No. 1 is dismissed. Disallowance u/s 14A - as per CIT(A) since the assessee has suo-moto disallowed sum u/s 14A the CIT(A) directed to restricted the disallowance of that amount - HELD THAT:- The Hon ble High Court of Delhi in the case of Cargo Motors Private Limited [ 2022 (10) TMI 571 - DELHI HIGH COURT] has held that only those investments were to be considered for computing average value of investments which yielded exempt income during assessment year. The same view was followed in the case of Caraf Builders and Constructions Private Limited [ 2018 (12) TMI 410 - DELHI HIGH COURT] and also in the case of ACB India Limited [ 2015 (4) TMI 224 - DELHI HIGH COURT] Respectfully following all we do not find any reason to interfere with the findings of the CIT(A). This ground is also dismissed. Disallowance of expenses - absence of direct nexus between income earned and expenses incurred - CIT(A) deleted the Addition - HELD THAT:- The undisputed fact is that the expenses have been incurred for normal business purposes and the books of account were audited both under the companies Act and also under the income tax Act and no defect has been pointed out in the books of account and no such disallowances have been made in earlier assessment years. We decline to interfere ground No. 3 is also dismissed. Disallowance of long term capital loss - transaction of sale of shares was not genuine and the same was done only to claim set off against long term capital gain arising from sale of property - CIT(A) deleted the Addition - HELD THAT:-here is no dispute that the assessee has sold 2 lacs equity shares @ 1 per share to Virender Kumar Chanana at a price resolved by the BOD of the assessee. It is equally true that trading in shares of Kingfisher Airlines Ltd. was suspended since 22.06.2015 when the last traded price was low Rs. 1.26 and high Rs. 1.38. Therefore, the determination of the share price at Rs. 1 per share cannot be doubted. Since the assessee had purchased the shares @ 70.17 per share, the loss of the sale of share is a genuine loss and rightly allowed the CIT(A). No interference is called for. Ground No. 4 is allowed.
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2024 (3) TMI 485
Disallowance u/s 14A - suo-moto disallowance made by assessee - HELD THAT:- It is evident from the record that the AO without recording any satisfaction regarding the claim of the assessee in respect of expenditure incurred in relation to exempt income proceeded to compute the disallowance u/s 14A read with Rule 8D of the Rules. Therefore, respectfully following the decision rendered in assessee s own case [ 2024 (3) TMI 484 - ITAT MUMBAI] , we do not find any reason for upholding the disallowance made by the AO under section 14A read with Rule 8D of the Rules. Accordingly, the same is directed to be deleted. As a result, ground no.1 raised in assessee s appeal is allowed. TP adjustment - low markup on support services provided to the associated enterprises - Comparable selection - HELD THAT:- Axis Integrated Systems Ltd. is not comparable to the assessee, and accordingly, we direct the exclusion of this company for benchmarking the international transaction of provision of support services and intragroup services. Inmacs Management Services Ltd. - Company has declared its revenue from operations from the professional income. Apart from the above details, there is no description of the activities undertaken by the company during the year under consideration. We find that the TPO has placed reliance upon the services offered by this company as mentioned on its website, however, there are no details as to whether these services were rendered in the year under consideration. Therefore, the nature of the consultancy business is not clear in the case of this company. Accordingly, due to the lack of complete data being available in the public domain, pertaining to the year under consideration, we are of the considered view that this company cannot be considered comparable to the assessee. Therefore, we direct the exclusion of this company for benchmarking the international transaction of provision of support services and intragroup services. TP Adjustment on account of non-recovery of charges for providing the letter of comfort/support - international transaction or not? - HELD THAT:- We find that in the year under consideration also the assessee has issued similar letters of credit, as were considered by the coordinate bench in the preceding year, and has also declared the letters of comfort/support issued to the banks on behalf of some of its subsidiaries as its contingent liability in Note-25 of the Notes to Financial Statements. Therefore, respectfully following the decision rendered in assessee s own case [ 2024 (3) TMI 484 - ITAT MUMBAI] we are of the considered view that letters of comfort issued by the assessee constitute an international transaction within the meaning of the Act. We further find that in the aforesaid decision, the coordinate bench upheld the arm s length rate of the letter of comfort to be @0.04% finding the same to be reasonable in the peculiar facts and circumstances of the case. Since undisputedly in the present case, similar facts are involved and both sides have also placed reliance on their submission as made in the preceding year, therefore we upheld arm s length rate of 0.04% computed by the learned CIT(A). Accordingly, ground no.3 rasied in assessee s appeal is dismissed. Allowability of expenditure u/s 35(2AB) - weighted deduction - HELD THAT:- We find that while deciding a similar issue the coordinate bench of the Tribunal in assessee s own case in Asian Paints Ltd [ 2014 (1) TMI 16 - ITAT MUMBAI] , for the assessment year 2007-08, restored the issue to the file of the AO with a direction to decide the same afresh after verifying whether the expenditure in question has been incurred by the assessee on research and development, which is eligible for deduction under section 35(2AB) - DR could not show us any reason to deviate from the aforesaid decision and no change in facts and law was alleged in the relevant assessment year. Disallowance of damaged stock in the valuation of the closing stock - CIT(A), following the decision of the coordinate bench of the Tribunal rendered in assessee s own case in earlier years restricted the disallowance to the tune of 0.5% of the value of closing stock for the purpose of valuation of damaged stock - HELD THAT:- We find that while deciding a similar issue in assessee s own case the coordinate bench of the Tribunal in Addl. CIT v/s Asian Paints Ltd [ 2022 (7) TMI 1508 - ITAT MUMBAI] wherein as observed that assessee is valuing closing stock for damaged stock taking the value at NIL and however, Assessing Officer makes disallowance to the extent of 0.5% of the value of closing stock and the same was confirmed by the Coordinate Bench in the earlier years from A.Y. 2003-04 to-2006-07 and A.Y. 2008-09. We further observed that following the decision of the ITAT, the Ld.CIT(A) in A.Y: 2009-10 and A.Y. 2010-11 had followed the same. Considering the fact on record and also this method is consistently followed by the assessee over the years there is no loss to the revenue. Ground no.3 raised in Revenue s appeal is dismissed. Allowance of balance additional depreciation - Asset put to use in less that 180 days - assessee submitted that as per section 32(1)(iia) of the Act, the assessee is entitled to claim 20% additional depreciation on any new plant and machinery acquired after 31/03/2005 - as submitted that as per the provision to section 32(ii)(b), if the assets are put to use for less than 180 days in the previous year, then the deduction in respect of depreciation shall be restricted to 50% - HELD THAT:- We find that similar findings were rendered by the coordinate bench of the Tribunal in assessee s own case in the assessment year 2012-13 [ 2024 (3) TMI 484 - ITAT MUMBAI] wherein dismiss the ground raised by the revenue holding that Ld.CIT(A) is correct in allowing the additional depreciation at the rate of 10% for asset purchased in the earlier year - We find that this issue is recurring in nature and has been decided in favour of the assessee in the preceding assessment years. TDS u/s 194H - Expenditure incurred on the Trip Scheme - non deduction of tds - HELD TYHAT:- As decided in own case [ 2022 (2) TMI 1428 - ITAT MUMBAI] for the assessment year 2010-11 entire trip scheme is for the purpose of expanding assessee's business by encouraging the dealers and distributors to achieve a specific target of purchase. Thus, the scheme is closely linked to assessee's business activity. It is also a fact that the assessee has not paid any amount to the dealers and distributors, but amount spent has been paid to SOTC for organizing the trip. It is also a fact on record that the amounts paid to SOTC has been subjected to TDS as per the relevant provision. Therefore, the allegation of the Assessing Officer that the amount has not been subjected to deduction of tax is without any basis. As regards the applicability of section 194H of the Act, by no means, the AO has established on record that dealers/distributors are agents of the assessee. Further, as we find, the trip scheme has been introduced by the assessee from past 20 years and the deduction claimed by the assessee on account of such trip scheme has never been disallowed by the AO except for the impugned assessment year. Therefore, even applying the rule of consistency, the expenditure claimed by the assessee has to be allowed. Addition on account of waiver of Royalty received from two subsidiaries - Royalty is calculated @3% of associated enterprises sales as per the agreement duly signed and executed - HELD THAT:- We find that while deciding a similar issue in favour of the assessee, the coordinate bench of the Tribunal in assessee s own case cited supra, for the assessment year 2012-13 [ 2024 (3) TMI 484 - ITAT MUMBAI] net sale price of the products sold can only be determined at the end of the financial year and accordingly, the amount of Royalty payable to the assessee can only be computed thereafter. Therefore, prior to the end of the financial year, no amount accrues or arises to the assessee outside India. In the present case, prior to the determination of the net sale price of the products sold, the assessee had decided to waive Royalty by 2%. No material has been brought on record to show that there is no understanding between the assessee and its overseas subsidiaries to waive the Royalty. Such being the facts, we are of the considered view when only 1% Royalty is payable by the overseas subsidiaries, therefore the AO has no authority to make an addition of the balance 2% Royalty waived by the parties, which is nothing but a notional income considered taxable by the AO in assessee s hands. Decided in favour of assessee. Allowance of Corporate Social Responsibility ( CSR ) expenses - AO disallowed the aforesaid expenditure on the basis that the assessee has neither proved any commercial expediency nor any obligation towards the school and other purposes - HELD THAT:- We find that the Hon'ble Delhi High Court in Pr.CIT v/s PEC Ltd. [ 2022 (12) TMI 759 - DELHI HIGH COURT] held that amendment brought by way of Explanation 2 to section 37(1) by Finance Act, 2014, with effect from 1-4-2015 is prospective in nature and thus, CSR expenditure incurred prior to 1-4-2015 was to be allowed. Since, in the present case, it is undisputed that the aforesaid expenditure incurred by the assessee is towards its Corporate Social Responsibility, therefore we find no infirmity in the findings of the learned CIT(A) in allowing the expenditure in the year under consideration. As a result, ground no.8 raised in Revenue s appeal is dismissed. Sundry balances written off - HELD THAT:- We find that the coordinate bench of the Tribunal in assessee s own case for the assessment year 2012-13 [ 2024 (3) TMI 484 - ITAT MUMBAI] restored this issue to the file of the AO as held assessee submitted that the expenditure is normal business expenditure and allowable as deductible expenditure. However, from the perusal of the record, we find that neither there is an examination of the aforesaid claim of the assessee nor any details were furnished. Accordingly, we deem it appropriate to restore this issue to the file of the AO for de novo adjudication. The assessee is directed to file necessary details/documents in support of its claim of deduction of sundry balances written off. Ground raised in Revenue s appeal is allowed for statistical purposes. Nature of receipt - Addition of subsidy received from the Government of Maharashtra under Package Scheme of Incentives, 2007 - HELD THAT:- Upon analysing the incentives/subsidy received by the assessee under the Package Scheme of Incentives, 2007, in light of the purpose test, as envisaged by the Hon ble Supreme Court in Ponni Sugars and Chemicals Ltd. [ 2008 (9) TMI 14 - SUPREME COURT] and Sahney Steel Press Works Ltd [ 1997 (9) TMI 3 - SUPREME COURT] we are of the considered view that incentives/subsidy granted was only to encourage the setting up of industries in the less developed areas of the State and the same was not for the purpose of running the business more profitably. Accordingly, respectfully following the aforesaid decisions, we find no infirmity in the impugned order passed by the learned CIT(A) on this issue in treating the subsidies as capital in nature. As a result, ground raised in Revenue s appeal is dismissed.
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Customs
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2024 (3) TMI 512
Maintainability of SLP - Validity of SCN - impugned SCN is issued without jurisdiction - it was held by High Court that Designated Officer shall follow the procedure, and after opportunity of hearing is granted to the Petitioner, pass appropriate orders on the show cause notice in accordance with law - HELD THAT:- It is not required to interfere in the matter as liberty has been granted to the petitioner to file his reply to the impugned show cause notice. SLP dismissed.
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2024 (3) TMI 511
Sustainability of supplementary Show Cause Notice, prior to insertion of second proviso to Section 124 of the Customs Act, 1962 w.e.f 29.03.2018 - effect to the second proviso to Section 124 of the Customs Act, 1962 which is effective from 29.03.2018 - retrospective or prospective effect? - to be treated as separate Show Cause Notice in terms of Section 124 of the Customs Act, 1962 or not - failure to appreciate the scope and context of the Customs (Supplementary Notice) Regulation, 2019 which was notified in exercise of the powers conferred by clause (f) of Sub-Section (2) of Section 157 read with second proviso to Section 124 of the Customs Act, 1962 - whether Regulation of the Customs (Supplementary Notice) Regulation, 2019 can be operative without the aid of Section 157 of the Customs Act wherein to Sub-Section (2)(f) was inbuilt with the wordings the Circumstances under which, and the manner in which, the supplementary notice may be issued? HELD THAT:- The provisions states that no order confiscating any goods or imposing any penalty on any person shall be made under Chapter (XIV) of the Act unless the owner of the goods are such persons-(a) is given a notice in writing with the prior approval of the officer of the Customs not below the rank of Assistant Commissioner of Customs, informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty. Clause (b) and (c) would not be relevant for the purpose of this case equally the first proviso is also not relevant. The second proviso which was inserted by the Act 13 of 2018 with effect from 29.03.2018 states that notwithstanding issue of notice under Section 124 the proper officer may issue a supplementary notice under such circumstance and in such manner as may be prescribed. Whether prior to insertion of the second proviso with effect from 29.03.2018 can it be said that there was no power conferred on the authority to issue a supplementary show cause notice or an addendum to a show cause notice already issued under Section 124 of the Act? - HELD THAT:- In STATE OF RAJASTHAN VERSUS. LEELA JAIN [ 1964 (9) TMI 59 - SUPREME COURT] it was held that as a general construction of a proviso is concerned, it has been broadly stated that the function of a proviso is to limit the main part of the section and to carve out something which but for the proviso would have been within the operative part. In SHAH BHOJRAJ KUVERJI OIL MILLS AND GINNING FACTORY VERSUS SUBBASH CHANDRA YOGRAJ SINHA [ 1961 (4) TMI 82 - SUPREME COURT] it was held that as a general rule, a proviso is added to an enactment to qualify or create an exception to what is in the enactment and ordinarily a proviso is not interpreted as stating a general rule. In COMMNR. OF INCOME TAX-I, AHMEDABAD VERSUS GOLD COIN HEALTH FOOD PVT. LTD. [ 2008 (8) TMI 5 - SUPREME COURT] the Hon ble Supreme Court referred Principles of Statutory Interpretation 11th Edition, 2008 by Justice G.P Singh wherein it was said that if a statute is curative or merely declaratory of the previous law, the retrospective operation is generally intended. A clarificatory amendment will have retrospective effect and therefore if the Principle Act which existed as law when the constitution came into force, the amending Act also will be part of the existing law. Having steered clear of the above issue, we also would endeavour to examine as to whether the use of the words supplementary in the notice dated 18.05.2017 would in effect be a supplementary show cause notice or a show cause notice issued at the first instance. Reverting back to the facts of the case, the notice dated 18.05.2017 states that certain facts emerged after the issuance of the notice dated 26.08.2016 to which the respondent was not a noticee. It has been further stated that after issuance of the show cause notice dated 26.08.2016 few more facts emerged and the same were investigated and hence the notice dated 18.05.2017 was issued and the same has to be read along with the notice dated 26.08.2016 and will be adjudicated. Thus, the purport and purpose for using the word supplementary in the notice dated 18.05.2017 is to connote that it has to be read along and adjudicated along with the notice dated 26.08.2016 and nothing more. Admittedly, in the notice dated 18.05.2017 the first three noticees are the officers of the department and the respondent herein is the second noticee, the first noticee, being the Deputy Commissioner and the third noticee being the Inspector of Customs along with these three noticees who are the officers of the department one more person who has been included as a noticee who was not a noticee in the notice dated 26.08.2016 is Jyoti Biswas. The other noticees namely 5 to 10 are the noticees in the notice dated 26.08.2016. Therefore, it is clear that the show cause notice dated 18.05.2017 is a notice issued based on new facts which emerged pursuant to the investigation conducted after the issuance of the show cause notice dated 26.08.2016 and for all the purposes it shall be treated as show cause notice and the word supplementary used therein is only to indicate that it needs to be adjudicated along with the notice dated 26.08.2016. Therefore, the adjudicating authority was correct in rendering the finding in his order dated 09.01.2023 that the supplementary show cause notice, although termed as the supplementary, is actually an independent show cause notice even though it relates with the case of smuggling which is also a subject matter of the first show cause notice dated 26.08.2016. The tribunal has committed an error in interfering with the order dated 09.01.2023 passed by the adjudicating authority - The order passed by the tribunal is set aside, the order of the adjudicating authority dated 09.01.2023 stands restored and the substantial questions of law are answered in favour of the appellant revenue - Appeal allowed.
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2024 (3) TMI 510
Seeking a clarification that the petitioner s goods are excluded from the scope of the product under consideration in the notification no. 15/2023-customs (ADD) dated 22.12.2023 - HELD THAT:- This petition is disposed and Respondent nos. 1 and 2 to are directed to consider the representation of the petitioner in accordance with law without being influenced by anything stated in this order.
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2024 (3) TMI 509
Amendment to bill of entry - Violation of principles of natural justice - price variation clause - volume discount - request for provisional assessment not considered - amendment of the Bills of Entry under Section 149 of the Customs Act, 1962 not considered by the proper officer - HELD THAT:- The agreement dated 05.07.2014, as amended on 01.01.2016, has the price variation clause on account of volume discount, which is determinable only at the end of the contract period. The price variation clause is very much available in the contract at the time of filing in the Bills of Entry. As the price was not final at the time of filing of the Bills of Entry, the proper officer should have considered the provisional assessment before final assessment. Had their request for provisional assessment has been considered by the proper officer, the necessity for amendment would not have arisen. The Bills of Entry were initially assessed without giving an opportunity to the appellant for submitting the documentary evidences required for considering amendment of the Bills of Entry - the reason given by the ld. Commissioner (Appeals) for rejecting their request for amendment is not proper. The agreement submitted by the appellant has a price variation clause, which clearly states that the discount can be determined only at the end of the contract period. As the price declared in the Bills of Entry were not the final price, final assessment was not possible. Thus, the proper officer should have considered their request for provisional assessment. Since, provisional assessment was not considered, the appellant sought amendment of the Bills of Entry after receipt of the credit notes on account of price variation. The amendment requested by the appellant should have been considered by the ld. Commissioner (Appeals), as the documentary evidences as provided under section 149 of the Customs Act, 1962, were available even at the time of filing of the Bills of Entry. The impugned order set aside - matter remanded back to take into account the credit note submitted by the appellant as documentary evidence as necessitated under the provisions of Section 149 of the Customs Act 1962 and allow the amendment of the Bills of Entry as requested by the appellant and re-assess the Bills of Entry as per the provisions of law - appeals filed by the appellant are allowed by way of remand to the proper officer.
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2024 (3) TMI 508
Liability to pay interest upon finalization of provisional assessment prior to insertion of sub-section (3) in Section 18 of the Customs Act, 1962 - case of appellant is that the said provisional assessment had been undertaken prior to the incorporation of the said provisions [Section 18(3)] in law carried out by Taxation Laws Amendment Act 2006 with effect from 13.07.2006. Whether the differential duty is payable upon finalization on the entire duty leviable or only on the differential component of duty paid by the importer upon finalization of the goods? Whether Section 18(3) would come into play for provisional assessments having taken place prior to the date of its insertion in the statute, i.e. to say if applicable, would it have a retrospective applicability? HELD THAT:- A perusal of sub-section (3) of Section 18 shows that an assessee becomes liable to pay interest on the differential duty calculated at the time of final assessment at the rate fixed under Section 28AB of the Customs Act, 1962. It is a common principle of law that a legislation is always prospective in nature unless when by express words or by necessary implication the provisions are declared or construed to have retrospective effect - Also it is well established that a substantive provision of law cannot be considered to be retrospective unless specified to the contrary by the Legislature. The court s have repeatedly held the amendment to Section 18 of the Act, as a substantive piece of legislation and it cannot be considered to be of a clarificatory nature. The same cannot be therefore given a retrospective effect. The provisions of Section 18(3) of the Act, would have no application to the present case and the Assessment Order demanding payment of interest, in respect of provisional assessment made prior to 13.07.2006 is not in accordance with law. The said issue being no more res integra, it need to be also pointed out that with the reference to similar provisions on the excise side, incorporated vide Rule 7(4) of the Central Excise Rules, 1944, the Board Vide Order- Instruction- Central Excise issued vide their Reference No.- F.No. 354/66/2001 TRU dated 21.06.2001, had clarified that provisions relating to charging of interest will apply only to cases in which provisional assessment is resorted to after the date of promulgation and had specifically indicated the date 01.07.2001. It clarified that such provisions would not be applicable with respect to provisional assessments carried out in the past period, even if the assessments were finalized on or after the said date of incorporation of similar provisions on the excise side for charging of interest. The question of demand of interest either on the entire duty amount or on the differential duty is no more relevant - the order of the lower authority suffers from inherent defect of misinterpretation of law and therefore is liable to be quashed - Appeal allowed.
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2024 (3) TMI 507
Refund claim for the amount of CVD paid - time limitation - no speaking order was passed by the assessing officers as required under Section 17(5) of the Customs Act - violation of principles of natural justice - HELD THAT:- There is nothing left to imagination that the impugned assessment would automatically be deemed to be provisional as CVD thereon was paid under protest, at the time of import and clearance of goods for home consumption in accordance with the scheme of the statue. It is therefore imperative to first finalize the assessment undertaken at the time of import. The decision on merits of the refund claim filed shall arise only thereafter once a speaking order in terms of Section 17(5) of the Customs Act has been issued finalising the assessment of the imported goods. In case the department is not able to lay its hands on the subject documents evidencing payment of duty under protest, the department is directed for the re-construction of the files and on the basis of documents filed by the appellant alongwith the subject refund claims filed by the importer/appellant. The orders passed by of the lower authorities set aside and the matter remanded to the assessing group to decide on the protest lodged, by the importer at the time of import and payment of duty (CVD) under protest . Appeal disposed off by way of remand.
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2024 (3) TMI 506
Prayer of Out-of-turn disposal of appeal due to indefinite deferment of proceedings - Piecemeal adjudication - correctness of the presumption by the adjudicating authority that the order of the Hon ble High Court of Bombay was intended to cease further proceedings in entirety - HELD THAT:- It is well-settled in law that an order or judgement, of appellate authority or constitutional court, operates qua the appellant/petitioner and respondent therein and none else even though qualified to be cited as precedent should another identically, or even similarly, situated appellant/petitioner plead for nondiscriminatory applicability for such relief/detriment. Show cause notice, under Customs Act, 1962, is prelude to adjudicating upon proposal to visit detriment on any person or entity which maybe that of recovery of duty, with attendant interest and penalty, of withholding of amount claimed as refund, of confiscation of goods for vesting with the Central Government or of penalty being imposed. Such notices, mandated in proceedings arising from section 27, section 28 and section 124 of Customs Act, 1962, comprise allegations against, as also the proposed consequential detriment prescribed by law to, each of the entities or persons therein. It is worth noting that, even in the same order, some outcomes may flow from ex parte proceedings which stand on an entirely different footing from others in which defence has been offered. Reversion to such natural autonomy, inhering for each noticee, is, thus, neither improper nor is the piece-meal disposal that has been judicially frowned upon; it is the partial disposal of issues in a notice, whether in relation to one noticee or all, that jeopardizes the integrity of the proceedings warranting appellate or writ intervention. It is merely the convenience of common adjudication, a privilege that the Central Board of Excise Customs (CBEC) invoked under the authority of its delegated empowerment in Customs Act, 1962, which enabled collating of the separate imports and, indeed, of the three separate importers in one notice. By no stretch would this be piece-meal disposal of the show cause notice. There is no reason to countenance the indefinite transfer of the proceedings, initiated against the appellant, to call book as communicated in the impugned order. Furthermore, the impending liquidation of the appellant company, approved by the duly constituted statutory authority, should also not be held to ransom by such extraordinary recourse on the part of an adjudicating authority. Approval thereto would not only impinge upon the intent of the law relating to insolvency and bankruptcy that replaced another which was found to be counterproductive by the supreme legislative organ of the State but also deprive the noticees of prompt appellate remedies should need thereof arise. In short, the appellate process should not be obviated by such peremptory action on the part of the adjudicating authority. The adjudicating authority is directed to dispose of the notice issued to the appellant herein forthwith, and in any circumstances, within four weeks from uploading of this order - appeal disposed off.
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2024 (3) TMI 505
Classification of goods proposed to be imported - Optoma Creative Touch 5-series Interactive Flat Panel (IFP) (Model- 5652RK+, 5752RK+ 5862RK+) - to be classified under sub-heading 8471 41 90 or not - HELD THAT:- On perusal of the comments of the concerned Commissionerate on the application for advance ruling, it is observed that the word, Display in the description of item, interactive Flat Panel Display, has caught their attention and same has been made basis to arrive at essential/principle function of the subject goods however, it appears that importance of the word, Interactive in the description of the subject goods, has not been discussed much. The word, Interactive , in the description of the subject goods immediately brings to the front various capabilities of the subject goods and on closer examination, the capabilities of the subject goods meet the requirement under Chapter Note 6(A) of Chapter 84 for a machine to mean as automatic data processing machine . Moreover, once an item has inbuilt input unit, output unit along with processing unit then it is obvious that the item can perform multiple functions. For such an item similar to the subject goods, the issue is to ascertain essential function and terms of the heading read with Section/Chapter Notes for determination of classification of such goods. The issue of classification, in the instant application gets settled in terms of Rule 1 and Rule 6 of General Rules for Interpretation of Import Tariff (GRI) without inviting reference to Rule 3 of GRI. Since the question under the application for advance ruling relates to classification of goods proposed to be imported, guidance of the World Customs Organization, to which India is a signatory, would be useful - The HS Committee of WCO decided the classification of this product under sub-heading 8471.60, adopting the classification rationale under General Rules for Interpretation vide Rule 1 read with Note 5(C) to Chapter 84 and Rule 6 of GRI. It is noted that a number of rulings and judgments have been quoted by the concerned Commissioner to justify classification under Heading 8528. However, it is felt that judgment of CESTAT, New Delhi in the case of M/S. INGRAM MICRO INDIA PRIVATE LIMITED VERSUS PRINCIPAL COMMISSIONER OF CUSTOMS (IMPORT) , NEW DELHI [ 2022 (2) TMI 308 - CESTAT NEW DELHI] is the most appropriate, giving detailed explanation for classification of goods similar to the subject goods under Heading 8471 It is also noted that Customs Authority for Advance Rulings, Mumbai examined the question of classification of similar goods and ruled for classification of such goods similar to the subject goods in sub-heading 8471 41 90, while referring to the Final Order of Hon ble CESTAT, New Delhi in an appeal filed by M/s. Ingram Micro India Pvt. Ltd. Thus, it is evident that the proposed items of import namely, Optoma Creative Touch 5-series Interactive Flat Panel (IFP) (Model-5652RK+, 5752RK+ 5862RK+V merit classification under sub-heading 8471 41 90 of the First Schedule to the Customs Tariff Act, 1975.
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Insolvency & Bankruptcy
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2024 (3) TMI 504
Calculation of the interest - admission of the claim by the Resolution Professional - HELD THAT:- The Adjudicating Authority in the impugned order having noticed certain instances and decided that with regard to claim charging of the interest should be examined and adjudicated, there are no error in the order of the Adjudicating Authority when direction has been passed to examine the interest charge in the claims. Till the issues are finalized, the Adjudicating Authority to balance the interest of the parties has directed that no further steps shall be taken for consideration and approval of the Resolution Plan. It is further to be noticed that the next date fixed is 12.03.2024 and in the interest of all concerned, Adjudicating Authority may take a decision on the application and thereafter further steps may proceed in accordance with the law. Appeal disposed off.
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2024 (3) TMI 503
Entitlement for the benefit of Section 14 of the Limitation Act - exclusion of period during pendency of Writ Petition and SLP was pending - Sufficient grounds exists to condone the delay or not - HELD THAT:- The Adjudicating Authority has referred to earlier order dated 11.10.2023 where Adjudicating Authority expressed its prima facie opinion with regard to limitation as well as on the default. When the Adjudicating Authority has granted time to the Respondent to file reply, it is always open for the Corporate Debtor to raise all issues including the issue of limitation and the issue of default - the prima facie view which was expressed by the Adjudicating Authority shall not come in the way of the Adjudicating Authority in deciding the issue after hearing the Corporate Debtor who is permitted to file reply. We see no reason to entertain the appeal filed against the order dated 28.11.2023. Appeal disposed off.
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FEMA
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2024 (3) TMI 502
Violation under FERA - export proceeds were not realized - as alleged transactions A1 to A3 have contravened the provisions of Section 18(2) and 18(3) of FERA Act, 1973 for failing to take steps to realize bill value of export proceeds and A2 and A3 abetted A1 in sending said consignments towards exports and the export proceeds were not realized, which is in violation of the said provisions of FERA - According to A1, the signatures on G.R.Forms were forged by A2, as such, she cannot be held responsible for the said exports. Export transactions are apparent and they were done on behalf of A1 s firm with the involvement of A2. A3 as the Customs House Agent had helped in the documentation for exports and received huge amounts for his services. HELD THAT:- Learned Sessions Judge in appeal found that A2 was using cell phone of A3 and he has made payments to A3 by way of cheques. The said cheques are Exs.P18 to P21 in the name of A3 issued by A1 on behalf of M/s.Sai International. Since the cheques were encashed, the complicity of A3 in the transactions cannot be doubted. Such huge amounts cannot be towards services of a custom house agent. The fact remains that the acts of A1 to A3 failing to realize the default value of the export proceeds, having availed duty draw back amount from the Customs Authorities in the name of M/s.Sai International is in violation of provisions of FERA. Both the Courts below have adjudicated the case on the basis of oral and documentary evidence. The grounds raised by the accused cannot form basis to set aside the well reasoned judgment of Courts below and the findings regarding the culpability of the petitioners. Both the Criminal Revision Cases are dismissed.
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Service Tax
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2024 (3) TMI 501
Refund of Service Tax - time limitation - date of payment as shown in the ledger account is 30.07.2015 and the submission of the party that cause of action for claiming refund is 31.01.2018, as the relevant date is the date of payment of duty in terms of explanation to Section 11B of the Central Excise Act, 1944 - Existence of provision under the GST Laws, which provides for refund of the service tax deposited by the Appellant? - HELD THAT:- The aspect of limitation in the facts and circumstances of the present matters, has already been decided by this Tribunal in the various cases, whereby it was held that the time limit prescribed under Section 11B of the Central Excise Act, 1944 cannot be invoked to reject a refund claim filed under Section 142(5) of the CGST Act, 2017 - reliance can be placed in M/S. WAVE ONE PRIVATE LIMITED VERSUS COMMISSIONER, OFFICE OF THE COMMISSIONER (APPEALS-I) , CENTRAL GOODS AND SERVICE TAX AND CENTRAL EXCISE, DELHI [ 2023 (11) TMI 1078 - CESTAT NEW DELHI] and M/S JAI MATESHWAARI STEELS PVT LTD VERSUS COMMISSIONER, CGST- DEHRADUN [ 2022 (3) TMI 49 - CESTAT NEW DELHI] . The learned Advocate further submits that in the absence of any services, Appellant cannot be burdened with the service tax liability - The Appellant as a law abiding citizen, entered the same in their books of account and paid the applicable service tax on it after collecting it from the buyer. But when the buyer cancelled the said booking on which service tax has been paid and the Appellant returned the booking amount along with service tax collected, then where is the question of providing any service by the Appellant to that customer. The cancellation of booking coupled with the fact of refunding the booking amount along with service tax paid would mean as if no booking was made and if that is so, then there was no service at all. If there is no service then question of paying any tax on it does not arise and the Department can t keep it with them. The Appellant had collected service tax from the allottees and had duly deposited such service tax with the Revenue. Subsequently, on cancellation of the bookings/allotments, the allottees were entitled to the entire invoice amount paid by them, including the service tax amount and the Appellant was eligible to avail Cenvat credit in respect of the service tax amount so deposited by it as per Rule 6(3) of the ST Rules. The said Rule provides for availment of Cenvat credit of the excess service tax paid by an assessee against a service which was ultimately not provided for any reason - In the present cases, the Appellant could not provide services to the allottees on account of cancellation of the bookings made by them. The credit/refund of the excess service tax paid by the Appellant was a right that had accrued in favour of the Appellant and therefore, as per Section 174 of the CGST Act, 2017, such right of the Appellant ought to be upheld and protected. Further, Section 142(5) of the CGST Act, 2017 contemplates the very situation as in the present appeals and accordingly, provides for refund of taxes paid under the erstwhile Laws. The Appellant is entitled for refund and the appeal is accordingly allowed.
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2024 (3) TMI 500
Scope of SCN - vague SCN - absence of specific demand of service tax under a particular service - Service tax on the Insurance commission received from Bajaj Alliance - service tax on reimbursements received by the appellant - service tax on TDS refund - interest - penalty. Vague SCN - HELD THAT:- The service tax of Rs.2,69,401/- has been demanded from the Appellant on the Appellant on the taxable value of Rs.22,77,358 received by them for the years 2006-07 to 2009-10. It is observed that neither the SCN dated 14.10.2011 nor the Order-in-Original dated 29.06.2012 has mentioned the specified category service under which the service tax has been demanded. In the absence of specific demand of service tax under a particular category of service, that the demand of service tax is not sustainable. This view has been held by Tribunal Hyderabad in the case of SYNIVERSE MOBILE SOLUTIONS PVT LTD., (EARLIER TRANSCIBERNET INDIA PVT LTD.) VERSUS COMMISSIONER OF CUSTOMS, CENTRAL EXCISE SERVICE TAX, HYDERABAD IV [ 2023 (6) TMI 463 - CESTAT HYDERABAD] , wherein it has been held Tribunals have been consistently holding that it is essential for the Show Cause Notice issuing authority to clearly indicate the sub-clause under which the service tax in question would fall. It is a settled law that the defect in the notice cannot be cured by the observations of the adjudicating authority or appellate authority. Accordingly, the demand of service tax along with interest and penalty confirmed in the impugned order is not sustainable as the SCN fails to specify the category of service under which the demand has been raised. Demand of service tax on the Insurance commission received from Bajaj Alliance - demand confirmed on the ground that the Appellant failed to substantiate that Bajaj Alliance for whom the Appellant has worked has paid the Service Tax - HELD THAT:- Board has issued Circular F. No. B11/1/2002-TRU, dated 1-8-2002, which provides that the Service tax would be paid by the Insurance Company and not the insurance agent. Relying on the Circular cited above, it is held that no service tax is payable by the Appellant on the amount received as Insurance commission. Demand of service tax on the reimbursements received by the appellant - HELD THAT:- The Appellant submits that they have acted as pure agent, as such, the invoices have been raised in the name of the principal and the exact amount has been reimbursed. The ledger would envisage that the exact amount spent on behalf of the principal has been reimbursed. Accordingly, it is held that the demand of service tax confirmed on the reimbursed expenses, where the Appellant acted as a pure agent is not sustainable. Demand of service tax on the TDS refund - HELD THAT:- There is no provision under the service tax act to demand service tax on TDS refund. Accordingly, it is held that the demand confirmed in the impugned order on this count is not sustainable. Interest and penalty - HELD THAT:- Since the demand itself is not sustainable, the question of demanding interest and imposing penalty does not arise. Accordingly, it is held that the demand of service tax along with interest and penalty confirmed in the impugned order is not sustainable. The impugned order set aside - appeal allowed.
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2024 (3) TMI 499
Levy of service tax - port services - business auxiliary service - providing services in the 'port area' in the capacity of a sub-contractor to the stevedores/main contractors - failure to pay Service Tax on services even though they were registered under the category of port services - HELD THAT:- Any service rendered within the port area by any person to any other person, in any manner has been brought under the Service Tax net under the category of port service only with effect from 01.07.2010 vide the Finance Act, 2010. Prior to this date, only such port services provided by a person authorized by the port in relation to a vessel or goods were liable to Service Tax under the category of port services. As the Respondent was not authorized by the port to render the services in the port area, the services rendered by them are not liable to Service Tax under the category of port services prior to 01.07.2010 - As the demand in this appeal pertains to the period from 2005-06 to 2007-08, it is held that the services rendered by the Respondent are not liable to Service Tax under the category of port services - there are no infirmity in the impugned order passed by the ld. adjudicating authority in dropping the demand of service tax under the category of port services. Demand of Service Tax under the category of business auxiliary service - HELD THAT:- The Respondent has given cranes and other equipments on hire to stevedores and other clients for handling of cargo. These services are classifiable under the category of supply of tangible goods service which has been brought under the Service Tax net only with effect from 16.05.2008. Thus, for the period prior to 16.05.2008, the services of hiring of equipment for handling of cargo in the port area cannot be charged to Service Tax under the category of business auxiliary service. Accordingly, there are no infirmity in the order of the ld. adjudicating authority in dropping the demand of service tax under the category of 'business auxiliary service'. The dropping of the demands by the ld. adjudicating authority in the impugned order upheld - appeal of Revenue dismissed.
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2024 (3) TMI 498
Eligibility for abatements under N/N. 15/2004 dated 10.09.2004 and N/N. 1/2006 dated 01/03/2006 - Maintenance and Repair service - Commercial or Industrial Construction Service - Erection Installation and Commissioning Service - Extended period of limitation - penalty - HELD THAT:- All these services have been rendered with materials. In respect of the cases where Repair and Maintenance service was done without materials, the appellant has charged service tax on the full value without claiming any abatement. This is evident from the findings recorded by the adjudicating authority in the Order-in Original. Hence, it is observed that the correct classification of the services rendered by the appellant would be Works Contract Service which was brought under ambit of service tax only with effect from 01.06.2007. Hence, the services rendered by the appellant prior to 01.06.2007 are not liable to service tax as held by the Hon'ble Supreme Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT] . Accordingly, the demand of service tax confirmed in the impugned order under the categories of Maintenance and Repair service, Commercial or Industrial Construction Service, provided with material, is not sustainable. In respect of the cases where Repair and Maintenance service was done by the appellant without materials, they have charged service tax on the full value without claiming any abatement. In respect of all these services, the appellant has collected the service tax from their clients under the category of Maintenance and Repair service, Commercial or Industrial Construction Service and paid the same to the Department. Hence, the service tax collected and paid by them to the Department is not liable for refund to them. Accordingly, the demand of service tax confirmed on the appellant up to 01.06.2007 is not sustainable on merits. After 01.06.2007 also, there is no demand made in the notice under the category of Works Contract Service . Hence, the demands confirmed under Maintenance and Repair service, Commercial or Industrial Construction Service and Erection Installation and Commissioning Service for the period after 01.06.2007 is not sustainable. However, since the appellant has collected the service tax and paid the same to the Department, they are not entitled for the refund of the service tax already paid by them. Time Limitation - HELD THAT:- The audit of the records of the appellant was conducted in November 2006 and the Show Cause Notice demanding service tax for the period April 2003 to September 2007 was issued only on 21.10.2008, by invoking the extended period of limitation. The appellant is registered with the Department in November 2004. Audit was also conducted in November 2006. Thus, we find that most of the demand raised are beyond the normal period of limitation - the demand, if any, within the normal period of limitation, is also not sustainable. Penalties - HELD THAT:- Appellant have paid service tax along with education cess amounting to Rs. 44,06,274/-immediately after the non-payment was pointed by audit. They have also paid late fee of Rs.14,000/- @Rs.2000/- per return. The appellant has calculated the above tax liability after availing the abatements provided under Notification No. 15/2004 dated 10.09.2004 for Maintenance and Repair service and Notification No. 1/2006 dated 01/03/2006 for Commercial or Industrial Construction Service, as they have provided such services with materials. In respect of the cases where Repair and Maintenance service was done without materials, the appellant has charged service tax on the full value without claiming any abatement. Thus, the notice itself need not have been issued as per the provisions of Section 73(3) of the Finance Act, 1994. Accordingly, the penalties under Sections 76, 77 and 78 of the Finance Act, 1994 confirmed in the impugned order is not sustainable. The impugned order is set aside - appeal allowed.
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2024 (3) TMI 497
Non-payment of appropriate service tax on the amount received from the said service recipient - providing taxable services on execution of agreements with Meghalaya State Electricity Board, Shillong for erection work on re-conductoring, feeder bifurcation and construction of new feeder - demand alongwith interest and penalty - HELD THAT:- As per the contract, the appellant was entitled for service charge on execution of work, which has been treated by Departmental Officers as service tax, this is the negligence on the part of the investigating officers for harassment of the appellant - Moreover, the Notification No.45/2010-ST dated 20.07.2010 was available with the Department. Despite that, they issued a show-cause notice to the appellant to harass the appellant - Further, during investigation, they recovered amount of service charge which is treated as service tax which is not permissible in law. In that circumstances, it is held that the appellant has borne the service tax, which has been forcefully recovered by the respondent from the appellant and the service recipient has not borne any part of the service tax involved in this case. The appellant is not required to pay service tax on their activities in the impugned order and whatsoever, the service tax was forcefully collected by the respondent from the appellant, the same is to be refunded to the appellant along with interest - the impugned order set aside - appeal allowed.
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2024 (3) TMI 496
Levy of service tax - Transportation of Gas through Pipeline and Conduit Service - Business Auxiliary Service - receiving consideration in the form of Minimum Demand Charges (MDC) for gas transportation from their customers. Demand on extra consideration in the form of MDC for gas transportation - total consumption of gas is falls 90% of the yearly booked quantity of gas by the customers - HELD THAT:- Aas the customer has failed to derive more than 90% through Pipeline, in that circumstances, the customer has to pay the penalty to the appellant. The amount received by the appellant by way of penalty, cannot be termed as the appellant has provided any service - the MDC received by the appellant, the appellant is not liable to pay service. Therefore, the demand confirmed in the impugned order quo minimum demand charges are set aside. Demand on realization of the sale value of gas on behalf of M/s Oil India Limited, Duliajan from the purchasers and from the consumers of gas along with royalty and marketing margin - HELD THAT:- It is reported that the marketing margins were collected from the customers for supply of gas on behalf of M/s Oil India Limited, Duliajan, which are also a sale value of the gas on which VAT has been paid and the said issue has been dealt with by this Tribunal in the case of GAIL INDIA LTD VERSUS CCE, DELHI [ 2017 (9) TMI 554 - CESTAT NEW DELHI] , wherein this Tribunal has held The jurisdictional authorities after examining the sale agreement, categorically held that the charges received by the appellant are part of sale of gas and cannot be subject to Service Tax. It was held that the value in dispute is included in the assessable value being part of the sale of gas and applicable VAT has been paid. Accordingly, the original authority dropped the demand for Service Tax. As the issue has been settled by this Tribunal in the case of GAIL India Limited, it is held that as on this marketing margin received by the appellant have already paid the VAT by M/s Oil India Limited, the appellant is not liable to pay the service tax thereon. In that circumstances, on marketing margin, the appellant is not liable to pay service tax. The impugned demands are not sustainable against the appellants and therefore, the same are set aside - Appeal allowed.
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2024 (3) TMI 495
Failure to discharge service tax liabilities - providing Business Auxiliary Service to the Govt. clients - Providing Services to the Ministry of Transport to the Govt. of Assam - Implementing IT Education under Education Department - Imparting IT Education under Rajiv Gandhi Computer Literacy Programme in Schools of Assam. Service provided by the Appellant to the Ministry of Transport to the Govt. of Assam - HELD THAT:- The Appellant has performed the functions of Ministry of Transport, which is a statutory function of the Govt. Hence, it is observed that the fees collected by them is not taxable service under the category of Business Auxiliary Service - the Appellant has referred Circular No. 89/7/2006-ST, dated 18.12.2006 issued under F.No. 255/1/2006-CX.4,in support of their contention that they are not liable to pay service tax for these services, but the adjudicating authority has not considered this Circular. There is no finding regarding the non availability of the Circular to the Appellant in the impugned order - the activity performed by the Appellant is a function to be performed by a public authority under the provisions of law and hence it does not constitute a taxable service for the purpose of levy of service tax - no service tax is leviable on such activities. Demand of service tax on the activities of Implementing IT Education under Education Department - HELD THAT:- The Department Circular No. 125/7/2010-ST issued under F.No. 354/35/2010-TRU dated 30.07.2010 categorically clarified that Levy and collection of service tax on State Government agencies/ departments implementing Centrally Sponsored Scheme under a central grant, is not legally tenable and therefore in such cases service tax should not be demanded - it is observed that even though the Appellant cited the Circular in their reply to the Notice, the adjudicating authority has not given any finding regarding the applicability of this circular in this case. This clarification clearly covers the Appellant's case. Relying on the Circular, the demand confirmed in the impugned order on this count is not sustainable and accordingly, the same is set aside. Service tax demand on the amount received in respect of Imparting IT Education under Rajiv Gandhi Computer Literacy Programme in Schools of Assam - HELD THAT:- The amount has been collected by the Appellant for implementing the Central Govt. sponsored scheme under Rajiv Gandhi Computer Literacy Programme. The Appellant cited the Circular No. 125/7/2010-ST issued under F.No. 354/35/2010-TRU dated 30.07.2010' wherein it has been clarified that Levy and collection of service tax on State Government agencies/ departments implementing Centrally Sponsored Scheme under a central grant, is not legally tenable. It is found that the contents of the Circular are squarely applicable in this case. Relying on the Circular, it is held that the demand confirmed in the impugned order on this count is not sustainable and accordingly, the same is set aside. Since the demand of service tax is not sustainable on the above three categories of services mentioned above, the demand of interest and penalty is also not sustainable. Accordingly, the same is set aside. Appeal disposed off.
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Central Excise
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2024 (3) TMI 494
Denial of CENVAT Credit - Input service or not - Inland Haulage Charges/Transport Charges - place of removal - HELD THAT:- The activity of transportation of goods for export is an input service provided it is availed upto the place of removal and that the service tax paid for transportation of goods upto the place of removal entitles the eligibility of availing cenvat credit there upon - Place of removal has not been defined in Cenvat Credit Rules however Section 4 (3) (C) of Central Excise Act, 1944 defines place of removal . However, Rule 2(t) of Credit Rules allowed import of definition of the terms under Excise Act for interpretation of the terms employed in the Credit Rules. Though the exporter always need not to appoint the CHA or the clearing and forwarding agent and can fulfill all the formalities on his own but the another peculiar admitted fact of the present case is that the goods were agreed to be exported on FOB basis. FOB in shipping terms indicate who owns the goods during transit and who pays for the shipping associated fees and other freight charges. There is nothing on record to show that the appellant as manufacturer-exporter has incurred the expenditure till the time the goods are put on the vessel at the Gateway Port. As the appellant had also impressed upon the concept of the sale, it is observed that the said aspect has already been decided by the Hon ble Apex Court in the case of COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE, NAGPUR VERSUS M/S ISPAT INDUSTRIES LTD. [ 2015 (10) TMI 613 - SUPREME COURT] , the Hon ble Apex Court in the said case has held i nvoices were prepared only at the factory directly in the name of the customer in which the name of the Insurance Company as well as the number of the transit Insurance Policy were mentioned. Above all, excise invoices were prepared at the time of the goods leaving the factory in the name and address of the customers of the respondent. When the goods were handed over to the transporter, the respondent had no right to the disposal of the goods nor did it reserve such rights inasmuch as title had already passed to its customer. Though the appellant has relied upon the Board Circular of 2007 and 2014 but both the circulars are prior to impugned decision in Ispat Industries Ltd. case otherwise also both these circulars stands superseded by the other circular of 2015 as relied upon by the department and of 2018 as has been issued subsequent to the decision in Ispat Industries Ltd. The Inland haulage charges from ICD Garhi Harsaru to shipping port, Pepavav were the charges for the service received beyond the place of removal, hence, the appellant has rightly been disallowed the availment of cenvat credit thereupon. Finding no infirmity in the order under challenge, the same is hereby upheld. Appeal dismissed.
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2024 (3) TMI 493
Activity amounting to manufacture or not - work of printed labels and printed cartons for corrugated boxes falling under Tariff Heading 48211020 and 48191010 of Central Excise Tariff Act, 1985 - manufacture and clearance of printed labels without assessing the duty involved thereon, without payment of duty and without issuing proper invoices for clearances of such goods during the period January 2007 to March 2011 - contravention of provisions of Rules, 4, 6, 8, 10, 11 and 12 of Central Excise Rules, 2002 - vague SCN - HELD THAT:- The case of the department is that the appellant is a job worker who received raw material from the customers and do the activity of printing which amounts to manufacture of finished products. However, in the show cause notice or in the Order-in-Original it is not explained by department as to which is the provision which renders the activity of printing undertaken by the appellant excisable so as to be manufacture . The Department has construed the activity of printing to be manufacture, merely because the goods fall under tariff heading 482110. The classification of the goods or its excisability cannot be a ground for holding that the activity amounts to manufacture . The department has to establish that the activity undertaken by the appellant as per the chapter notes of Section 48 to be that of manufacture. In the present case, there is nothing brought out on record to hold that the activity of printing is manufacture by chapter notes. In the case of M/S MATCHWELL VERSUS C.C.E. -AHMEDABAD-I [ 2019 (6) TMI 1019 - CESTAT AHMEDABAD] , the Tribunal had occasion to consider similar issue. It was held that merely because the goods are classifiable under a particular tariff heading, it cannot be said that the activity undertaken by the appellant in the nature of printing of images on paper would amount to manufacture . In the case of HBD PACKAGING (P) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, NOIDA [ 2013 (5) TMI 33 - CESTAT, NEW DELHI] , similar issue was considered wherein it was held that the activity of printing and plastic / varnish coating of plain paperboard as per customer s specification either purchased by assessee or received for job work does not amount to manufacture. It was held that the basic character of paper board has not changed. Thus, the activity of printing done by the appellant does not amount to manufacture . The demand of Excise duty, interest and the penalties imposed cannot sustain. The demand, interest and penalties are set aside. The impugned order is set aside. Appeal allowed.
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2024 (3) TMI 492
Recovery of CENVAT Credit already taken - allegation is that the Invoices under which the Cenvat Credit has been taken are not proper documents in terms of Rule 9 Rule 11 of the Cenvat Credit Rules, 2004 - time limitation - suppression of facts or not - HELD THAT:- Admittedly, there is no dispute that the goods in question have been received by the Appellant and the same have been taken in their Stock Register and have been consumed by them in the factory premises. On going through the endorsed invoices, it is seen that the agent Krishna Chemicals has endorsed to the effect that the entire consignment in respect of the Invoices have been sold to the Appellant. Coming to the Circular issued on 05/05/2015, it is seen that under Para 5 (iii), it has been clarified that when unregistered dealer sells the entire consignment in respect of particular invoice with endorsement to that effect, the recipient would be eligible to take the Cenvat Credit - this Circular has been issued clearly specifying that clarifications are being given after the amendments have been carried out vide Notification No. 08/2015-CE (NT) dated 01/03/2015. Therefore, the Commissioner (Appeals) is correct in taking the stand that the Circular would be effective from 01/03/2015 only cannot be applied retrospectively for the period 2012-13 and 2013-14. However, when compared the amendments carried out under Notification No. 08/2015 and the clarifications given in the Circular, it is found that this Notification No. 8/2015 has not amended any provision with regard to the endorsement to be done by un-registered dealer. Thus, the unregistered dealer Krishna Chemicals has correctly endorsed the invoice and the Appellant has correctly taken the Cenvat Credit. Further, there is no dispute about the goods having been received and used by the Appellants. Therefore, on merits the appeal succeeds. Time Limitation - suppression of facts or not - HELD THAT:- There are force in the arguments of the Learned Advocate that the Appellant has received the goods, taken the same in the stocks and accounted for the same in RG 23A Part I and Part II and also has declared the details in their Monthly ER-1 Returns. Therefore, the Department has not made out any case of suppression against the Appellant. Accordingly, the confirmed demand is required to be aside on account of limitation also. Appeal allowed.
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2024 (3) TMI 491
Maintainability of appeal - non-prosecution of the case - when the matter was called neither anybody appeared nor is there any adjournment request - HELD THAT:- The appellant counsel have received the notice for hearing. However he has not shown any interest in pursuing this matter. From the facts given, it is observed that the matter is pending only for the reason that appellant/counsel on record is not responding to the notices for hearing issued making it evident that they are not interested in prosecuting this matter any further. Having allowed a sufficient number of opportunities to the appellant/appellant s counsel for hearing, there are no reason to further adjourn this matter. Interestingly in this case this appeal filed by the appellant was earlier also dismissed for non prosecution. Subsequently it was restored by the bench on application made by the appellant. However it is observed that that appellant chose not appear even at the time of hearing of the miscellaneous application also appellant was not represented and restoration was done in absentia. Even after restoration appellant has not shown any interest towards prosecuting this appeal. Even in response to the hearing notice no communication has been made by the appellant/ appellant s counsel. In case of Ishwarlal Mali Rathod [ 2021 (9) TMI 1301 - SUPREME COURT] condemning the practice of adjournments sought mechanically and allowed by the courts/ Tribunal s Hon ble Supreme Court has observed considering the fact that in the present case ten times adjournments were given between 2015 to 2019 and twice the orders were passed granting time for cross examination as a last chance and that too at one point of time even a cost was also imposed and even thereafter also when lastly the High Court passed an order with extending the time it was specifically mentioned that no further time shall be extended and/or granted still the petitioner defendant never availed of the liberty and the grace shown. In fact it can be said that the petitioner defendant misused the liberty and the grace shown by the court. It is reported that as such now even the main suit has been disposed of. Appeal is accordingly dismissed for non prosecution in terms of Rule 20 of the CESTAT Procedure Rules, 1982.
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2024 (3) TMI 490
Method of valuation - section 4 or 4A of CEA - Packaged Drinking Water - SSI Exemption - Eligibility for abatement Notification No.2/2006, 14/2008 and 49/2008 - threshold exemption limit of Rs.150 lakhs of all the four units crossed - failure to account details of production and clearance in daily stock account - non-issuance of invoices - non-payment of duty - Demand alongwith interest and penalty - invocation of Extended period of limitation - HELD THAT:- The whole confusion has arisen for the reason that the Notification No.2/2006-CE (NT) [noticed in para 14 above] has mentioned the chapter heading in Col. 2 as CETH 22019090 as well as 22011010. As per the Tariff Act, Heading 22011010 applies to Mineral Waters and Heading 22019090 applies to Packaged Drinking Water . However, the description in column (3) of the notification is given as Mineral Waters . The department has therefore held that the Packaged Drinking Water would fall within the category of Mineral Water . A product has to be classified on the basis of Tariff Act and not on the basis of the notifications. The present notifications are Central Excise Notifications giving the details of abatement in regard to valuation of goods under Section 4A. Merely because the chapter heading, sub heading has been mentioned in Col. 2, the goods cannot be said to be assessed under Section 4A unless the goods also fall under the description given in Col.3. At the cost of repetition, in Column 3 of Notification No.2/2006, 14/2008 and 49/2008, the description of goods is given as Mineral Water only. The process of manufacturing Mineral Water and Packaged Drinking Water is different. From the Circulars issued by the Board, it can be seen that when no minerals are added to the water, it cannot be classified as mineral water. So also, it is clarified by the Board that when the water is demineralized by reduction of minerals the same would form artificial mineral water . The Packaged Drinking Water is entirely different product falling under separate chapter sub-heading. Further, the price of Packaged Drinking Water is less than the price applicable to Mineral Water. Again, BIS specification for Mineral Waters is different from that of Packaged Drinking Water. The appellant has been issued BIS certification for packaged drinking water as IS 14543. The valuation of the product has to be based upon the classification of the product. When the classification unambiguously falls under 22019090 the valuation has to be on transaction value as per Section 4 of Central Excise Act, 1944. Merely because the abatement notification mentioned heading 22019090 in column (2) it cannot be said that the Packaged Drinking Water is included in the Mineral Waters. Interestingly, the department does not dispute the classification adopted by appellant for packaged drinking water . However, department construes that packaged drinking water is mineral water as per notifications 2/2006, 14/2008 and 49/2008. These notifications are issued under subsection (1) and (2) of Section 4A - The department is of the view that sub-heading 22019090 applicable to packaged drinking water when mentioned in column (2) of the notification, it is implied that packaged drinking water is to be included in the category of mineral water. This view cannot be endorsed with. Taxation statutes cannot be interpreted on any presumptions or assumptions. In other words, there is no implied power of taxation. It has often been held by courts that subject goods is not to be taxed, unless the words of the statute unambiguously impose a tax. An ambiguity in a taxation provision is to be interpreted in favour of assesee. In Notification 49/2008, the Sl.No.24 referred to Mineral Water and Sl.No.25 to Aerated Water . As per amendment brought forth in Notification 49/2008 w.e.f. 1.3.2015, a new Sl.No.25A was added which referred to all goods except mineral water and aerated water . This makes it clear, that drinking water was never intended to be specified as goods to which Section 4A would apply - the duty demand cannot sustain. Time Limitation - Penalty - HELD THAT:- The issue is purely interpretational in nature. Further, there were earlier notices issued to the appellant on the very similar set of facts. In other similar matters, the department has set aside demand and taken the view that Packaged Drinking Water cannot be assessed under Section 4A of the Act ibid. For these reasons, the invocation of extended period cannot sustain. For the same reasons, the penalty imposed on the Executive Director of appellant-company is not warranted and requires to be set aside. The impugned order is set aside - Appeal allowed.
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2024 (3) TMI 489
Reversal of CENVAT Credit - duty paying document - reversal sought on the ground that while WCMIL was not eligible to take Cenvat credit as the same was imported by M/s. Neo Metaliks Limited (NML) who had paid the CVD - it is alleged that invoice issued by WCMIL is not a proper document for availing the Cenvat credit - HELD THAT:- If the department had any dispute that WCMIL was not eligible to take Cenvat credit of the CVD paid by NML, it was for the Department to initiate action against WCMIL. From the appellant s side, they have received the invoices from WCMIL and after finding that Excise Duty payments have been properly recorded in the invoices, they have taken the Cenvat credit. After converting the cooking coal to Metcoke, treating this activity not as a mere job work, but as a jobwork amounting to manufacture, they have paid the Excise Duty on the finished goods by way of PLA and RG-23A part-II as recorded by the Commissioner(Appeals). There are no reason to interfere with the considered order passed by the Commissioner(Appeals) - appeal of Revenue dismissed.
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2024 (3) TMI 488
Liability to pay interest on the goods cleared to their sister unit in terms of proviso to Rule 9 read with Rule 8 of the Valuation Rules, 2000 - duty was levied @ 110% of the cost of production determined on the basis of annual CAS-4 certificates/guidelines of stock transferred goods in accordance with CBEC Circular No.692/08/2003-CX dated 13.02.2003 - Revenue Neutrality - HELD THAT:- The only argument that the Ld.Commissioner has been able to make out in his order is the proposition that since the value of goods could not be determined at the time of clearance, the appellant could have opted for provisional assessment for delayed payment of duty, interest as automatic and is better considered as compensation . For these findings, the Ld.Commissioner has relied upon the Hon ble Supreme Court s pronouncement in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS INTERNATIONAL AUTO LTD. [ 2010 (1) TMI 151 - SUPREME COURT] . At the outset it may be pointed out that the aforesaid two situations relied upon by the Ld.Commissioner(Appeals) do not cater to a situation of revenue neutrality and are concerned where price revision had happened and duty short paid was subsequently paid by way of supplementary invoices raised in favour of the customers to whom the goods were sold form the factory gate. There is marked difference with the scenarios and for this reason, the aforesaid Supreme Court s decisions are not applicable to the facts of the present case. It is not deniable that there ought to be an adjustment of excess duty paid against the cases of short payment of duty. However, the appellant is not seeking any such interference at this stage. It is a fact that ignoring duty paid in excess and only considering the duty that has been short paid would lead to an anomalous situation where it would tantamount to retention of undue tax by the Government in clear violation of the stipulation of Article 265 of the Constitution. Revenue Neutrality - HELD THAT:- There are series of cases wherein it has been held that in a revenue neutral situation demand for duty does not arise - Reliance can be placed in the case of Hindalco Industries Ltd. v. CCE, Bhubaneswar-II [ 2023 (5) TMI 720 - CESTAT KOLKATA] . Further, even if the disputed amount of duty is paid by the appellant, question of saddling them with payment of interest clearly does not arise. In the present matter, no case has been made out by the department - the order of the lower authority set aside - appeal allowed.
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CST, VAT & Sales Tax
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2024 (3) TMI 487
Levy of interest on late payment of profession tax - requirement to deduct the profession tax from the salaries and wages of the employees - time limit for filing return and payment of profession tax under the Andhra Pradesh Tax on Professions, Trades, Callings and Employments Act, 1987 - interest for delayed payment of tax - HELD THAT:- In State of Himachal Pradesh v. Himachal Techno Engineers [ 2010 (7) TMI 875 - SUPREME COURT] one of the questions which arose was that whether the period of three months can be counted as 90 days while answering, the Hon ble Apex Court held that, considering Section 34 (3) of the Arbitration and Conciliation Act 1996 and also the definition of month as defined in Section 3 (35) of the General Clauses Act, 1897 that the legislature had the choice of describing the periods of time in the same units, that is, to describe the periods as three months and one month respectively or by describing the periods as ninety days and thirty days respectively. It did not do so. Therefore, the legislature did not intend that the period of three months used in sub-section (3) to be equated to 90 days, nor intended that the period of thirty days to be taken as one month - The Hon ble Apex Court clearly held that a month does not refer to a period of thirty days, but refers to the actual period of a calendar month. The present case pertains to the period prior to the amendment in Rule 12 by which a specific date i.e., on or before 10th day of the month succeeding the month for which the return has to be filed, has been specified. The further submission of the learned counsel for the petitioner based on the amendment in the year 2011 is that it the amendment , fortifies that there was no date prescribed prior to the amendment and consequently, the same has been specified by way of amendment and consequently, there would be no liability for payment of interest. The said submission also deserves rejection. Even if there was no specified date, as has now been incorporated in Rule 12, it cannot be said that there was no date prescribed for filing return or/and payment of tax - Now in view of the amendment of Rule 12 (1) the said period is on or before 10th day of the month succeeding the month for which the return has to be filed . From the aforesaid provisions of Sections 4, 5, 7, 11, 12 of the Act 1987; the Rules 12 unamended (as the present case is prior to amendment), 13, 24 of the Rules 1987 and Form-V, it is evident that the liability for payment of interest on tax is on the assessee, if the assessee does not deduct the tax at the time of payment of salary or wages. Liability would also be if after deducting, the assessee fails to pay the tax as required by or under the Act. Such liability was monthly liability for payment of tax and filing of returns. This liability to pay the interest is in addition to the amount of profession tax if the same was not paid on monthly basis i.e., up to the last date of the succeeding month for which the return had to be filed. There are no substance in the submissions advanced by the learned counsel for the petitioner that there was no liability to make payment of interest, as there was no time specified for payment of professional tax - the impugned order does not suffer from any illegality. Petition dismissed.
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Indian Laws
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2024 (3) TMI 486
Dishonour of Cheque - civil nature dispute - main contention of the petitioners is that the transaction between them and respondent No. 2 was purely of civil nature as such, the respondents could not have given a criminal colour to it by registering the impugned FIR - whether in the face of aforesaid nature of dispute between the parties, it would be open to set the criminal proceedings into motion at the instance of one party to the dispute against the other and whether this Court in exercise of its jurisdiction under Section 482 Cr.P.C. can quash impugned proceedings? HELD THAT:- This issue has been discussed and deliberated upon by the Supreme Court in the case of INDIAN OIL CORPORATION VERSUS NEPC INDIA LTD ORS [ 2006 (7) TMI 575 - SUPREME COURT] has held that A commercial transaction or a contractual dispute, apart from furnishing a cause of action for seeking remedy in civil law, may also involve a criminal offence. As the nature and scope of a civil proceedings are different from a criminal proceeding, the mere fact that the complaint relates to a commercial transaction or breach of contract, for which a civil remedy is available or has been availed, is not by itself a ground to quash the criminal proceedings. The test is whether the allegations in the complaint disclose a criminal offence or not. From the foregoing enunciation of the law on the subject, it is clear that a commercial transaction or a contractual dispute apart from furnishing a cause of action for seeking remedy in civil law, may also involve a criminal offence. It is also clear that the scope of a civil proceeding is different from a criminal proceeding and the mere fact that the allegations relate to a commercial transaction or breach of contract for which a civil remedy is available, is not by itself a ground to quash the criminal proceedings. In the present case, the petitioner-Mohd Afzal Beigh despite having the knowledge that he was not the owner of the property in question, represented to respondent No. 2 that he is owner of the property in question. Whether the action of petitioner-Mohd. Afzal Beigh amounts to the offence of cheating? - HELD THAT:- The fraudulent intention on the part of petitioner Mohd Afzal Beigh was existing there from the very inception of the transaction between the parties. It is not a case where petitioner-Mohd Afzal Beigh was owner of the property and he had agreed to sell the said property to respondent No. 2 and for any reason, he could not execute the sale deed, but it is a case, where he falsely represented to respondent No. 2 that he is owner of the property in question, which he was not. So from the very beginning, he was knowing that it was not within his power and competence to execute the sale deed in respect of the land in question in favour of respondent No. 2, but despite this, he entered into agreement to sell with respondent No. 2 and made her to part with partial amount of sale consideration. Thus, offence under Section 420 IPC, which is a cognizable offence, is made out from the allegations made in the complaint and the material available on record. Petitioner-Mohd Afzal Beigh has executed a number of affidavits declaring therein that he has received an amount of Rs. 1.80 crores from respondent No. 2, which he has been unable to repay to her. Subsequently cheques have also been issued by his wife petitioner- Fehmida Kouser in connection with repayment of the aforesaid amount but the cheques have been dishonoured, in respect of which separate proceedings are stated to be pending. There are allegations against the petitioners that after receiving the amount from respondent No. 2 they have diverted the funds and out of the said funds, petitioner-Abdul Rashid Beigh has constructed a building in his village. This prima facie goes on to show that the petitioners were having fraudulent intention while entering into transaction with respondent No. 2 and all the petitioners appear to be having a role in it. The power under Section 482 Cr.P.C. to quash the criminal proceedings has to be exercised sparingly only in deserving cases in the circumstances illustrated in the aforesaid judgment. Even allegations of mala fides against the informant by itself is not a ground for quashing the criminal proceedings. The defence set up by the petitioners particularly the petitioners-Abdul Rashid and Fehmida Kouser can be looked into by the Investigating Agency during the investigation of the case and not by this Court in their proceedings by holding a mini trial. Having regard to the fact that allegations made in the impugned FIR disclose commission of cognizable offences, therefore, exercise of jurisdiction under Section 482 Cr.P.C. to quash the proceedings in the instant case would amount to stifling a legitimate prosecution, which is not permissible in law. There are no merit in the instant petitions. The same are dismissed.
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