TMI Tax Updates - e-Newsletter
March 2, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Release of conveyance alongwith the goods - in the E-way bill which is one of the essential document to be carried otherwise by the conveyance, Part-B was not updated - before such completion of adjudication proceedings since the goods have been detained from 18.01.2022 and the goods is chemical component, the same may be directed to be released, of course with some conditions. - HC
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Income Tax:
The income accrued or arisen to, or received by, a non-resident as a result of transfer of non-deliverable forward contracts under clause (4E) of section 10 of the Act, shall be exempted subject to fulfillment of the conditions under rule 21AK
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Income Tax:
Form no 56FF of particulars to be furnished along with ITR for claiming deduction u/s 10A(1B)(b) - Rule 16DD of the Income-tax Rules, 1962 which was omitted w.e.f. 29-7-21 re-introduced vide notification dated 29.12.21 w.e.f. 29-7-21
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Income Tax:
Determination of income of a specified fund attributable to the investment division of an offshore banking unit under sub-section (1B) of section 115AD of the Act - Rule 21AJAA of the Income-tax Rules, 1962 - w.e.f. 1-4-2022
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Income Tax:
Computation of exempt income of specified fund, attributable to the investment division of an offshore banking unit, for the purposes of clause (4D) of section 10 of the Act - Rule 21AJA of the Income-tax Rules, 1962 - W.e.f. 1-4-2022
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Income Tax:
Computation of capital gains for the purposes of sub-section (1B) of section 45 - Rule 8AD of the Income-tax Rules, 1962 - Receipt of any amount under a specified unit linked insurance policy, including the amount allocated by way of bonus on such policy
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Income Tax:
Deduction of interest on accrual or actual payment basis - interest payable under clause (d) of section 43B - Thus the orders of the Tribunal are set aside and the matters are remanded to the Assessing Officer to examine, whether M/s.Infrastructure Leasing and Financial Services Limited (IL&FS) is a public financial institution; and if it is in affirmative, then, section 43B(d) r/w explanation 3C will be applicable; and pass orders afresh - HC
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Income Tax:
Correct head of income - Treating the receipts of compensation for vacating tenancy to be assessable as “Capital Gains” instead of income under the head “Profit and Gains of Business or Profession" - The Court took note of the circular issued by the CBDT being Circular No. 684 dated 10th June, 1994, which was issued to meet the situation created by the decision in B. C. Srinivasa Setty (supra). By Finance Act, 1994, Section 55(2) was amended to provide the cost of acquisition, inter alia, the tenancy right could be taken as nil. By this amendment the judicial interpretation put on capital assets for the purposes of the provisions relating to capital gains was met. - HC
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Income Tax:
Exemption u/s 11 - accumulation of income - In section 11(6), it is specifically provided that "In this section, where any income is required to be applied or accumulated or set apart " does not make any distinction as to whether such income should be only revenue receipts and not capital receipts in the form of corpus donation with specific directions for construction of the hospital building and other infrastructural facilities as brought on record by the assessee. The legal position as existing at the relevant of point, we find no infirmity in the order passed by the ld.CIT(A) in allowing the claim of the assessee. - AT
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Income Tax:
TDS u/s 194H - commission payment to dealers - commission payment to dealers for distribution of SIM cards and recharge coupons of telecom service providers - whether there is principal and agent relationship between the assessee and dealers? - discount offered by the assessee to dealers for distribution of SIM cards and recharge coupons is in the nature of commission which is liable for TDS u/s.194H - AT
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Income Tax:
Addition u/s 68 - the source for cash deposit into assessee’s bank account is out of distribution of assets by HUF and thus, there is no reason to the AO to disbelieve the claim of the assessee that the source for cash deposit is out of amount received from HUF. - AT
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Income Tax:
Addition on account of deemed dividend u/s 2(22)(e) - advance on account of business transaction cannot be categorized as loans so as to attract deeming fiction under section 2(22)(e) of the Act. - AT
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Income Tax:
Penalty u/s 271(1)(c) - Having capitalized the amount of foreign exchange fluctuation in the relevant block of assets reveals its clear intent of treating it as capital expense. Not adding it back while computing the income for the year can be safely beleived to be mistakenly done unless otherwise proved. - We agree with the assessee that it was mistake on his part for not having added the amount to his income. There is, therefore we hold no case for levy of penalty u/s 271(1)(C) of the Act - AT
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Income Tax:
Correct head of income - Capital gain or business income - income from sale of land - . Merely because, the assessee earned huge profits thereon cannot alone be the criteria or basis for understanding the intention of the assessee in undertaking the transaction. - There was no basis at all with the A.O. for treating the transaction as an adventure in the nature of trade. - AT
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Income Tax:
Deduction u/s 35(2AB) - research and development expenses - The position is clear that prior to amendment introduced w.e.f. 01/07/2016, the deduction u/s 35(2AB) of the Act would be available to an assessee having an approved in-house R&D facility by the prescribed Authority Act and there is no mention of approval of the ‘quantum’ of expenditure in the law as it stood prior to that date. The mandate of quantification of expenditure has been put in place only w.e.f. 01.07.2016. - Claim allowed - AT
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Income Tax:
Penalty u/s 271(1)(c) - bogus purchases @ 25% on total purchase - After analyzing the order of the A.O. as well as the ld. CIT(A), we also found that both the lower authorities had made respective additions on the basis of estimation and it is settled law that no penalty can be levied on disallowance made on the ground of unverifiable purchases - AT
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Customs:
Levy of ADD - determination on the non-injurious price - It is stated that some of the issues pertaining to the factual and circumstantial inputs which otherwise are provided by the domestic industry can also be verified from the contemporary data on the same transaction which may be available with the GST department and in order to arrive at a correct factual determination, such data may also be taken into consideration. - The reasoned order as required be passed as expeditiously as possible so that the process initiated under the law is not inhibited in any manner. - HC
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Corporate Law:
NFRA - National Financial Reporting Authority (Manner of Appointment and other Terms and Conditions of Service of Chairperson and Members) Amendment Rules, 2022 - Notification
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Indian Laws:
It is well established that an advocate is a guardian of constitutional morality and justice equally with the Judge. He has an important duty as that of a Judge. He bears responsibility towards the society and is expected to act with utmost sincerity and commitment to the cause of justice. He has a duty to the court first. As an officer of the court, he owes allegiance to a higher cause and cannot indulge in consciously misstating the facts or for that matter conceal any material fact within his knowledge. - it would be open to the CMM/DM to appoint an advocate commissioner to assist him/her in execution of the order passed under Section 14(1) of the 2002 Act. - SC
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Indian Laws:
Unauthorized and illegal encashing of Kisan Vikas Patras (KVPs) - Fraud / Cheating - endorsement of KVP - Presumptions as to negotiable instruments - Negligence on the part of appellant / contributory negligence - a KVP can also be encashed at any other post office if the Officer-in-charge of that post office is satisfied, on production of the identity slip or on verification from the post office of issue, that the person presenting the certificate for encashment is entitled to encashment. Thus, it cannot be said that the KVPs are simple bearer instruments payable to anyone who presents the same for encashment and discharge. - SC
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IBC:
Non-Bailable Warrants of Arrest - The procedure adopted by the Tribunal is in conformity with the NCLT Rules, 2016 as well as order XVI Rule 10 of the Code of Civil Procedure, 1908 - the provision of Order XVI Rule 10 of the Code of Civil Procedure which empowers the Tribunal to issue warrant either with or without bail for arrest of such person. The condition that such person has without lawful excuse, failed to attend or to produce the document in compliance with such summons were fully met and it cannot be said that conditions for issuance of Non-Bailable Warrant were not satisfied. - AT
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IBC:
Closure of liquidation process - sale of the Corporate Debtor as a going concern - It is no longer Res Integra that while approving a ‘Corporate Debtor’ sale as a ‘going concern’ in Liquidation Proceedings without its dissolution in terms of Regulation 32(e) of the Liquidation Process Regulations, 2016, it is essential to see that the ‘Corporate Debtor’ is not burdened by any past or remaining unpaid outstanding liabilities prior to the sale of the Company as a ‘going concern’ and after payment of the sale proceeds distributed in accordance with Section 53 of the Code - AT
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Service Tax:
Reimbursement of service tax - works contract - It is clear that irrespective of the fact who has to pay the service tax under statute, the parties by contract can fix the liability on any one between them. It goes without saying that if the contract is silent as in the instant case, one has to necessarily fall back on the statute to fix the liability. As rightly contended by the learned Standing Counsel for respondents, the agreement dated 20.07.2015 is silent on the liability of service tax being born by whom. Therefore, primarily the petitioner is responsible to pay the service tax - the petitioner cannot, as a matter of right, claim that the respondents should reimburse the service tax paid by him. - HC
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Service Tax:
Construction of residential complex - It appeared to Revenue that the appellant is also collecting one time Preferential Location Charges, Car Parking Charges, Club Membership Charges, Interest Free Maintenance Security charges (IFMS), Internal or External Development Charges, Electrical charges, Power Back up charges etc. from their buyers over and above the basic price of flat - the service tax is not payable on such hypothetical calculation, there being no actual consideration towards these, which is an admitted fact. - AT
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Service Tax:
Refund of service tax - Export of goods - allegation of illicit mining - Levy of tax on illegal activities / illegal export. - unless there is any provision to the contrary, the charging sections of the tax laws apply to illegal acts as they apply to legal acts and therefore tax is leviable notwithstanding that action for the illegal actions may be taken under some other law. This does not amount to endorsing the illegal activity by the State but only the recognition that it has taken place. This taxes illegal businesses and does not absolve them of their tax liability by virtue of their illegality. Since tax is leviable on illegal activity, tax benefits or tax relief are equally available to illegal businesses. - AT
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Central Excise:
CENVAT Credit - receipt of raw materials or inputs - non-existent dealers - the burden is cast upon the Revenue to prove that it was merely a paper transaction, and goods were not received by the assessee-Appellant, as alleged, which it failed - AT
Articles
Notifications
News
Case Laws:
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GST
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2022 (3) TMI 42
Release of conveyance alongwith the goods - in the E-way bill which is one of the essential document to be carried otherwise by the conveyance, Part-B was not updated - HELD THAT:- When the interception was made on 18.01.2022, it was found by the respondents that, Part-B of the E-way bill was not updated. However, it is the case of the petitioner that, on 18.01.2022 at 10.45 a.m, a corrected E-way bill was generated, where Part-B also had been updated with necessary details including the vehicle number - it is the case of the petitioner that, if a date is given, particularly on that date, the petitioner would appear to give his show cause with documents and thereafter, let the adjudication go on and be completed at the earliest. However, before such completion of adjudication proceedings since the goods have been detained from 18.01.2022 and the goods is chemical component, the same may be directed to be released, of course with some conditions. Whether the Part-B updation admittedly was not available on the date of interception, subsequently has been updated? - HELD THAT:- It is a matter of merit to be decided by the adjudicating authority, for which show cause notice alredy been issued. Insofar as the said show cause notice is concerned, let there be a specific date to be specified by the respondents Revenue and communicate the same immediately to the petitioner, on that date, it is open to the petitioner to appear before the respondents and to give show cause with his documents. Thereafter the respondents can decide the same by way of adjudication and pass final orders - insofar as the releasing of the goods are concerned, during the pendency of the adjudication proceedings, this Court feel that, the goods in question, being chemicals, can be directed to be released by way of provisional release, of course with certain condition. The condition being the petitioner shall execute a Bank guarantee for the equal sum of the tax due / tax demanded by the Revenue and on receipt of such Bank guarantee, the goods in question can be released by the respondents. There shall be a direction to the respondents to give a specific date for personal hearing to the petitioner and the same shall be intimated to the petitioner immediately and on receipt of the same, the petitioner shall appear on the date without fail and give his defence with documents. Thereafter, it is open to the Revenue to complete the adjudication and pass a final order as early as possible - Petition disposed off.
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2022 (3) TMI 44
Search and seizure - retraction of payment which was alleged to be forcibly made - HELD THAT:- The case of the petitioner is at the investigation stage and writ court should not interfere with the investigation, however, the alleged forcible payment will abide by the final outcome of the investigation. During the pendency of the investigation proceeding before the authority concerned, respondent concerned is directed to consider the representation of the petitioner dated 30th December, 2021 within three weeks from date in accordance with law and by giving an opportunity of hearing to the petitioner or its authorized representatives. Petition disposed off.
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2022 (3) TMI 43
Maintainability of two parallel proceedings under CGST Act in two places over the self-same incident and cause of action against the petitioner - HELD THAT:- It is submitted by petitioners that two parallel proceedings are not prima facie maintainable against the petitioner. Having heard the learned Senior Counsel for the petitioners, this Court is of the view that the petitioners have been able to make out an arguable case and accordingly, the instant petition is admitted for hearing - Since the respondents have already been served, they are at liberty to file affidavit-inopposition within three weeks from the date and serve a copy of the same to the learned Advocate for the petitioner. Considering the fact that over the self-same incident of alleged evasion of tax two proceedings are prima facie not maintainable and in view of sudden surge in Covid cases, the proceedings at Kolkata initiated against the petitioners be stayed till 9th February, 2022 or until further order, whichever is earlier.
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Income Tax
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2022 (3) TMI 37
Addition on account of late deposit of ESI and EPF contribution from the employees - Payments payments were made by the assessee before filing of the due date of filing the return of income - HELD THAT:- It is undisputed fact that the payments were made beyond due date of specified time mentioned in the Provident Fund Act. It is also admitted fact that the payments were made by the assessee before filing of the due date of filing the return of income. On this aspect, the coordinate Bench of ITAT, Visakhapatnam [ 2021 (9) TMI 1350 - ITAT VISAKHAPATNAM] under similar set of facts decided the issue in favour of the assessee, relying on the decision of Hon ble Karnataka High Court in the case of Essae Teraoka (P) Ltd. [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT] - Decided in favour of assessee.
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2022 (3) TMI 36
Disallowance of interest u/s 36(1)(iii) - interest free loans and advances given by the assessee - HELD THAT:- We have gone through the order of the ITAT in the case of assessee in assessment year 2010-11 [ 2019 (2) TMI 2004 - ITAT AHMEDABAD] and we have noted therefrom that the ITAT on finding that the assessee s pleadings, that it had sufficient own funds to cover the advances for business purposes, was not adjudicated despite specific submissions made before the lower authorities, restored the issue back for adjudication afresh. Considering presumption of utilization of own funds for making interest free business advances in the case of Reliance Industries [ 2019 (1) TMI 757 - SUPREME COURT] and noting the fact that the sufficiency of own funds was pointed out by the assessee ,and further considering the order of the ITAT in the case of the assessee itself in the preceding year assessment year 2010-11 restoring identical issue back to the AO for adjudication considering the availability of own funds for making interest free advances, we consider it fit to restore this issue back to the A.O. to adjudicate the issue afresh in the light of the aforesaid submissions made by the assessee.The AO is directed to verify the fact of availability of own interest free funds with the assessee for making the impugned interest free advances - Ground allowed for statistical purposes. TDS u/s 195 - Disallowance of expenses invoking the provisions of section 40(a)(ia) - non-deduction tax at source on payments made for export clearing and forwarding charges, shipping freight and export expenses - contention of the assessee that no tax was required to be deducted on same, being payments made to agents of non-resident shipping companies for freight and for payments made on behalf of the non-residents - HELD THAT:- Undeniably the disallowance of expenses u/s. 40(a)(ia) of the Act has been made for want of evidences without considering the contentions advanced by the assessee on merits,but ld. Counsel for the assesee has demonstrated that the evidences were filed to the lower authorities. The issue therefore needs to be adjudicated on merits. We therefore consider it fit to restore this issue back to the A.O. to adjudicate it afresh in accordance with law after considering and verifying the evidences filed by the assessee, and the contentions made by the assessee. Needless to add due opportunity of hearing be granted to the assessee - Ground allowed for statistical purposes. TDS u/s 195 or 194A - Disallowance of expenses relating to payments made to non residents as per the provisions of section 40(a) - HELD THAT:- Undeniably the interest paid to Barclays Bank by the assessee has been added to the income of the assessee for non deduction of tax at source thereon as per section 195 of the Act treating the said Bank to be a non resident. The order of the Ld.CIT(A) in the case of the assessee however for another A.Y ,i.e A.Y 12-13 reveals that Barclays Bank was found to be a resident and no tax deductible on the interest payment made to it as per section 194A of the Act. The fact of the status of the Bank therefore appears contradictory and in the absence of the same having been examined as per law at any stage in the impugned year, this issue is also restored back to the AO for adjudication afresh . The AO is directed to determine the residential status o f the Bank to which the impugned payment of interest is made and consider the findings of the Ld.CIT(A) in A.Y 2012-13 for the same. He may thereafter adjudicate the issue of disallowance of the expense for non deduction of tax at source in accordance with law. Ground allowed for statistical purposes.
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2022 (3) TMI 35
Exemption u/s 11 - accumulation of income - capital expenditure incurred by the assessee Trust from the corpus funds, shall be allowed as application of income - HELD THAT:- Provisions of section 11(1)(d) specifying the income in the form of voluntary contributions made with a specific direction are independent of section 11(1)(a) - corpus donation as referred to in section 11(1)(d) of the Act does not require any application of income as it has to be received with specific direction that the said income would be forming part of the corpus of the trust or institution as contemplated in section 11(1)(a) . Therefore, incurring of capital expenditure out of corpus fund, if read with inserted provisions of section 11(6) of the Act, has to be allowed. The amendment brought in the Statute book by inserting the provisions of sub-section (6) and (7) w.e.f.1.04.2015 to redress the controversy over allowing the depreciation on the capital assets generated by spending the corpus donation or revenue receipts generated by carrying out other activities. In section 11(6), it is specifically provided that In this section, where any income is required to be applied or accumulated or set apart does not make any distinction as to whether such income should be only revenue receipts and not capital receipts in the form of corpus donation with specific directions for construction of the hospital building and other infrastructural facilities as brought on record by the assessee. The legal position as existing at the relevant of point, we find no infirmity in the order passed by the ld.CIT(A) in allowing the claim of the assessee.
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2022 (3) TMI 41
Order u/s 269 UD - pre-emptive purchase of the flat - breach of principles of natural justice - whether authorities took note of extraneous material into consideration while passing the order? - Order by appropriate authority for purchase by Central Government of immovable property - flat was occupied by Stewart Hall (India) Limited as a tenant and possession would be granted to the original writ petitioner (licensee) only after no objection certificate is issued by the Appropriate Authority - writ petitioner s case is that no documents relating to the sale instance were provided along with the show cause notice and in none of the sale instances, the property was shown to be a tenanted property or a property developed by a Cooperative Housing Society, as in the case of the subject flat - writ petitioner contended that the order of pre-emptive purchase of the flat under Section 269 UD (1) of the Act is arbitrary and unreasonable and in violation of the principles of natural justice - HELD THAT:- The opportunity should be adequate, reasonable and not illusory. Assuming the writ petitioner had sought for an adjournment, obviously the Appropriate Authority could not grant one as within a day thereafter, he would loose jurisdiction to pass any orders. Thus, even if such a representation had been made, the Appropriate Authority would have not acceded to the request as he was statutorily barred from doing so. In DLF Universal Ltd. Versus Appropriate Authority [ 2000 (5) TMI 2 - SUPREME COURT] it was held that the provisions of Section 269 UD are to be strictly construed, there is no power to extend time lines stipulated in the said provision. Thus we are of the clear view that the transferors and the transferee did not have adequate opportunity to put forth their objections apart from failure to furnish the copy of the valuation report of the subject property as done by the department. The documents pertaining to the three sale instances which were referred in the show cause notice were also not provided. Therefore, it is amply clear that there has been gross violation of principles of natural justice which would be sufficient to set aside the order passed by the Appropriate Authority by allowing the writ petition. Valuation of the property - Transferors and the transferee contended that the appropriate method of valuation shall be the rent capitalisation method. The Appropriate Authority rejected such contention by observing that since the tenancy is not recognised, such rent capitalisation method cannot be adopted - We fail to understand as to the meaning of the expression tenancy is not recognised. The Appropriate Authority had two options firstly to examine and ascertain as to whether there was a valid tenancy or to hold that there is no tenancy subsisting. There cannot be a finding or in other words, there cannot be a conclusion, that the tenancy is not recognised and there is no such power vested with the Appropriate Authority by piercing into the transactions which were much ahead of the agreement for sale. The Appropriate Authority has no right to question the validity of the agreement for sale, nor it can go into the legality of the transaction or the title of the vendors. Therefore, the finding of the Appropriate Authority to the effect that the tenancy is not recognised is perverse and unsustainable. It is equally well known that a property in respect of which there is a subsisting lease for a substantial period of time would fetch a comparatively low price because the purchase thereof would not carry with it the right to possession or occupation during the subsistence of the leasehold interests, in such cases, the amount of apparent consideration could be even less than the value of the encumbrances or the leasehold interests. The specific plea of the transferors as regards the compelling circumstances to sell the property was not noted by the Appropriate Authority. The other factors which diminish the value of the property were not taken into consideration. As laid down by the Hon ble Supreme Court in Kailash Suneja [ 2001 (8) TMI 10 - SUPREME COURT] in case of pre-emptive of purchase of property, the method of valuation of the fair market value has to be just and reasonable. The writ petitioner was not provided with the copies of the relevant documents pertaining to the three properties which were referred to as the sale instances to arrive at the value of the subject property. The writ petitioner has specifically stated that none of those three properties are tenanted properties. In Kailash Suneja, it has been held that while considering comparable instances, the instances of tenanted properties has to be taken into consideration. This aspect has been brushed aside by the Appropriate Authority. The valuation of the property must be made by taking into consideration all relevant facts which has not been done by the Appropriate Authority. The valuation adopted by the authority has not been done in an objective manner, without reference to the materials placed by the transferors and transferee. More importantly proper and adequate opportunity was not granted to the transferors/transferee/tenant. Fair hearing is a postulate of decision making by a statutory authority exercising quasi-judicial powers. The rules of natural justice operates as implied mandatory requirement, non-observance whereof invalidates the exercise of power In Kamala (Ch.) Versus Appropriate Authority[ 1998 (11) TMI 70 - MADRAS HIGH COURT] it was held that sufficient opportunity should be given to the concerned parties and copies of relevant documents should be furnished, failure to do so was held to be gross breach of natural justice, as held in Sona Builders [ 2001 (7) TMI 3 - SUPREME COURT] In Amudha (T) Versus Members, Appropriate Authority [ 1992 (2) TMI 14 - MADRAS HIGH COURT] it was held that the Appropriate Authority should exercise power under Section 269 UD with great care and utmost fairness. Market value should be determined in a fair and just manner. Thus, for all the above reasons, we are of the clear view that the order passed by the Appropriate Authority dated 29.07.1993 is unsustainable, in gross violation of principles of natural justice, perverse and liable to be set aside. In the result, the appeal is allowed, the order passed in the writ petition is set aside. Consequently the writ petition is allowed and the order passed by the Appropriate Authority dated 29.07.1993 is set aside and the Appropriate Authority is directed to issue necessary certificate under Section 269 UL.
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2022 (3) TMI 34
TDS u/s 194H - commission payment to dealers - commission payment to dealers for distribution of SIM cards and recharge coupons of telecom service providers - whether there is principal and agent relationship between the assessee and dealers? - HELD THAT:- Admittedly, the very same issue has come up in the case of M/s. Cellular Mobile Telecom Services [ 2012 (12) TMI 294 - ITAT CHENNAI ] as held that commission paid by the assessee to dealers for distribution of SIM cards and recharge coupons for telecom providers is liable for TDS u/s.194H of the Income Tax Act, 1961. We further noted that the Tribunal has considered agreement between the assessee and telecom provider and also nature of services rendered by the assessee to dealers by distribution of SIM cards and recharge coupons and also considered relevant facts and rightly held that discount offered by the assessee to dealers for distribution of SIM cards and recharge coupons is in the nature of commission which is liable for TDS u/s.194H CIT(A) after considering relevant facts and also by following decision of the ITAT., Chennai in the case of M/s.Cellular Mobile Telecom Services Vs. ITO (supra), has sustained additions made by the Assessing Officer towards disallowance of commission expenses u/s.40(a)(ia) of the Act, for non-deduction of TDS u/s.194H of the Income Tax Act,1961. Therefore, we are of the considered view that reasons given by the learned CIT(A) is in consonance with reasoning given by the ITAT., Chennai in the case of M/s.Cellular Mobile Telecom Services Vs. ITO (supra), and thus, we are inclined to uphold findings of the learned CIT(A) and reject arguments taken by the assessee. - Decided against assessee.
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2022 (3) TMI 33
Capital gain computation - Non reference to DVO - AO rejected the report of the Registered Valuer taking the rate of ₹ 17 per sq.ft. as on 1.4.1981 - HELD THAT:- There is neither any reference to the receipt of the report of the DVO nor of carrying out any rectification to align the original computation of capital gain with the values as per the DVO s report. This course of action is impermissible. The contention of the ld. DR that the assessee did not extend co-operation to the DVO as a result of which the valuation could not take place, is neither here nor there. It is trite that even if an assessee does not extend co-operation in any proceedings under the Act, there are well defined ways and means to complete the proceedings. Once the assessment was finalised by expressly agreeing and specifically mentioning that the computation of capital gain was subject to rectification/revision as per valuation report of the DVO , it was all the more obligatory on the part of the AO to honour his words and do the needful. It is a matter of record that the AO did not give effect to his own undertaking which was a pre-condition of the assessee accepting the values proposed by the AO. In such a scenario, we are unable to countenance the view taken by the authorities below in the matter of computation of capital gain. We, therefore, set aside the impugned order and remit the matter to the file of the AO for obtaining the report of the DVO as admitted in the assessment order and then compute fresh amount of capital gain as per law after allowing adequate opportunity of hearing to the assessee - Appeals are allowed for statistical purposes.
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2022 (3) TMI 32
Computation of long term capital gains from transfer of property - AO came to the conclusion that cash consideration claimed by the assessee is nothing but income from unexplained source - whether cash consideration claims to have been received for transfer of property or income from undisclosed source? - reason given by the AO for the simple reason that the assessee (HUF) does not own any other property except the property sold during the impugned assessment year - HELD THAT:- When the assessee has claimed that it has received sale consideration in cash for transfer of property, it is for the AO to disprove the claim of the assessee with cogent reason and sufficient evidences. In this case, the AO has simply gone on the basis of Sale Deed executed by the assessee and also statement of the buyer of the property. It is accepted but not admitted fact that there is a vast difference between guideline value of the property and market value of the property and the guideline value of the property not necessarily be Fair Market Value of the property. In the present case, consideration shown in the Sale Deed is more or less equivalent to guideline value of the property fixed by the Stamp Duty Authority as on the date of sale. Therefore, if you consider the arguments of the assessee in light of prevailing fact that there will be a difference between guideline value of the property and Fair Market Value of the property, then, the claim of the assessee that it has received cash consideration cannot be doubted, more particularly if you consider the location of the property - There is no error in the reasons given by the Ld.CIT(A) to accept the arguments of the assessee that it has received sale consideration for sale of property, even though, the Sale Deed shown only ₹ 2.50 Crs. and also the buyer has denied having paid any cash consideration. Hence, we are inclined to uphold the findings of the Ld.CIT(A) and reject the ground taken by the Revenue. Addition u/s 68 - CIT(A) after taking into consideration various facts has given categorical findings that the source for cash deposit into assessee s bank account is out of distribution of assets by HUF and thus, there is no reason to the AO to disbelieve the claim of the assessee that the source for cash deposit is out of amount received from HUF. We find that the reasons given by the Ld.CIT(A) to delete the addition made by the AO, cannot be faulted, because the Revenue has failed to bring on record any evidences to counter the findings of the facts recorded by the Ld.CIT(A). Hence, we are inclined to uphold the findings of the Ld.CIT(A) and dismiss the appeal filed by the Revenue.
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2022 (3) TMI 31
Addition on account of deemed dividend u/s 2(22)(e) - HELD THAT:- CIT(A) held that assessee is neither registered nor beneficial shareholder of JIIPL. Thus, the deeming provision of section 2(22)(e) is for taxing deemed dividend is always meant for registered and beneficial shareholder of the JIIPL company. We find that the CIT(A) also examined the contention of assessee made purchases to the tune of ₹ 127.24 crores from JIIPL during the year under consideration and that transaction with JIIPL was pertaining to business transaction and not liable to be covered by the ambit of section 2(22)(e) - CIT(A) held that AO has not controverted this contention of assessee in the assessment order. CIT(A) further held that during appellate proceedings, the assessee furnished copy of ledger account of transaction with JIIPL and filed copy of transfer pricing officer (TPO) under section 92(CA), pertaining to specific domestic transaction with its associates companies. To support his contention, CIT(A) find the fund from JIIPL was pertaining to the business transaction - CIT(A) by referring the decision of Hon'ble jurisdictional High Court in the case of Shripad Concrete Pvt.Ltd. [ 2013 (7) TMI 117 - GUJARAT HIGH COURT] wherein the Hon'ble court held that advance on account of business transaction cannot be categorized as loans so as to attract deeming fiction under section 2(22)(e) of the Act. We also find merit in the submission that on similar transaction in earlier and subsequent year no such addition was based on similar transaction. In our view, the Ld. CIT(A) is after considering the entire fact and legal position took a legaly plausible view which we affirm. So far as reliance in case of National Travel Services [ 2018 (1) TMI 1159 - SUPREME COURT] by Ld. CIT-DR, we find that in the said decision the Hon'ble apex court merely referred the case before Hon'ble Chief Justice of India to constitute a larger bench and no finding which may be said to the adverse to the assessee is made. In view of the aforesaid factual and legal discussion, we affirm the order of Ld. CIT(A). - Decided against revenue.
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2022 (3) TMI 30
Difference in net profit as reported in ITR filed for the relevant assessment year and tax audit report filed by the auditor u/s.44AB in Form 3CD - HELD THAT:- On perusal of reasons given by the Assessing Officer, it is abundantly clear that even after filing revised tax audit report, tax auditor has reported very same net profit which was reported in earlier tax audit report filed on 17.10.2016, even before the assessee filed return of income on 27.10.2016. If at all, claim of the assessee is correct that auditor has not considered year end provisions while uploading Form 3CD, then tax auditor would have corrected said mistake, when he had filed second audit report on 27.10.2016, subsequent to return of income filed by the assessee on 19.10.2016. In this case, net profit shown in Form 3CD as per first audit report filed on 17.10.2016 and second audit report filed on 27.10.2016 is one and the same, whereas, there is difference in net profit shown by the assessee in ITR filed on 19.10.2016 and same is unreconciled, although the assessee claims to have reconciled difference by showing certain provisions, but said claim was not satisfactorily explained to the Assessing Officer as well as learned CIT(A). Even before us, although the assessee has filed a chart explaining difference between income and expenditure shown in ITR as well as Form 3CD, but claim of the assessee goes unproved in absence of any evidences. Therefore, we are of the considered view that there is no error in the reasons given by the Assessing Officer to make additions towards difference in net profit shown in ITR filed for relevant assessment year and tax audit report issued in Form 3CD. Assessing Officer, after considering relevant facts has rightly made additions towards difference in net profit. The learned CIT(A) after considering relevant arguments of the assessee has rightly held that there is no error in the reasons given by the Assessing Officer to make additions towards difference in net profit. Hence, we are inclined to uphold findings of the learned CIT(A) and dismiss appeal filed by the assessee.
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2022 (3) TMI 29
Penalty u/s 271(1)(c) - furnishing inaccurate particulars/concealment of particulars of income levied on the assessee on account of disallowance of Foreign Exchange Fluctuation treating the same as capital in nature - HELD THAT:- As is evident from the assessment order, on the first instance when asked to file details of Foreign Exchange Fluctuation, the assessee had surrendered the said amount to taxation. The revenue was not even in the possession of the details of Foreign Exchange Fluctuation and therefore there was no question of any detection by the revenue of concealment of any inaccurate particular of income on this count. We agree with assessee that the impugned foreign exchange fluctuation was surrendered for taxation by the assessee immediately on becoming aware of the fact that it had not done so in the computation of income during assessment proceedings and even before detection by the Revenue The undisputed fact that the assessee had added this Foreign Exchange Fluctuation in its block of assets of plant and machinery and claimed depreciation thereon, which is clearly brought out from the computation of income for the year filed before us, lends credence to the explanation of the assessee that it was left out to be added to its income mistakenly. Having capitalized the amount of foreign exchange fluctuation in the relevant block of assets reveals its clear intent of treating it as capital expense. Not adding it back while computing the income for the year can be safely beleived to be mistakenly done unless otherwise proved. We agree with the assessee that it was mistake on his part for not having added the amount to his income. There is, therefore we hold no case for levy of penalty u/s 271(1)(C) of the Act - Decided in favour of assessee.
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2022 (3) TMI 28
Nature of expenses - Disallowance of repairs maintenance expenses - revenue or capital expenses - HELD THAT:- Since the assessee itself is accepting that 23 items found in the list are capital in nature, the addition of above said items are confirmed. With regard to remaining 32 items, we are of the view that they require verification at the end of the AO in the light of decisions relied upon by the assessee. Accordingly, we restore this issue to the file of AO for examining the claim of assessee with regard to the 32 items found in the list. Claim of depreciation on the amount held to be capital in nature which was disallowed from repairs maintenance expenditure. Since this claim of the assessee is in accordance with law, we restore this issue to the file of the A.O. with a direction to allow depreciation thereon in accordance with law. Disallowance of claim for deduction u/s 80G - contributions made under CSR scheme - HELD THAT:- We direct the A.O. to allow deduction u/s 80G of the Act in respect of contributions made under CSR scheme, after examining the claim of the assessee that the said payments are eligible for deduction u/s 80G. Claim for deduction of Education Cess including secondary higher education Cess on income tax as deduction while computing the total income - HELD THAT:- Following the above said decision of Kolkata bench of Tribunal in the case of Kanoria Chemicals Industries Ltd [ 2021 (10) TMI 1153 - ITAT KOLKATA ] we hold that payment of education cess including secondary and higher education cess is not allowable as deduction. Accordingly, we reject this ground of the assessee.
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2022 (3) TMI 27
Correct head of income - Capital gain or business income - income from sale of land - Making huge profit from sale - Whether transaction was an adventure in the nature of trade? - HELD THAT:- We are in complete agreement with the CIT(A) that there is no reasonable basis with the A.O. for holding the transaction of sale of land as being in the nature of adventure in the course of business. On the contrary, we find that the A.O. has only referred to certain decisions of the Hon ble Apex Court and the Hon ble High Courts to infer that the impugned transaction was an adventure in the nature of trade, which finding, we find are not based on appropriate appreciation of the ratio laid down in the said cases. AO has made absolutely no effort to examine the facts of the case in the light of the proposition laid down by the various judicial authorities referred to by him for holding a transaction to be an adventure in the nature of trade. Though, admittedly he has gone on to interpret the said term in Para VI of his order but has failed to apply the same appropriately in the facts of the present case. Now the facts on the basis of which the A.O. has held the transaction to be an adventure in the nature of trade are merely that the asset was bought in 2006 and sold in the impugned year, that it was bought for consideration of ₹ 14 lakhs and sold for 6 crores. Merely because, the assessee earned huge profits thereon cannot alone be the criteria or basis for understanding the intention of the assessee in undertaking the transaction. If this be so, then every transaction involving transfer of capital asset where consideration is multiple times the purchase value, it would be treated as an adventure in the nature of trade. CIT(A), we find ,has noted that except for the facts as stated above, there was nothing else indicating that the transaction was undertaken by way of or with the intention of conducting it by way of a business. He has pointed out that this was the solitary transaction undertaken by the assessee, and had not frequently such transactions nor had the asset sold ever been claimed as a business asset and depreciation claimed thereon, the assessee having treated the said land as investment all throughout. We agree with the CIT(A) that there was no basis at all with the A.O. for treating the transaction as an adventure in the nature of trade. We therefore see no reason to interfere in the order of the CIT(A) allowing the assessee s claim of treating the transaction as that of transfer of a capital asset income earned thereon being in the nature of capital gain. - Decided against revenue.
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2022 (3) TMI 26
Disallowance of commission to persons specified u/s 40A(2)(b) - HELD THAT:- In our view, since the facts in the immediately preceding year [ 2021 (9) TMI 161 - ITAT AHMEDABAD] both in respect of the nature of payments i.e. commission paid as well as the parties to whom the payments were made are identical as held that AO has not demonstrated any material or information gathered to disprove the genuineness of the expenditure incurred on commission payment - we accordingly allow the assessee s appeal and the disallowance on account of commission u/s. 40A(2)(b) is hereby deleted. Disallowance of claim of deduction u/s 35(2AB) - research and development expenses - HELD THAT:- We note that the ITAT, Ahmedabad for the immediately preceding year on identical set of facts has adjudicated the issue in favour of the assessee. The ITAT in the above Ruling held that this issue has been dealt with by the ITAT Ahmedabad in the case of Sun Pharmaceuticals v Pr. CIT [ 2016 (12) TMI 1539 - ITAT AHMEDABAD] which has been approved by the Gujarat High Court [ 2017 (8) TMI 933 - GUJARAT HIGH COURT] We also note that the ITAT Pune Tribunal in the recent case of DCIT v. Force Motors [ 2021 (9) TMI 244 - ITAT PUNE] while dealing with identical issue held that prior to amendment in 2016, section 35(2AB) of the Act does not provide any methodology of approval to be granted by prescribed authority vis-a-vis expenditure from year to year and therefore, order of Assessing Officer in curtailing expenditure and consequent weighted deduction claimed under section 35(2AB) on ground that deduction cannot exceed claims approved by prescribed authority, had rightly been set aside. The position is clear that prior to amendment introduced w.e.f. 01/07/2016, the deduction u/s 35(2AB) of the Act would be available to an assessee having an approved in-house R D facility by the prescribed Authority Act and there is no mention of approval of the quantum of expenditure in the law as it stood prior to that date. The mandate of quantification of expenditure has been put in place only w.e.f. 01.07.2016. In view of the above observations and also the decision of the Ahmedabad Tribunal in assessee s own case for immediately preceding year, where on identical set of facts, the assessee s appeal has been allowed, we allow the appeal of the assessee.
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2022 (3) TMI 40
Carry forward losses under Section 72A - scheme under this Act an amalgamation of a sick industrial company with another company - HELD THAT:- Issue decided in favour of assessee as relying on own case [ 2020 (2) TMI 96 - MADRAS HIGH COURT] as held that the claim of the assessee is liable to be allowed in the light of the provisions of section 32(2) of the SICA and its interpretation by the Supreme Court [ 2021 (11) TMI 1026 - SC ORDER] is thus, the correct one. - Decided in favour of assessee.
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2022 (3) TMI 25
Disallowance u/s 14A r.w.r. 8D - disallowance of the expenditure incurred for earning of the exempt income - HELD THAT:- We concur with the claim of the Ld. learned Authorized Representative for the assessee that no part of interest expenditure was liable to be disallowed in the hands of the assessee company. We, thus, in terms of our aforesaid observations vacate the disallowance of interest expenditure of ₹ 890,454/- made by the AO u/s.14A r.w.r.8D(2)(ii). Disallowance of the administrative expenses - AO by triggering the mechanism contemplated under Rule 8D(2)(iii) of the Income-tax Rules, 1962, we are of the considered view, that as stated by the ld. A.R, and rightly so, for the purpose of computing the disallowance of the administrative expenses the average value of investment has to be computed by considering only those investments which had yielded exempt income during the year under consideration. Our aforesaid conviction is fortified by the order of the Income-tax Appellate Tribunal, Special Bench, Delhi in the case of ACIT Vs. Vireet Investment Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] wherein the Tribunal had held that for the purpose of computing the disallowance of the administrative expenses under Rule 8D(2)(iii) of the Income-tax Rules, 1962, only those investment have to be considered for computing the average value of investments which had yielded exempt income during the year under consideration - we herein direct the AO to rework out the disallowance of the administrative expenses u/s.14A r.w Rule 8D(2)(iii) by determining the average value of investments after considering only those investments that had yielded exempt income during the year under consideration. The Ground of appeal No.1 is allowed
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2022 (3) TMI 24
Reopening of assessment - Unexplained cash deposits in bank account - HELD THAT:- It is the submission of the Ld. Counsel for the assessee that the assessee is a trader in milk and his returns for AYs 2011-12 and 2012-13 were accepted by the AO in the orders passed u/s. 147/143(3) wherein the AO has accepted the provisions of section 44AD in the case of the assessee. It is also his submission that in the AYs 2013-14 to 2015-16, the returns were filed by applying the provisions of section 44AD and the AO has accepted the same without disturbing the return. Thus deem it proper to restore the issue to the file of the AO with a direction to adjudicate the issue afresh in the light of the orders passed by him for AYs 2011-12 and 2012-13 wherein the AO has completed the assessment u/s. 147/143(3) of the Act. He shall also keep in mind the return filed by the assessee in the subsequent years which have been accepted by the AO. Appeal filed by the assessee is allowed for statistical purposes.
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2022 (3) TMI 23
Assessment u/s. 144/147 - not allowing proper opportunity of being heard to the assessee - HELD THAT:- As AO, in the instant case, has given a very short time to submit the details and the principles of natural justice has not been followed and, therefore, in the interest of justice, the assessee should be given due opportunity to represent her case properly. We deem it proper to restore the issue to the file of the AO with a direction to grant one final opportunity to the assessee to substantiate her case and decide the issue as per fact and law. The assessee is also hereby directed to appear before the AO and cooperate in early completion of the assessment proceedings by filing the requisite details and without seeking any adjournment under any pretext, failing which the AO is at liberty to pass appropriate order as per law - Appeal filed by the assessee is allowed for statistical purposes.
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2022 (3) TMI 22
Addition due to alleged non-appearance of the assessee - HELD THAT:- We are of the opinion that the matter deserves to be remanded back to the Ld. AO. DR had no objection. As observed from the statement of facts filed by the assessee before the CIT(A) that the assessee company had a bank account which was not mentioned in the balance sheet. The assessee's grievance before the CIT(A) was that the entire credit in that account even after explaining the transactions has been added to the income of the assessee. As been submitted by the Ld. AR that the explanation offered by the assessee has not been duly considered by the AO. CIT(A) has also passed ex-parte order in violation of principles of natural justice as no notice of hearing was served upon the assessee. Explanation, if any, in respect of the transactions recorded in the said bank account given by the assessee before the Ld. AO/CIT(A) is not forthcoming from the records. In such a scenario, it would be just and fair if the matter is remanded to the Ld. AO for fresh adjudication - Appeal is treated as allowed for statistical purposes.
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2022 (3) TMI 21
Disallowance on account of expenses incurred on construction of road (owned by the State Government Authorities) - Allowable expenses u/s 37(1) - AO noted that the roads were not owned by the assessee; in view of which, he disallowed the expenses incurred on construction of the road - HELD THAT:- We find that the identical issue has already been decided against Revenue and in favour of the assessee in the case of NTPC Ltd[ 2019 (5) TMI 95 - ITAT DELHI] wherein held when the roads were constructed around the factory with an amount incurred by the assessee existing on the land owned by Government of UP, the assessee did not acquire any asset of an enduring nature. Assessee is having existing right to carry out the business, any expenditure made by it for smooth running of the business would not lead to acquisition of capital assets. Thus the expenditure incurred by the assessee on construction of road, water supply, rail connectivity and other infrastructure activities on the assets not owned by it but owned by various Government Departments are revenue expenditure. - Decided in favour of assessee. Addition of excess interest claimed - disallowance of community development and welfare expenses - AO was of the view that this expenditure was in the nature of Corporate Social Responsibility, and was not allowable - CIT-A deleted the addition - HELD THAT:- No material have been brought for our consideration from either side, Revenue or the assessee, to persuade us to take a view different from view already taken by the Ld. CIT(A) in the impugned appellate order dated 15.06.2017 on these issues. Therefore, we decline to interfere with the impugned appellate order of the Ld. Ld. CIT(A); and dismiss grounds 2 and 3 of appeal. - Decided against revenue.
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2022 (3) TMI 20
Reopening of assessment u/s 147 - validity of reasons to believe - HELD THAT:- We find that the reasons for reopening are same for the A.Y. 2008-09, A.Y. 2009-10 and A.Y. 2010-11. No doubt, each Assessment Year is to be seen differently, but the note from the Investigation unit indicate the same pattern of expenditure claimed over a period of 5 years. Two of these years were dealt with by the Hon'ble High Court and hence the same ratio applies to the year before us also. The SLP filed by the revenue has been summarily dismissed by the Hon'ble Apex Court. Hence, keeping in view the judgments of the Hon'ble Delhi High Court in the case of the assessee for the A.Y. 2009-10 A.Y. 2010-11 and order of the Hon'ble Apex Court, we decline to interfere with the order of the ld. CIT(A) quashing the notice issued u/s. 148 in the case of the assessee. - Decided against revenue.
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2022 (3) TMI 19
Disallowance of expenses - assessee has not submitted any document before tax authorities for claiming the expenses - HELD THAT:- AO fully relied on the findings in the case of Ms. Anita L. Ghadge without analyzing the nature of transactions in that case. Ms. Anita L. Ghadge [ 2018 (11) TMI 1889 - ITAT MUMBAI] was sub-contracting the agency services to others, whereas the assessee completes the services himself. Ms. Anita L. Ghadge declared the profit @10% whereas the assessee declared Gross Profit @56% after adjusting direct expenses. In our view, the assessee has declared better profit and the fact in Ms. Anita L. Ghadge cannot be applied in the case of the assessee. We observe that no doubt the assessee has not submitted proper documents, the disallowance based on Ms. Anita L. Ghadge to the extent of 30% is too high. Disallowance of 10% of the total expenses will be appropriate, considering the fact that Assessing Officer in the subsequent assessment year has disallowed only 5% of the expenses in the regular assessment u/s. 143(3) of the Act. Therefore, we direct Assessing Officer to disallow 10% of the total expenses claimed by the assessee. Accordingly, ground raised by the assessee is partly allowed.
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2022 (3) TMI 18
Disallowance u/s 14A r.w.r 8D - As argued assessee has not received dividend on certain shares and, therefore, no disallowance could be made u/s 14A in those shares on which no dividend has been received - HELD THAT:- It has been held in various decisions that for the purpose of computing disallowance u/s 14A r.w.r. 8D, the investments which has yielded dividend income are only to be considered. Since it is the submission of the ld. Counsel that it has received dividend income only in respect of six investments, the average investment of which comes to ₹ 16,55,49,405/-, therefore, we deem it proper to restore the issue to the file of the AO with a direction to recompute the disallowance u/s 14A r.w. Rule 8D by considering the investment which has actually yielded dividend income and exclude the investments on which the assessee has not received any dividend income in view of the decision in the case of ACIT vs. Vireet Investment Pvt. Ltd., [ 2017 (6) TMI 1124 - ITAT DELHI] and case of ACB India Ltd [ 2015 (4) TMI 224 - DELHI HIGH COURT] - Grounds raised by the assessee are accordingly allowed for statistical purposes.
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2022 (3) TMI 39
Deduction of interest on accrual or actual payment basis - interest payable under clause (d) of section 43B - interest on loan borrowed from the Tamil Nadu Government and Infrastructure and Leasing Financial Services Ltd - whether IL FS is a public interest institution. though the liability to pay interest cannot be stated to have accrued until after 5 years and that too, is payable half yearly instalments along with principal amount beginning from 1st May 2013 and ending with 1st November 2022 - Contention of Revenue is that the Tamil Nadu Government may not be a Public Financial Institution but M/s.Infrastructure Leasing and Financial Services limited is a Public Financial Institution and therefore, the interest payment not paid by the assessee company to the promoters is hit by explanation 3C to Section 43B (d)? - HELD THAT:- Deduction of any sum being interest payable under clause (d) of section 43B of the Act, shall be allowed if such interest has been actually paid and any interest referred to in that clause, which has been converted into a loan or borrowing, shall not be deemed to have been actually paid. It is not in dispute that the interest payable to the Government of Tamil Nadu is not hit by the provisions of section 43B of the Act. However, in the present case, the assessee was provided with loan not only by the Government of Tamil Nadu, but also by M/s.Infrastructure Leasing and Financial Services Limited, and the interest liability, which accrued during the relevant assessment years, was not actually paid by the assessee, was sought to be deducted. In such circumstances, it has to be examined as to whether IL FS is a public interest institution. Without verifying the same, the Tribunal simply held that the promoters were not covered under the definition of Public Financial Institution as per Explanation 4 to section 43B r/w section 4A of the Companies Act and hence, the provisions of section 43B(d) r/w Explanation 3C would not be applicable to the case of the assessee. As decided in Tamil Nadu Small Industries Corporation [ 2020 (12) TMI 1315 - MADRAS HIGH COURT] Tribunal remanded the matter to the assessing officer to examine as to whether the assessee paid the interest to the Government of Tamil Nadu or to any other financial institution, after having held that interest paid to Government of Tamil Nadu is not hit by the provisions of section 43B of the Act. Thus the orders of the Tribunal are set aside and the matters are remanded to the Assessing Officer to examine, whether M/s.Infrastructure Leasing and Financial Services Limited (IL FS) is a public financial institution; and if it is in affirmative, then, section 43B(d) r/w explanation 3C will be applicable; and pass orders afresh, after providing due opportunity of hearing to all the parties, within a period of eight weeks from the date of receipt of a copy of this judgment.
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2022 (3) TMI 38
Correct head of income - Treating the receipts of compensation for vacating tenancy to be assessable as Capital Gains instead of income under the head Profit and Gains of Business or Profession - HELD THAT:- In the decision of CIT Vs. D.P. Sandu Bros. Chembur (P) Ltd. [ 2005 (1) TMI 13 - SUPREME COURT] it was held that the tenancy right was a capital asset, surrender of tenancy right was a transfer and the consideration received thereof was a capital receipt within the meaning of Section 45. The Court noted the decision in the case of CIT Vs. B.C. Srinivasa Setty [ 1981 (2) TMI 1 - SUPREME COURT] which was followed by several High Courts and held that if the cost of acquisition of tenancy right cannot be determined, the consideration received by reason of surrender of such tenancy right could not be subjected to capital gains tax - The Court took note of the circular issued by the CBDT being Circular No. 684 dated 10th June, 1994, which was issued to meet the situation created by the decision in B. C. Srinivasa Setty (supra). By Finance Act, 1994, Section 55(2) was amended to provide the cost of acquisition, inter alia, the tenancy right could be taken as nil. By this amendment the judicial interpretation put on capital assets for the purposes of the provisions relating to capital gains was met. - Decided in favour of assessee.
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2022 (3) TMI 17
Penalty u/s 271(1)(c) - bogus purchases @ 25% on total purchase - HELD THAT:- CIT(A) applied G.P. rate of 16% as against 15.23% declared by the assessee for estimation the income of the assessee. In this way, the ld. CIT(A) has restricted the addition. Although, according to the ld. AR, the ld. CIT(A) has not given any specific finding in this regard and has only mentioned that to plug to leakage of the revenue and in the interest of justice the ld. CIT(A) applied 16% GP rate in the given circumstances and thus, according to the ld. AR, it is a case of estimation only where the AO has estimated the profit and these estimates were further reduced by ld. CIT(A). After analyzing the order of the A.O. as well as the ld. CIT(A), we also found that both the lower authorities had made respective additions on the basis of estimation and it is settled law that no penalty can be levied on disallowance made on the ground of unverifiable purchases. Hon ble Jurisdictional High Court in the case of CIT Vs. Malpani House of Stones [ 2017 (3) TMI 1885 - RAJASTHAN HIGH COURT] has categorically held that on the basis of bogus purchases/enhancement of GP rate and the addition was made in quantum proceedings cannot be made basis for levy of penalty u/s 271(1)(c) of the Act. Tribunal have considering these facts deleted the penalty. We found merit in the contention raised by the ld. AR and no new facts and circumstances has been put forth by the ld. DR to controvert or rebut the contentions made by the ld. AR, therefore, we direct to delete the penalty. Addition u/s 41(1) of the Act on account of cessation of liability of trade creditors by treating the payments as doubtful - HELD THAT:- We observed that the cash payment amount of ₹ 5,90,320/- was sustained by the ld. CIT(A). In this count the ld. CIT(A) has not given any specific finding with regard to the concealment of income or it has not been established that the payments were not genuine. The purchases made were accepted against which these cash payments were made. When purchases are not doubtful and they have been accepted so there is no reason to doubt on the payments. Since this was a small issue, therefore the assessee has not agitated further. But in penalty proceedings lenient view should be taken and no penalty should be levied on the quantum addition which has been sustained only on doubts and surmises and nothing has been brought on the record to prove the concealment of income or furnishing of inaccurate particulars of income. In Section 271(1)(c) of the Act, the authority is given the discretion to levy a penalty if there is concealment of particulars of income and even as regards the quantum of the penalty there is a discretion of greater importance is the necessity for a definite finding that there is concealment, as without such a finding of concealment, there can be no question of imposing any penalty. The mere revision of the income to a higher figure by the assessing authority does not automatically warrant an inference of concealment of the expenditure on the construction. The addition to the income of the assessee based on estimate basis. Concealment implies some deliberate act on the part of the assessee in withholding the true facts from the authorities. The fact that the valuer assessed the building at a figure higher than the one reported by the assessee does not by itself lead to the inference that there had been concealment We also observed that it is a case where the assessee has disclosed all the material facts for the purposes of assessment. The A.O. has applied the provision of section 145(3) merely on ground of non maintenance of stock register or kachha bills. Kachha bills are subject to verification. However despite this the A.O. rejected the books of account and applied GP rate of 10%. A.O. has failed to point out in the assessment order any item of income which was concealed by the assessee. A.O. himself has resorted to estimate for making addition. Thus this is not a case where there was any specific item of income which is concealed by the assessee. It would be appropriate to refer the latest decision of SC in the case of Dharmendra Textiles [ 2008 (9) TMI 52 - SUPREME COURT] wherein it has been held-(i) the Explanations appended to section 271(1)(c) indicate the element of strict liability,(ii) the object behind the enactment shows that it provides for remedy for loss of revenue,(iii)that penalty under the section is civil liability,(iv)willful concealment is not an essential ingredient for attracting penalty (v) no discretion with the authority imposing penalty. Hence, revenue is not required to prove the element of mens rea on the part of assessee. This decision was understood to mean that levy of penalty is automatic. Penalty is imposed only when there is some element of deliberate default and not when there is merely a mistake or bona fide claim. Considering the above case laws it is clear that the explanation offered by the assessee was possible one which were rejected by the revenue authorities without assigning any reason or without examining the evidences submitted by the assessee. The A.O. has not proved any mens rea of the assessee in this regard. Therefore penalty is not leviable under the given circumstances and facts of the case of the assessee. Considering the totality of the facts and circumstances of the case, we direct to delete the penalty made and confirmed by the ld. CIT(A). - Decided in favour of assessee.
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Customs
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2022 (3) TMI 16
Levy of ADD - determination on the non-injurious price - extraordinary transactions due to COVID pandemic situation - It is the contention of the petitioners that the Covid19 pandemic period for the purpose of all activities including commercial activities may contain factual and circumstantial inputs which may be at a variance compared to such factual and circumstantial inputs pertaining to a normal period - HELD THAT:- It is the apprehension of the petitioners that the disclosure statement dated 02.02.2022 in the manner as it exists as on today, if leads to a final determination on the non-injurious price which may ultimately be the basis for imposition of the anti dumping duty and which would remain in force for a period of five years since its determination would adversely affect the petitioners inasmuch as the duty imposed may be on the basis of certain factual and circumstantial inputs which were at a variance with that of what would have been for a normal period. Without expressing any view on the merit of such claim, if certain factual and circumstantial inputs pertaining to the Covid19 pandemic period which may be at a variance from the inputs that may have been in the normal period are made the basis for the final determination of the non-injurious price as well as the consequential anti dumping duty that may be imposed may be incorrect. The petitioners claim that they have already submitted a representation dated 09.02.2022 before the designated authority on the issue as to whether any incorrect factual and circumstantial inputs were made the basis of arriving at the disclosure statement. As incorporation of incorrect factual and circumstantial inputs to arrive at the non injurious price may lead to an incorrect imposition of anti dumping duty, the interest of justice would be met on the designated authority giving a due consideration to such representation of the petitioner and pass a reasoned order thereon - It is stated that some of the issues pertaining to the factual and circumstantial inputs which otherwise are provided by the domestic industry can also be verified from the contemporary data on the same transaction which may be available with the GST department and in order to arrive at a correct factual determination, such data may also be taken into consideration. The reasoned order as required be passed as expeditiously as possible so that the process initiated under the law is not inhibited in any manner. In doing so, if necessity arises, the respondent No.3 may also be given an opportunity to substantiate their version for the factual and circumstantial inputs - petition disposed off.
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Insolvency & Bankruptcy
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2022 (3) TMI 15
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - position on contract - Purview of review - HELD THAT:- A Contract comes into existence, when the Terms and Conditions of the Contract were finalised. A proposal when accepted gives rise to an Agreement. The Agreement if reduced into writing and a document is executed between the parties, affixing their signature/thumb impression, such an agreement is to be a lawful one - It cannot be gain said that an offer is accepted when the acceptance is communicated. In reality, the communication is to be made to the offeror and a communication of acceptance made to a third person does not create a Contract. According to the Respondent, the Appellant/Operational Creditor was the CRM Manager, an important position of the branch and that many clients of the Respondent, who were availing the services of the Branch had abruptly cancelled their procedures under the influence of the Appellant/Operational Creditor. Which was poaching of clients, thereby causing huge loss to the Respondent/Corporate Debtor and, therefore, the Appellant is guilty of gross misconduct. In fact, the amounts which was to be refunded by the Corporate Debtor/Respondent is ₹ 2,13,000/-, during the period September 2018 to January, 2019 and that the Respondent/Corporate Debtor was seriously considering taking legal action for recovery of the amounts from the Appellant/Operational Creditor - the Respondent/Corporate Debtor denies the claim of the Appellant/Operational Creditor of ₹ 3,74,004/- together with interest @ 18% p.a. CIRP under I B Code - HELD THAT:- The CIRP under the I B Code, 2016 is not to be determined by a Court of Law. Further, CIRP is not an adversarial litigation. The proceedings under the I B Code are summary in character. The Adjudicating Authority does not determine a Money Claim or Suit. I B Code is not a Debt Enforcement Procedure. Purview of review - HELD THAT:- While scrutinising/examining a petition/application under the I B Code, an Adjudicating Authority is to decide (a) whether there is an operational Debt as per Section 4 of the Code (b) whether the documentary material/evidence submitted alongwith the Application exhibits that the aforesaid Debt is Due Payable and was not yet paid (c) whether there is an existence of Dispute between the Litigants/parties or the record of pendency of a Suit or Arbitration Proceedings filed by the receipt of Demand Notice of the unpaid Operational Debt pertaining to the Disputes - If anyone of the above aid stipulations is not there, then the Application is liable to be rejected. An Adjudicating Authority is required to adhere to the ingredients of Section 9 of the Code and especially, the requirement of Section 9(5) of the Act and admit or reject the application, depending upon the factors adumbrated under Section 9(5) of the Code. Role of Adjudicating Authority - HELD THAT:- An Adjudicating Authority is to find out whether the Dispute in issue needs further investigation and the said Dispute is not a weak one. To put it succinctly, if an Adjudicating Authority is subjectively satisfied that the Dispute in question is plausible one and was raised as specified under Section 8(2)(a) then the Adjudicating Authority as per Section 9(5)(ii)(d) is to reject the Application, filed by the Applicant praying for the initiation of Corporate Insolvency Resolution Process - In the instant case, as per Clause 13 of the Appointment Letter of the Appellant/Operational Creditor, the Employment may be terminated without notice or payment in lieu of Notice, in the event of any breach of any terms of the Contract. This Tribunal taking note of the surrounding facts and circumstances of the present case, in an holistic manner and on a consideration of contentions advanced on behalf of the Appellant, this Tribunal comes to an irresistible conclusion that there is an existence of Dispute relating to the Contract of Employment of the Appellant with the Respondent coupled with the breach and the Dispute in question is not an illusory or moonshine one - Appeal dismissed.
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2022 (3) TMI 14
Rejection of application filed by the Appellant for cancellation of the Non-Bailable Warrants of Arrest - Section 61 of the Insolvency and Bankruptcy Code, 2016 - whether the Adjudicating Authority while exercising jurisdiction under the Code have any jurisdiction to issue Non-Bailable Warrant against any person or party? - HELD THAT:- Order XVI Rule 10 specifically empowers the Court to issue in its discretion at any time warrant either with or without bail for arrest of such person who without any lawful excuse, failed to attend or to produce the document in compliance with such summons - the present is a case where the order was issued to Suspended Directors to produce the documents. When the Suspended Directors failed to produce documents required and appear before the Court, Non-Bailable Warrants were issued on 16.07.2021. It is clear that in spite of several opportunities given to Suspended Directors, they refused to surrender even though their prayer for cancellation of the Non-Bailable Warrants was rejected. The provision of Rule 77 of the NCLAT Rules, 2016 read with Order XVI Rule 10 of Civil Procedure Code fully empowers the Adjudicating Authority to issue a Non-Bailable Warrant for enforcing attendance of a person. The power exercised by the Adjudicating Authority in issuing a Non-Bailable Warrant to the Appellants is thus well within jurisdiction of the Adjudicating Authority and the submission of the Counsel for the Appellants that Adjudicating Authority is not clothe with any power to issue Non-Bailable Warrant has to be rejected - The proceedings under the IBC are proceedings of special nature object of which is resolution of insolvency of Corporate Debtor. The Resolution Professional for discharging various statutory duties as entrusted under the Code should have access to necessary documents and records without which the proceedings under the IBC cannot proceed as per the objective of the Code. The Code empowers the Adjudicating Authority to take appropriate measures for ensuring compliance of the provisions of the Code and for ensuring that all personnel extend co-operation to IRP/ RP. The Submission of the Learned Counsel for the Appellants is that Tribunal is not bound by procedures laid down under the CPC, we have already noticed that Rule 77 of the NCLT Rules, 2016 applies various provisions of Civil Procedures Code. The present case are only concerned with the procedure where a person fails to comply with summons which we have already dealt above. The procedure adopted by the Tribunal is in conformity with the NCLT Rules, 2016 as well as order XVI Rule 10 of the Code of Civil Procedure, 1908 - the provision of Order XVI Rule 10 of the Code of Civil Procedure which empowers the Tribunal to issue warrant either with or without bail for arrest of such person. The condition that such person has without lawful excuse, failed to attend or to produce the document in compliance with such summons were fully met and it cannot be said that conditions for issuance of Non-Bailable Warrant were not satisfied. There are no error in the impugned judgment of the Adjudicating Authority rejecting the Application for recall of cancellation of Non-Bailable Warrants - appeal dismissed.
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2022 (3) TMI 13
Closure of liquidation process of the Corporate Debtor K.T.C. Foods Private Limited without dissolution of K.T.C. Foods Private Limited - denial of sale of the Corporate Debtor as a going concern - extinguishment of the remaining unpaid liabilities of the Corporate Debtor after distribution of the proceeds of the sale of Corporate debtor as a going concern as per the order of priority provided in Section 53 of the Insolvency and Bankruptcy Code, 2016 - waiver from all the past non-compliances of the Corporate Debtor under applicable laws for the period prior to the e-auction - HELD THAT:- Since, no Resolution Plan was received during the CIRP, the Committee of Creditors in the meeting held on 25.04.2019 passed resolution with 100% voting rights approving liquidation of the Corporate debtor and the Ld. Adjudicating Authority after considering entire facts passed the liquidation order against the Corporate Debtor and appointed the Resolution Professional as the Liquidator - during the process, the valuation reports were obtained from two valuers and since it came to the notice of then Resolution Professional that the estimates of the values provided are significantly different, the then Resolution Professional /Liquidator in compliance with Regulation 35(1)(b) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 appointed a third valuer as approved by the Members of the CoC in the third meeting of CoC on 12.03.2019 being Crest Capital Group Private Limited and in compliance with Regulation 35(1) of the CIRP Regulations 2016, considered the average of estimates of the values. As per the summary of the valuation the fair value is fixed at 24.63 Crores and liquidation value at 18.45 Crores. The e-auction was conducted on 19.11.2019, the Appellant also participated in the e-auction and successfully bid an amount of ₹ 18,45,86,646/- being 100% of the reserve price. The Letter of Intent was issued to the Appellant on 21.11.2019 declaring the prospective bidder as successful bidder and the Appellant deposited ₹ 17,42,86,646/- after netting off the process participation deposit of ₹ 3,00,000/- and earnest money deposit of ₹ 1,00,00,000/- accordingly - It is also an admitted fact the sale certificate was issued on 26.11.2019 to the Appellant by the Liquidator wherein it was explicitly mentioned that the proceeds from sale of the Corporate debtor as a going concern shall be allocated for payment to respective creditors in terms of Section 53 of the Code. Thus, the Adjudicating Authority has erred in denying the sale of the Corporate Debtor as a going concern to the Appellant without including any contingent liabilities, we hold that it is a settled law that when the sale proceeds of a Corporate Debtor are duly distributed in the Order of priority and in the manner prescribed under Section 53 of the Code, claims of any other Creditor cannot be entertained contrary to the provisions entailed under Section 53; subsequent to the distribution of sale proceeds under Section 53 no other entity including any Government entity can claim any past unpaid or outstanding dues against the Appellant who has purchased the Corporate Debtor Company as a going concern - at this stage subsequent to the sale of the Corporate Debtor Company as a going concern , these claims cannot be foisted upon the Appellant. The scope and objective of the Code is to extinguish all claims specifically the ones which were not even made during the CIRP or in the Liquidation stage, to aid the purchaser of the Company as a going concern to start on a clean slate . The Hon ble Supreme Court in GHANASHYAM MISHRA AND SONS PRIVATE LIMITED THROUGH THE AUTHORIZED SIGNATORY VERSUS EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED THROUGH THE DIRECTOR ORS. [ 2021 (4) TMI 613 - SUPREME COURT ] and in COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA OTHERS [ 2019 (11) TMI 731 - SUPREME COURT ] has laid down the proposition that the purchaser of the Company even in the Liquidation stage cannot be burdened with past liabilities when it is not mentioned in the Sale Notice . It is no longer Res Integra that while approving a Corporate Debtor sale as a going concern in Liquidation Proceedings without its dissolution in terms of Regulation 32(e) of the Liquidation Process Regulations, 2016, it is essential to see that the Corporate Debtor is not burdened by any past or remaining unpaid outstanding liabilities prior to the sale of the Company as a going concern and after payment of the sale proceeds distributed in accordance with Section 53 of the Code - Impugned Order is modified to the extent that the sale of the first Respondent as a going concern is upheld and the direction seeking extinguishment of past/remaining unpaid outstanding liabilities including contingent liabilities, prior to the sale as a going concern , after payment of sale proceeds distributed in accordance with Section 53 of the Code, is allowed. Appeal allowed.
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Service Tax
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2022 (3) TMI 10
Refund of service tax - service tax on Development Charges wrongly collected by SIPCOT, which is a Government of Tamil Nadu Undertaking - appellant had filed the refund claim on 29.12.2017 which is beyond 6 months as prescribed under Section 104 (3) of Finance Act - applicability of time limitation - HELD THAT:- The Finance Bill received the assent of the President of India on 31.03.2017. The refund ought to have been filed within a period of 6 months of which the Finance Act, 2017 receives the assent of the President of India i.e; on or before 30.09.2017. The claimant has filed application for refund of service tax on 29.12.2017 which is beyond 6 months from 31.03.2017. It is filed within one year from the date of assent of the Finance Bill, 2017. Further, in the present case, the appellant is not at all responsible for the delay. The Section 104 of the Finance Act, 1994 does not provide as to who has to file the refund claim. When SIPCOT has collected service tax from the appellant, the refund claim can be filed by SIPCOT or the appellant. However, when the appellant has to make an application for refund, they have to get the necessary documents from SIPCOT. Only after obtaining necessary documents, the refund claim can be filed. SIPCOT has intimated the appellant vide letter dated 09.11.2017. This letter issued by SIPCOT dated 09.11.2017 has been received by the appellant only on 26.11.2017. The refund claim has been filed in the next month itself. Thus, it can be seen that there is no delay on the side of the appellant. In the decision in the case of M/S. ROOP AUTOMOTIVES LTD. VERSUS THE COMMISSIONER OF G.S.T. CENTRAL EXCISE, CHENNAI OUTER COMMISSIONERATE [ 2019 (7) TMI 907 - CESTAT CHENNAI] , the matter has been remanded to look into whether the refund has been made within a period of one year in terms of Section 11B of the Central Excise Act, 1994. The rejection of refund is not justified - Appeal allowed - decided in favor of appellant.
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2022 (3) TMI 9
Construction of residential complex - It appeared to Revenue that the appellant is also collecting one time Preferential Location Charges, Car Parking Charges, Club Membership Charges, Interest Free Maintenance Security charges (IFMS), Internal or External Development Charges, Electrical charges, Power Back up charges etc. from their buyers over and above the basic price of flat - alleged additional amount collected from the customers would be taxable at full rate of service tax without even classifying and mentioning the category of service under which the same will be taxable or not - financial year 2013-14 to 2016-17 - abatement under Notification No. 26/2012-ST as amended - Circular TRU/CBEC letter dt. 20.02.2010 - HELD THAT:- The service tax law was revamped w.e.f. 01.07.2012 by bringing in various changes. It is also noticed that TRU/CBEC letter dt. 20.02.2010 regarding the scope of valuation of taxable amount in respect of residential complex service, which was introduced in the year, 2010. With effect from 01.07.2012, Section 66F have been added to the Finance Act, which deals with classification of service in case of bundled services. Section 66 F (1) provides that - unless otherwise specified, reference to a service (hereinafter referred to as main service) shall not include reference to a service which is used for providing main service. Further, where a service is capable of differential treatment for any purposes based on its description, the most specific description shall be preferred over a general description. From the facts on record and on perusal of the RUDs, it is found that although the appellant may have prepared a price list showing preferential location charges, car parking charges etc. separately, but it is evident from the buyer-agreements (sample buyer agreement produced at the time of hearing), that the appellant have charged the negotiated sales price per sq. ft. and in addition have charged IFMS and EDC/IDC per sq. ft. basis. In addition, there is power back up charges in some of the cases. Evidently, it is found that Revenue have calculated preferential location charges, IFMS charges, EDC/IDC, power back up charges based on the price list. It is found that there is no such mention in the buyer agreement, nor there is any amount collected towards such heads in the books of accounts maintained by the appellant, as is evident from their balance sheet/ P L account/ trial balance. Thus, the service tax is not payable on such hypothetical calculation, there being no actual consideration towards these, which is an admitted fact. Security charges - HELD THAT:- This is actually interest free maintenance security charges collected from the prospective buyer of the flat, which are separately shown in the builder buyer agreement and the sale deed, and appellant have maintained separate ledger relating to such collection customer-wise. Such charges are collected by the appellant / builder as a trustee of the flat buyers and such total amount of a project of a building, is handed over to the maintenance committee or RWA at the time of handing over the maintenance alongwith accrued interest etc. if any - the appellant is not liable to pay service tax on such receipts which are not part of consideration towards any service. Accordingly, we set aside the demand of ₹ 1,44,599/-. Electrical charges - HELD THAT:- Such amount have been maintained in a separate ledger called electrical ledger. The appellant have explained that such charges are collected on behalf of the customer or buyer of the flat, as the trustee, for getting electrical connection in the name of the buyer of the flat from the electrical supply company, for which connection charges, and security deposit have to be given for obtaining the connection - such amount is not collected towards providing any service by the appellant. The amount collected is as a pure agent for disbursing the expenses and amount of security deposit for obtaining the electrical connection in flat buyer s name. Accordingly, the appellant is not liable to pay service tax on the electrical charges. Thus, the demand of ₹ 27,30,298/- is set aside. Rental income - HELD THAT:- The appellant have received rent both for renting of residential flat as well as for commercial space. The appellant have admitted the liability under this head. However, as stated that they are not paying service tax on the rent received from renting of residential flat. As the appellant has not given the break-up of the rent received from residential flats and commercial space, it is confirmed demand under this head of ₹ 1,57,467/-. It is further evident from the record that the appellant has not collected any service tax on this account. Short payment of tax in respect of advance received from the customer for buying the flats - HELD THAT:- The appellant has paid the service tax on the full consideration received at the time of finalisation of the sale or execution of sale deed, on the total consideration received. However, in view of the tax liability which arises on the event of receipt of advance consideration, there is only case of deferment in deposit of tax. Thus, the appellant is only liable for interest on the delay deposit of tax in respect of advance received, in accordance with law. Excess abatement claim as per Notification No. 26/2012-ST - HELD THAT:- From perusal of the purchase deed and other documents produced before us, we find that the purchase agreement and the sale deed mentions the area sold as super area in sq. ft, and not the carpet area. Whereas the rate of abatement under the said notification is based on two criteria (i) carpet area not more than 2000 sq. ft. and (ii) sale consideration not more than ₹ 1 crore. We find that the submissions of the appellant in this regard that they have not sold any flat in excess of 2000 sq. ft. as supported by Chartered Engineer certificate, have not been found to be untrue or false. Thus, evidently the Commissioner have erred in considering the super area as carpet area and have drawn erroneous conclusion - the carpet area is the area on which carpet may be spread within a house. Whereas built up area or super area includes also the space occupied by the walls and may also include loading by the builder towards profit or other amenities provided or to be provided. The impugned order is modified - appeal allowed in part.
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2022 (3) TMI 8
Service tax liability for the period prior to 01.07.2010 - vacant land given on lease or licence for construction of a building or a temporary structure at a later stage to be used for furtherance of business or commerce - consideration received for leasing vacant land by the appellant to BJCL - relevant period is 1.06.2007 to 31.02.2012 - penalties under section 76, 77 and 78 for this period - HELD THAT:- The Section 65 (105)(zzzz) was amended with effect from 01.07.2010 and vacant land given on lease or licence for construction of a building or a temporary structure at a later stage to be used for furtherance of business or commerce has been included in this definition and hence such leases became exigible to service tax under the category renting of immovable property service . It is undisputed that the appellant has leased about 35 acres of land to BJCL so that latter could set up cement plants and carry on business. Prior to 01.07.2010, such leases were not exigible to service tax. In NEW OKHLA INDUSTRIAL DEVELOPMENT AUTHORITY VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX [ 2014 (1) TMI 1203 - CESTAT NEW DELHI] , the question as to whether the service tax can be levied under this clause for the period prior to 01.07.2010 was examined and it was held in negative. The contract was for vacant land and not for a building or complex. Vacant land, even if it has some facilities incidental to the use of such land, was clearly excluded by sub-clause (c) to clause (iv) to the Explanation - it is found from the lease deed entered into by the appellant on 5th June, 2007 with BJCL and the supplementary lease deed entered into on 23rd November, 2007 that the lease was only for the land there was no lease of any building or structure as presumed by the Commissioner. The appellant is not liable to pay service tax prior to 01.07.2010 on the land leased to BJCL. The demand to this extent cannot be sustained and needs to be set aside along with interest and any penalty pertaining to such demand. So far as a period post 01.07.2010 is concerned, the appellant has already paid service tax and is only paying for waiver of penalty - Section 80 (2) of the Finance Act 1994 specifically provided for waiver of penalty under Section 76, 77 and 78 for failure to pay service tax payable as on 6th day of March, 2012 on taxable service referred to in sub-clause (zzzz) of clause 105 of Section 65 (i.e. renting of immovable property service) if the service tax was paid within six months from the date of presidential assent to the Finance Bill. This Bill was assented to by the President on 28.05.2012. The appellant has paid the service tax well before six months from this date. Therefore, in terms of 80(2) no penalty can be imposed upon on the appellant. All penalties, therefore, need to be set aside and are set aside. The case is found to be in favour of the appellant on merits, other submissions on extended period of limitation, cum tax benefit and revenue neutrality are not required to be examined - appeal allowed - decided in favor of appellant.
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2022 (3) TMI 11
Reimbursement of service tax - works contract - maintainability of petition in view of the express term in the agreement dated 20.07.2015 that any claim exceeding ₹ 50,000/- related to the contract shall be decided by the Civil Court of competent jurisdiction - Whether the respondent University is liable to reimburse the service tax to the petitioner? - HELD THAT:- It is clear that by 01.03.2014 i.e., on the date of approval of the estimates by the Executive Council and by 09.03.2015, i.e., the date on which tender notification NIT No.08/DU/Engg/2014-15 was issued, the exemption of service tax was in force. However, by 20.07.2015, the date on which agreement was entered into by the parties, the exemption on service tax was withdrawn by the Central Government. It appears, in this peculiar factual background, perhaps the parties have not mentioned in the agreement as to who has to bear the service tax. Therefore, the statute has to be referred to know about the liability - A perusal of sub-section (1) of Section 68 of the Finance Act, 1994, would show that generally a service provider has to pay service tax to the Department. Section 68(2) introduced the concept of reverse charge mechanism under which the service recipient is liable to pay tax and be assessed to tax. Be that it may, a plain reading of section 68(1) will reveal the petitioner in this case being the service provider has to pay service tax to the Department. However, it must be noted that service tax is an indirect tax and the burden of the tax can be passed on to service recipient provided the parties agreed upon to this effect. It is clear that irrespective of the fact who has to pay the service tax under statute, the parties by contract can fix the liability on any one between them. It goes without saying that if the contract is silent as in the instant case, one has to necessarily fall back on the statute to fix the liability. As rightly contended by the learned Standing Counsel for respondents, the agreement dated 20.07.2015 is silent on the liability of service tax being born by whom. Therefore, primarily the petitioner is responsible to pay the service tax - it is only an act of recommendation which has to be approved by the Executive Council. The same was not ratified by the Executive Council after ascertaining the legal opinion. Therefore, the petitioner cannot, as a matter of right, claim that the respondents should reimburse the service tax paid by him. Whether the writ petition is not maintainable in view of the express term in the agreement dated 20.07.2015 that any claim exceeding ₹ 50,000/- related to the contract shall be decided by the Civil Court of competent jurisdiction? - HELD THAT:- It is true that in the Articles of agreement dated 20.07.2015, clause No.3 shows that all claims above ₹ 50,000/- in value shall be decided by the Civil Court of competent jurisdiction by way of a regular suit. On the strength of this term, it is argued by the respondents that the writ petition is not maintainable. This argument has no much force for the reason that the claim of the petitioner is not for the contractual amount agreed upon by the parties. On the other hand, he claims the refund of the service tax which, in my view, cannot be termed as a contractual amount so as to drive the petitioner to the Civil Court. So the writ petition is maintainable. The Writ Petition is devoid of merits and accordingly dismissed.
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2022 (3) TMI 12
Inquiry proceedings under Service Tax - apprehension of arrest - Seeking stay of proceedings and consequential penal action, initiated against the petitioners pursuant to issuance of summons - Section 83 of the Finance Act, 1994 read with Section 14 of the Central Excise Act, 1944 - It was held by Bombay High Court that there are no reason for the petitioners / petitioner No.2 to apprehend arrest on presenting himself before the investigating officer in response to the summons which have been issued to the petitioners. HELD THAT:- There are no reason to interfere with the impugned order - special leave petition is, accordingly, dismissed.
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2022 (3) TMI 7
Refund of service tax - Export of goods - allegation of illicit mining - Levy of tax on illegal activities / illegal export. As per : Sulekha Beevi C.S., Member (J), 100% EOU - refund of service tax paid - input services used for export of goods - respondent was of the view that appellants were not eligible for the refunds claimed, inasmuch as, the minerals had been exported by illicit mining and transportation - N/N. 41/2012-S.T., dated 29-6-2012 - HELD THAT:- Undisputedly, the department does not have a case that the appellant has not exported goods or that they have not paid service tax on the input services used for export of goods. So also, there is no allegation that the conditions of the above notification are not fulfilled. The reason for rejecting the refund claims for the period from May, 2016 to December, 2016 is that the department gathered information from the District Level Committee of Tirunelveli that appellant has committed illicit mining of Beach Sands and unlawfully transported the same. The export of goods procured by violation of MM DR Act/Rules and, therefore are illegal exports as per Section 11H of Customs Act, 1962. The MMDR Act itself provides for punishments for contraventions of provisions of the Act. Sub-clause (a) of Section 11H defines illegal exports - appellant herein is a registered 100% EOU and does not possess any mining lease. Both these are different entities in the eyes of law. Merely because the supplier of goods has committed violation of local law, the exporter, who has procured the goods cannot be put into adverse situations. Even if it is proved that the supplier had contravened the provisions of MMDR Act, to hold that the exports are illegal exports, it has to be established that the exporter had acted consciously or abetted for such illegal mining. It needs to be stated that there is no show cause notice issued under the Customs Act, 1962 against the appellant alleging illegal export. By depriving the refund the department has sought to impose a punishment or penalty on the appellant for the alleged illegal export. The intention of Notification No. 41/2012 is to refund the service tax paid by the exporter on the goods exported. This is to give effect to the policy of the Government that taxes are not to be exported . To deny refund would be directing the appellant to suffer the burden of taxes on the goods exported. Thus, it would be imposing penalty/punishment on the appellant without due process of law. If the department has reasons to believe that appellant has contravened any provision of the Customs Act, 1962, then the appellant has to be put to notice by issuing a show cause notice. The rejection of refund claim is unjustified. The impugned orders are set aside, the appeals are allowed with consequential reliefs, if any. As Per P. Venkata Subba Rao, Member (T), Whether tax laws apply even to cases of illegal activities if they are otherwise covered by the tax law? - will tax be leviable even on illegal activities? - whether any tax benefit or relief is available to illegal activities also? - HELD THAT:- The goods exported in this case are allegedly made out of illegally mined sand according to the State Government which regulates the mining of sand. As per Notification No. 41/2012-S.T., dated 29-6-2012, exporters are eligible for refund of the service tax paid on transport of the exported goods. The appellant in this case is a 100% EOU and hence no taxes are paid. However, the export goods had to be transported from the factory to the port and service tax was paid on such transportation charges and they sought refund of the same as per the notification. It is undisputed that the conditions of the Notification No. 41/2012-S.T. have been fulfilled. However, the exported goods were made out of illicitly mined beach sand - sand is a minor mineral which can be regulated by the State Government under the MMDR Act. In this case, in violation of the ban imposed by the State Government, the appellant unlawfully extracted beach sand and transported and the minerals were exported. According to the Revenue since the export was from illegal mining and transportation, they cannot be given the benefit of refund of service tax paid in such illegal export. Thus, while the export itself is not illegal the product emanated from illegal mining in violation under the MMDR Act. The question is can the Government incentivize such an export by providing refund? Conversely, if tax could have been collected on an illegal activity, can such a tax be collected notwithstanding the action under some other law? Can the Government profit from an illegal activity by collecting tax on it while on the other hand, taking action against the person under some other law? Does it not amount to the Government endorsing the illegal activity? These fundamental questions do not appear to have been addressed in the context of service tax. The settled legal position is therefore, the taxation should not consider legality or illegality of the acts in question. So long as the acts in question fall under the taxing statute, tax must be paid regardless of whatever action is necessary and may be taken under any other law which has been violated. Conversely, if any benefit is available under the tax laws, it is available regardless of the illegality of the underlying act. Although the goods are illegally imported, duty as applicable, is collected. This rate would be the tariff rate read with any exemption notifications that may apply. Not only is the customs duty collected on the illegal imports but the benefit of any exemption notification is also available for such illegal imports. Similarly, when export goods confiscated under Section 113 and thereafter allowed to be redeemed and exported, if any export duty is leviable, it has to be paid and if any exemption notification is available from such export duty, they can avail the benefit of the same - unless there is any provision to the contrary, the charging sections of the tax laws apply to illegal acts as they apply to legal acts and therefore tax is leviable notwithstanding that action for the illegal actions may be taken under some other law. This does not amount to endorsing the illegal activity by the State but only the recognition that it has taken place. This taxes illegal businesses and does not absolve them of their tax liability by virtue of their illegality. Since tax is leviable on illegal activity, tax benefits or tax relief are equally available to illegal businesses. Notification No. 41/2012-S.T. which provides for refund of the service tax is agnostic to the legality of the export and is available to both legal exports and illegal ones and also to legal exports of goods allegedly procured through illegal means such as the illegal mining in this case - appellant, is therefore, eligible for the benefit of the exemption Notification No. 41/2012-S.T. and the impugned order is liable to be set aside. Appeal allowed.
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Central Excise
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2022 (3) TMI 6
CENVAT Credit - receipt of raw materials or inputs - non-existent dealers - purchases were actually made by the said First Stage Dealers from manufacturing units of Dhanbad or not - reliability of statements - discharge of onus as required under Rule 9(1) (5) of CCR, 2004 - HELD THAT:- The Revenue is not disputing the fact that First Stage Dealers raised invoices giving all the particulars required to be given under the provisions of Cenvat Credit Rules, in respect of material supplied to the assessee-Appellant. It is also not being disputed that the assessee-Appellant has received inputs for manufacture and entered the same in their Central Excise records. The said inputs were further used by the assessee-Appellant in the manufacture of their final product which were cleared by them on payment of duty. This fact is sufficient to prove the physical entry of the inputs in the assessee-Appellant s premises. Further, the ledger account and RG-23A register (cenvat register) maintained by the assessee-Appellant is supported by weighment slips, also proves the receipt of the goods. The assessee-Appellant also produced the sample invoices against which they have availed the Cenvat Credit along with supporting documents, including lorry receipts and weighment slips. Also demonstrated the ledger account of the suppliers, supported with statutory register and Bank Statement. Thus, appellant have prima facie, discharged the onus on them. Therefore, the burden is cast upon the Revenue to prove that it was merely a paper transaction, and goods were not received by the assessee-Appellant, as alleged, which it failed - It is further demonstrated that all the payments made to the First Stage Dealers are through banking channels, by way of Cheques/RTGS. The Revenue has not brought on record any evidence to prove any flow back of monies. The assessee-Appellant have discharged its onus as required under Rule 9(1) (5) of CCR, 2004 and as explained by Hon ble Allahabad High Court in its decision in the case of THE COMMISSIONER OF CENTRAL EXCISE CUSTOMS SERVICE TAX VERSUS M/S. JUHI ALLOYS LTD., ANIL KUMAR SHUKLA [ 2014 (1) TMI 1475 - ALLAHABAD HIGH COURT] . Appeal allowed - decided in favor of appellant.
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2022 (3) TMI 5
Entitlement of interest on delayed refund of pre-deposit - time limitation - from the date of pre-deposit till the date of refund of the principal amount or otherwise? - HELD THAT:- Admittedly, the amount under dispute was deposited as a pre-deposit within the meaning of Section 35 F. Further, I find that in the preceding order of this Bench in the case of M/S J.K. CEMENT WORKS VERSUS COMMISSIONER, CENTRAL EXCISE, CENTRAL GOODS AND SERVICE TAX, UDAIPUR [ 2021 (3) TMI 123 - CESTAT NEW DELHI] , it has been held that the interest on the refund shall be payable @ 12% per annum, as held by Hon'ble Kerala High Court in the case of SONY PICTURES NETWORKS INDIA PVT. LTD. VERSUS THE UNION OF INDIA, THE COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE, THE ASSISTANT COMMISSIONER OF CUSTOMS, THIRUVANANTHAPURAM [ 2017 (5) TMI 864 - KERALA HIGH COURT] , wherein it was held that the appellants are entitled to claim interest from the date of payment of initial amount till the date its refund @ 12% per annum. This appeal is allowed and the impugned order is set aside, so far the interest claim has been disallowed. The Adjudicating Authority is directed to grant interest from the date of deposit (31.03.2006) till the date of grant of refund @12% p.a. Such interest on refund should be granted within a period of 60 days from the date of receipt of, or service of a copy of this order - appeal allowed.
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CST, VAT & Sales Tax
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2022 (3) TMI 4
Violation of principles of natural justice - the reply to a question posed by this Court as to why the petitioner has chosen to file writ petition under Article 226 of the Constitution of India instead of preferring an appeal, has not been considered or it has not been considered in proper perspective - HELD THAT:- Though it was contended by the learned Senior Counsel appearing for the petitioner that, the detailed reply given by the petitioner dated 22.11.2021 has not at all been considered or not been considered in proper perspective by the respondents, on a perusal of the impugned orders, this Court finds that, there has been some consideration in respect of the defence taken by the petitioner through his reply dated 22.11.2021 item-wise. Therefore, it cannot be stated that the assessing authority has passed the impugned assessment orders without considering the reply given by the petitioner dated 22.11.2021, as the said reply has been cited as Reference No.6 in the impugned orders itself and the main issue of stock transfer has also been considered by the respondents in the impugned orders. These are all not the cases to be considered as cases where the assessment orders are passed by the assessing authority without giving any proper opportunity to the petitioner by thus following the principles of natural justice. Instead, these are all the cases where there has been consideration on the part of the respondents - on factual matrix whether the consideration is not enough to be accepted by the petitioner that it has been a proper consideration by meeting each and every fine and minute detail of the factual matrix, that aspect necessarily has to be gone into by the appellate authority and not by this Court exercising its extraordinary jurisdiction under Article 226 of the Constitution of India. The impugned orders, for the reasons stated in the affidavit, and the arguments advanced by the learned Senior Counsel are not liable to be interfered with at this stage - petition dismissed.
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Indian Laws
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2022 (3) TMI 3
Interpretation of statute - possession of secured assets - expression used in the provision of section 14 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), may authorise any officer subordinate to him - whether it is open to the District Magistrate (DM) or the Chief Metropolitan Magistrate (CMM) to appoint an advocate and authorise him/her to take possession of the secured assets and documents relating thereto and to forward the same to the secured creditor within the meaning of Section 14(1A) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002? HELD THAT:- While considering the purport of the expression in Section 14(1A) of the 2002 Act, it must be noticed that the said provision was inserted vide Act 1 of 2013 with effect from 15.1.2013. In absence of express provision, such as sub-Section (1A) under the unamended Act, the CMM/DM could take possession of secured assets on a written application made by the secured creditor under Section 14(1); and while doing so in terms of Section 14(2) of the 2002 Act, it was open to the CMM/DM to take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion be necessary. This would include taking assistance of the local Police to obviate any untoward situation or law and order problem at the site while taking over possession. It was an inherent or implicit power vested in the stated authority and more particularly because advocates were no less than officers of the court of the CMM/DM. This view has been consistently followed not only by the High Court of Kerala, but also by other High Courts such as High Courts of Madras and Delhi. Most of the CMMs/DMs across the country have been following that dispensation. The only discordant note can be discerned from the decision of the Bombay High Court which is impugned before us. The Bombay High Court has followed the strict and literal interpretation rule and, thus, preferred statutory subordination logic. The view so taken can be sustained only if we were to hold that legislative intent in using the expression any officer subordinate to him completely rules out the other option which is being followed since commencement of the Act in 2002. The statutory obligation enjoined upon the CMM/DM is to immediately move into action after receipt of a written application under Section 14(1) of the 2002 Act from the secured creditor for that purpose. As soon as such application is received, the CMM/DM is expected to pass an order after verification of compliance of all formalities by the secured creditor referred to in the proviso in Section 14(1) of the 2002 Act and after being satisfied in that regard, to take possession of the secured assets and documents relating thereto and to forward the same to the secured creditor at the earliest opportunity. The latter is a ministerial act. It cannot brook delay. Time is of the essence. This is the spirit of the special enactment. However, it is common knowledge that the CMM/DM are provided with limited resources. That inevitably makes it difficult, if not impossible, for the CMM/DM to fulfil his/her obligations with utmost dispatch to uphold the spirit of the special legislation - It is well established that an advocate is a guardian of constitutional morality and justice equally with the Judge. He has an important duty as that of a Judge. He bears responsibility towards the society and is expected to act with utmost sincerity and commitment to the cause of justice. He has a duty to the court first. As an officer of the court, he owes allegiance to a higher cause and cannot indulge in consciously misstating the facts or for that matter conceal any material fact within his knowledge. Application disposed off.
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2022 (3) TMI 2
Suit for specific performance of a collaboration agreement - termination of Collaboration Agreement - prayer for declaration of perpetual injunction - whether the Appellant is entitled for damages for the period between 24.08.2005 and 31.12.2009? - time limitation - HELD THAT:- The relevance of 24.08.2005 is that the Supreme Court disposed of the SLP on that date vacating the interim order granted in favour of the Appellant. Since there was an interim order operating in favor of the Appellant, damages are sought only from 24.08.2005 till 31.12.2009. The Appellant admits that no relief for damages or compensation was claimed in the suit. Admittedly, such a relief was not sought for either before the Division Bench or before this Court. No steps were taken by the Appellant to amend the appeal even after the date of expiry of the Collaboration Agreement, i.e., 31.12.2009. Whether even if a relief for damages has not been specifically sought for, this Court can still award damages to the Appellant? - HELD THAT:- In JAGDISH SINGH VERSUS NATTHU SINGH [ 1991 (11) TMI 246 - SUPREME COURT] , the Respondents suit for specific performance of an agreement for conveyance of certain properties was dismissed by the Civil Court and the judgment of the Civil Court was upheld in appeal. As the High Court reversed the findings of the First Appellate Court, the defendant filed an appeal before this Court. The contention of the Appellant in that case was that the contract itself became incapable of specific performance as a proceeding for compulsory acquisition of suit properties was initiated during the pendency of the second appeal. It was not clear as to whether compensation in lieu of specific performance was sought by the plaintiff in the suit. However, on a finding that there is no difficulty in assessing the quantum of compensation for the subject property which was ascertainable by determination of market value, this Court permitted amendment of relief to do complete justice. The scope of Section 21 (4) and (5) was examined by this Court in SHAMSU SUMARA BEEVI VERSUS G. ALEX AND ANR. [ 2004 (8) TMI 694 - SUPREME COURT] . This Court referred to the Law Commission of India s recommendation that in no case the compensation should be decreed, unless it is claimed by a proper pleading. However, the Law Commission was of the opinion that it should be open to the plaintiff to seek an amendment to the plaint, at any stage of the proceedings in order to introduce a prayer for compensation, whether in lieu or in addition to specific performance. In the said case no claim for compensation for breach of agreement of sale was claimed either in addition to or in substitution of the performance of the agreement. Admittedly, there was no amendment to the plaint asking for compensation either in addition or in substitution of the performance of an agreement of sale - thus, in the present case, the Appellant is not entitled to claim damages for the period between 24.08.2005 and 31.12.2009. The request of the Appellant for grant of damages cannot be accepted - Appeal dismissed.
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2022 (3) TMI 1
Unauthorized and illegal encashing of Kisan Vikas Patras (KVPs) - Fraud / Cheating - endorsement of KVP - Presumptions as to negotiable instruments - Negligence on the part of appellant / contributory negligence - KVPs were simple bearer instruments or a bearer instrument with conditions - HELD THAT:- The presumption under clause (g) to Section 118 would not apply as Rukhsana is not an indorsee and the instrument was in the name of the appellants. Further, Rukhsana is not a holder in due course , for she had, and the respondents accept, obtained possession of the instrument from the lawful owners, i.e. the appellants, by means of an offence or fraud. It is an admitted case of the parties that Rukhsana was convicted and sentenced for the fraud committed. However, Section 78 uses the expression holder and not holder in due course . Rukhsana was not the holder as defined under Section 8 of the NI Act. She was not entitled to sue the maker, acceptor or indorser of the instrument of the amount due thereon in her name. Sections 8 and 11 of the GSC Act have no application in the present case. Section 8 states that payment would be in full discharge when payment is made in accordance with the foregoing provisions of the GSC Act, that is, payment, where the certificate is held by or on behalf of the minor, in terms of Section 5 and payment on the death of a holder in terms of Section 7. The expressions minor , his parent or guardian in Section 8 of the GSC Act are persons referred to in Section 5 of the GSC Act and the word nominee and any other person are persons referred to in Section 7 of the GSC Act - sub-section (1) to Section 8 would come to the aid of the respondents only when the payment is made where the savings certificate is held by or on behalf of the minor and to the nominee or to a person mentioned in sub-section (5) of Section 7 on death of the holder. It is not a provision of general or universal application and does not discharge the respondents of their liability when Sections 5 and 7 of the GSC Act do not apply. Section 8(1) does not protect payments not covered and governed by Sections 5 and 7 of GSC Act. Sections 5 and 7 do not apply to the present case. To decide whether the KVPs were simple bearer instruments or a bearer instrument with conditions, it is essential to glean the relevant 1988 Rules - in terms of Rule 9, an identity slip is to be issued to the holder or the holders of the certificate when they request to the said effect when and after the KVPs are issued. The holder/holders have to sign the identity slip. Sub-rule (2) to Rule 9 states that the identity slip shall be surrendered at the time of final discharge of the certificate, or in case of loss, a declaration of the said loss shall be furnished to the post office. Rule 11 states that a certificate shall be encashable at the post office which issued it. However, a KVP can also be encashed at any other post office if the Officer-in-charge of that post office is satisfied, on production of the identity slip or on verification from the post office of issue, that the person presenting the certificate for encashment is entitled to encashment. Thus, it cannot be said that the KVPs are simple bearer instruments payable to anyone who presents the same for encashment and discharge. Whether the respondents would be liable for the wrongs and act of M.K. Singh, respondent No. 4, in connivance or at the behest of Rukhsana? - HELD THAT:- This Court in STATE BANK OF INDIA VERSUS SHYAMA DEVI [ 1978 (5) TMI 124 - SUPREME COURT ] held that for the employer to be liable, it is not enough that the employment afforded the servant or agent an opportunity of committing the crime, but what is relevant is whether the crime, in the form of fraud etc., was perpetrated by the servant/employee during the course of his employment. Once this is established, the employer would be liable for the employee s wrongful act, even if they amount to a crime. Whether the fraud is committed during the course of employment would be a question of fact that needs to be determined in the facts and circumstances of the case. The findings recorded in the inquiry report, which became the basis for the order of dismissal, which punishment was subsequently converted to compulsory retirement, would equally apply to the encashment of all the KVPs. No valid distinction can be drawn between the case that became the subject matter of departmental enquiry and other cases of encashment of the KVPs. Hence, the post office/bank can be held liable for the fraud or wrongs committed by its employees. Accordingly, the respondents will be held liable for the acts of M.K. Singh during the course of his employment. Respondent Nos. 1 to 4 would be jointly and severally liable to pay the maturity value of the KVPs as on the date the KVPs were presented to the post office for encashment, along with 7% simple interest per annum from the said date till the date of payment - the appellants would be entitled to a compensation of ₹ 1,00,000/- and costs of ₹ 10,000/- - appeal allowed - decided in favor of appellant.
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