TMI Tax Updates - e-Newsletter
April 7, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Refund alongwith Interest - amount deposited during search proceedings - If tax is collected without any authority of law, the same would amount to depriving a person of his property without any authority of law and would infringe his right under Article 300 A of the Constitution of India as well. In the present case, no receipt was given by the Proper Officer after accepting the impugned amount - Thus, the amount deposited by the petitioner under protest were liable to be refunded, as the petitioner has been deprived of his right. - HC
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GST:
Supply or not - liquidated damages collected for non-performing of an act - In the light of section 7 read with definition of consideration u/s 2(31), liquidity damages paid by defaulting party to the non-defaulting party for tolerating the act of non performance or breach of contract have to be treated as consideration for tolerating of an act or a situation under an agreement and hence such an activity constitutes supply of service - rate of GST is 18% - AAR
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GST:
Levy of GST - supply of 1kg packing red gram dal secondary packing in 50 kg bag to the AP State Civil Supplies Corporation Limited, Vijayawada - the commodity is packed for retail sale for any buyer who may purchase at a later point, but it is packaged to a specific buyer. Thus the first and foremost condition of taxability is not satisfied. Hence there is no question of taxability of the commodity in the instant case - No GST - AAR
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GST:
Levy of GST - amount recovered from employees for canteen facility provided to them - As provision of canteen facility is a mandate as per Factories Act, 1948, we see that even considering the employee and employer transaction solely, GST is not applicable - the applicant is not liable to pay GST on the recoveries from the employees for the canteen services provided to them. - AAR
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Income Tax:
Provision for warranty - Tribunal has examined the relevant clause in the terms and conditions and found that the warranty clause is in-built in the guarantee clause itself as the assessee, in the event of any defective supply within a period of 5-1/2 years has to replace the meters and in the event of the meters not getting replaced, the assessee has to pay twice the cost of meters. - Revenue appeal dismissed - HC
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Income Tax:
Power of CIT(A) - Admitting new evidence under Rule 46A(1) of the Income Tax Rules - Sub-rule(4) of Rule 46-A starts with an obstante clause empowering the CIT(A) to direct the examination of any witness and production of any document to enable him to dispose of the appeal. The exercise of power by the CIT(A) in allowing admission of the exemption Order in support of the Appellant's case, cannot be said to be arbitrary or perverse exercise to warrant interference. - HC
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Income Tax:
Reopening of assessment u/s 147 - Reason to believe - issuance of a notice u/s 148 in the absence of any new tangible material was nothing but an attempt to review the earlier order of assessment passed by the A.O. - HC
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Income Tax:
Lease equalization charge claimed as a deduction from gross lease rentals received - the assessee is entitled for bifurcation of lease rental as per the accounting standards prescribed by the ICAI. Moreover, there is no express bar in the IT Act regarding the application of such accounting standards. - HC
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Income Tax:
Revision u/s 263 - Having found that the assessee was owner of at least 2 residential houses, we are in agreement with the twin-issues raised by Ld. PCIT i.e. (i) the exemption u/s 54F has been wrongly allowed to assessee; (ii) by not declaring notional income from properties under “Income from house property” head, there was underassessment of taxable income. - AT
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Income Tax:
TP Adjustment - Recovery of expenses represent expenses incurred by the assessee company on behalf of AE towards Bid bond expenses. These expenses were also recovered by the assessee from its AE with markup of 10%. Hence, the reasoning given by us hereinabove for reimbursement of expenses would apply for this issue of recovery of expenses also. Hence, we dismiss the action of the ld. TPO in determining the ALP of this transaction at Nil - AT
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Income Tax:
TDS u/s 195 - Non-deduction of TDS for legal and professional charges paid - no technical knowledge, skill, experience, knowhow or process is made available to assessee Company in terms of Article 12(b) of the India-US Treaty and Assessee has not defaulted in deducting TDS u/s 195 of the Act. Therefore the disallowance is unwarranted. - AT
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Income Tax:
Depreciation - mandation of ownership of such machines in name of the assessee - a hire purchase agreement is one where the hirer has an option to purchase the goods in accordance with terms of the agreement and the property in the goods pass on to such person on the payment of the last installment. Thus the allegation of the revenue is on a totally wrong appreciation of facts. - AT
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Income Tax:
Undisclosed income - differential amount of sale proceeds - the findings of the lower authorities were not based any documentary evidences, but based on some presumption that the assessee has concealed sale of plot - On such presumption, burden to establish concealment of income indeed was with the AO with some incriminating material.- AT
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Income Tax:
Addition u/s 56(2)(vii)(b) - immovable property having difference between actual consideration and stamp duty value - the mere fact that some stray revenue entries have gone against the assessees or no sale deed had been executed in their favour would not amount to them having not actually “received” the land in issue once they have received the corresponding exact compensation of their respective shares under the land acquisition law. - AT
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Income Tax:
Addition u/s 68 - unexplained cash credit - no proof/evidence of sale of crops - the AO has disbelieved the statement of the assessee and the nature of trend in the agriculture sector wherein proper sale records could not be maintained by the small time agriculturist. For all these reasons, the addition made by the A.O. u/s. 68 is not sustainable in law - AT
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Corporate Law:
Abuse of dominant position - Google has not provided the financial information as sought by the CCI vide its order dated 6.10.2021, and reiterated in its later order dated 17.10.2021. The inadequacy of the data supplied by Google has been mentioned in detail in paragraphs 630, 631, 632, 633 and 634, whereafter the CCI points out to significant inconsistencies and wide disclaimers in presentation of the requisite data by Google. In such a situation, CCI has carried out the “best estimation” on the basis of a financial statements and information submitted by Google - the amount of penalty imposed by CCI sustained - AT
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Indian Laws:
Scope of RTI - private unaided educational institution - It cannot be disputed that educational institutions, whether private or public, perform a critical public function, being the dissemination of education. Hence, there must be, and the Court agrees with R1 on this, scrutiny of the manner and mode of such dissemination, and the quality maintained by the institutions. For this purpose, though not a public authority, they would still come within the ambit of the RTI Act, although by strict application of the provisions of Section 11 of the Act. - HC
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Service Tax:
Taxable services or not - providing corporate guarantee to its group companies without consideration - No effort was made on behalf of the Revenue to assail the above finding or to demonstrate that issuance of corporate guarantee to group companies without consideration would be a taxable service. - Revenue appeal not admitted - SC
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Service Tax:
Invocation of extended period of limitation - uppression of facts or not - the Department could not have taken shelter of the third party information, as it was possessed of all the information necessary for the said period. - The invocation of the extended period of limitation cannot be sustained and needs to be set aside and is set aside. - AT
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Service Tax:
Export of service - Place of provision of services - analysis and identification of genetic patterns of a disease/ailment -reports are sent to the clients electronically - The CESTAT has rightly recorded that assessee has clearly satisfied the conditions required for treating the service as export of service - HC
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VAT:
Assessment of turnover of the applicant as per Section 4(3) of the VAT - levy of tax on turnover of sale has to be done in the manner provided in Section 4(3) of the Act and Rules 8 and 9 do not restrict the power of the assessing authority in doing so. Section 4(3) read in harmony with Rule 8 and 9 and the interpretation given by the Tribunal while extending the benefit of Rule 9(1)(e) to the dealer and denying the benefit of computation of tax as per the formula provided under Section 4(3) of the Act does not hold good. - HC
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VAT:
The profile of an assessing authority can no longer be that of a stern and unreasonable automaton that is programmed solely to collect the tax that the revenue department feels is due from an assessee. The right of an assessee to seek justification of state action would mandate that this court step in to correct unreasonable orders of assessing authorities so as to uphold the culture of justification that legitimizes state action. - HC
Articles
Notifications
Central Excise-
G.S.R. 273 (E) - dated
5-4-2023
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CE
Prescribe rates of Special Additional Excise Duty for exports of petrol and diesel Corrigendum for Notification No. 17/2023-Central Excise, dated the 3rd April, 2023 - “Dy. Secy” to be read “Under Secy”.
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G.S.R. 272 (E) - dated
5-4-2023
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CE
Special Additional Excise Duty on production of Petroleum Crude and export of Aviation Turbine Fuel - Corrigendum for Notification No. 16/2023-Central Excise, dated the 3rd April, 2023 - Dy. Secy” to be read “Under Secy”.
SEZ-
S.O. 1647(E) - dated
5-4-2023
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SEZ
Special Economic Zone - Central Government de-notifies an area of 12.942 hectares, thereby making the total area of the Special Economic Zone as 56.841 hectares at State Industries Promotion Corporation of Tamil Nadu Limited, Industrial Growth Centre, Perundurai Village, Erode District, in the State of Tamil Nadu
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S.O. 1646 (E) - dated
5-4-2023
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SEZ
Sector specific Special Economic Zone - Central Government de-notifies an area of 5.1333 hectares, thereby making resultant area as 22.1647 hectares at Plot No. 3, Rajiv Gandhi Infotech Park, Hinjewadi, Phase II, Village Marunji, Taluka Mulshi, District Pune in the State of Maharashtra
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2023 (4) TMI 207
Refund alongwith Interest - amount deposited during search proceedings - blocking of Input Tax Credit - whether the amount deposited on behalf of the petitioner-concern, during search proceedings carried out, was a voluntary act or not? - HELD THAT:- Reference at this stage can further be made to judgment of Karanataka High Court in a case of THE UNION OF INDIA REP. BY THE SECRETARY DEPARTMENT OF REVENUE MINISTRY OF FINANCE, DIRECTORATE GENERAL OF GOODS AND SERVICES TAX INTELLIGENCE NEW DELHI, SENIOR INTELLIGENCE OFFICER DIRECTORATE GENERAL OF GOODS AND SERVICES TAX INTELLIGENCE HYDERABAD ZONAL UNIT, DEPUTY DIRECTOR DIRECTORATE GENERAL OF GOODS AND SERVICES TAX INTELLIGENCE HYDERABAD, ADDITIONAL DIRECTOR DIRECTORATE GENERAL OF GOODS AND SERVICES TAX INTELLIGENCE HYDERABAD PRINCIPAL ADDITIONAL DIRECTORATE GENERAL DIRECTORATE GENERAL OF GOODS AND SERVICES TAX INTELLIGENCE HYDERABAD VERSUS M/S. BUNDL TECHNOLOGIES PRIVATE LIMITED, THE STATE OF KARNATAKA, COMMISSIONER OF STATE TAX GOODS AND SERVICE TAX BENGALURU [ 2022 (3) TMI 625 - KARNATAKA HIGH COURT] , wherein the question was that whether the amount was voluntarily paid during investigation by a company under Section 74 (5) of Act. The appeal was dismissed and it was held that Article 264 of the Constitution of India mandates that collection of tax has to be by authority of law. If tax is collection without any authority of law, the same would amount to depriving person of his property without any authority of law and would infringe his right under Article 300A of Constitution. The only provision which permits deposit of amount during pendency of investigation is Section 74 (5) of Act, which is not attracted. The amount collected from company is in violation of Article 265 and 300A of Constitution. The contention of the department that amount under deposit be made subject to outcome of pending investigation, cannot be accepted. In the present case, as per the department, the petitioner has deposited the impugned amount voluntarily and the proper procedure has been followed. But Article 265 of the Constitution of India lays down that collection of tax has to be by the authority of law. If tax is collected without any authority of law, the same would amount to depriving a person of his property without any authority of law and would infringe his right under Article 300 A of the Constitution of India as well. In the present case, no receipt was given by the Proper Officer after accepting the impugned amount - Thus, the amount deposited by the petitioner under protest were liable to be refunded, as the petitioner has been deprived of his right. The writ petition is partly allowed and respondent No. 1 is directed to refund a sum of Rs.1,99,90,000/- along with 6 % interest.
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2023 (4) TMI 206
Violation of principles of natural justice - non-service of speaking order - petitioner contends that even though they have sent a reply in Form GST DRC-06 to the show cause notice issued by the respondents dated 17.02.2022, in Form GST DRC-01, the same has not been considered in the impugned order dated 05.04.2022 by the respondents - HELD THAT:- Since the petitioner has been able to convince this Court that even though they have sent a reply dated 25.02.2022 to the show cause notice sent by the respondents, the same has not been considered by the respondents in the impugned order, dated 05.04.2022, hence, there is no necessity for this Court to adjudicate on the second ground raised by the petitioner viz., non service of the speaking order dated 05.04.2022 on them. Since, it is made clear that the respondents have not considered the reply, dated 25.02.2022, even though the same was received by them, the impugned order, dated 05.04.2022 has to be quashed and the matter will have to be remanded back to the respondents for fresh consideration on merits and in accordance with law. The matter is remanded back to the respondents for fresh consideration on merits and in accordance with law - Appeal allowed by way of remand.
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2023 (4) TMI 205
Supply or not - liquidated damages collected by the APPDCL from CHETTINAD LOGISTICS PRIVATE LIMITED for non-performing of an act - classification under GST for such liquidated damages collected by the service receiver from such service provider for non performing of an act - applicable rate of tax - HELD THAT:- In the present case the service provider CHETTINAD LOGISTICS PRIVATE LIMITED in paying certain amount to the applicant. The amount so paid is neither ad-hoc, unconditional nor at the whims of any service provider nor the appellant. There is a clear mathematical formula as to calculation of such amount and the conditions/scenarios contingent upon which the amounts are payable are clearly narrated in the agreement itself. The circular 178/10/2022 is only meant to clarify the position of law and shall be applied reasonably having regard to the facts of the case. The circular had clearly mentioned, inter alia, vide para 7.1.6 that Therefore, such payments, even though they may be referred to as fine or penalty, are actually payments that amount to consideration for supply, and are subject to GST, in cases where such supply is taxable. Since these supplies are ancillary to the principal supply for which the contract is signed, they shall be eligible to be assessed as the principal supply - Thus the circular had said payment towards damages are incidental to the main supply and if the main supply is taxable they shall also be taxable and if the principal supply is exempt then the incidental shall also be exempt. Thus the circular shall be understood in the proper context. In the light of section 7 read with definition of consideration u/s 2(31), liquidity damages paid by defaulting party to the non-defaulting party for tolerating the act of non performance or breach of contract have to be treated as consideration for tolerating of an act or a situation under an agreement and hence such an activity constitutes supply of service and the liquidity damages are exigible to tax under CGST and SGST @9% each under the chapter head 9997 al serial no. 35 of Notification No.11/2017- Central/State tax rate.
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2023 (4) TMI 204
Levy of GST - supply of 1kg packing red gram dal secondary packing in 50 kg bag to the AP State Civil Supplies Corporation Limited, Vijayawada as per the design and label given by the corporation with a prior agreement - HELD THAT:- The first and foremost condition of taxability is that the commodity should have been a pre-packed commodity which means that the commodity is not packed for any specific known buyer. In the Instance case the applicant is packing the commodity at the behest and at the specific instructions of the buyer, ie., AP State Civil Supplies Corporation Limited. It is clearly evident from the package that the AP State civil have made very clear instruction as to the color, theme, transparency and the details to be printed on the package. Thus the commodity is packed for retail sale for any buyer who may purchase at a later point, but it is packaged to a specific buyer. Thus the first and foremost condition of taxability is not satisfied. Hence there is no question of taxability of the commodity in the instant case. In view of this the discussion as primary / secondary packaging or Institutional supply is nothing but infructuous.
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2023 (4) TMI 203
Levy of GST - amount recovered from employees for canteen facility provided to them - amount recovered from employees for transportation facilities provided to them - HELD THAT:- It is clearly seen that the provision of service of canteen is by the third-party to the applicant and not by the applicant to their employees. As per Section 7 of the CGST ACT, supply includes all forms of supply of goods or services for a consideration by the person in the course or furtherance of business. The applicant is involved in the supply of manufacture of apparel and not in the activity of provision of canteen service. The canteen service is not an output service of the applicant as it is in the business of apparel manufacture. In fact, the canteen services are being received by the applicant from the third-party providers. Therefore, it can be concluded that the provision of canteen facility by the applicant to the employees is not a supply as it is not in the course or furtherance of business. Further, the applicant is merely collecting a part of the canteen expenses from the employee and this does not tantamount to supply as per Section 7 of the CGST and SGST Act. Further, even if the transaction between the applicant and its employees are analysed, a reference to the GST Policy wing Circular 172/04/2022 dated 6th July 2022, para 2, serial no 5, clarifies that any perquisites provided by the employer to its employee in are In lieu of the services provided by the employee to the employer in relation to the employment and therefore the perquisites provided by the employer to the employee will not be subjected to GST. As provision of canteen facility is a mandate as per Factories Act, 1948, we see that even considering the employee and employer transaction solely, GST is not applicable - the applicant is not liable to pay GST on the recoveries from the employees for the canteen services provided to them. Levy of Service Tax - transportation services by a third-party to the employees of the applicant - HELD THAT:- The service provider is charging Rs 2,277 from the applicant per month per employee. The applicant is recovering Rs 350 per employee per month and bearing Rs 1927 on their account - the main business of the applicant is manufacture of apparel and they are not engaged in the business of bus transportation. The transportation services is not a supply for the applicant made in the course or furtherance of business and the recoveries made by the applicant from their employees does not fall under the definition of supply under Section 7. Further, the transportation services are being supplies by the third-party to the applicant and they are receiver and not supplier of the same. Therefore, it can be concluded that the GST is not applicable for the recoveries from the employees for the transportation services provided to them.
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2023 (4) TMI 158
Unblocking of account after a period of one year - HELD THAT:- after blocking his account, they have unblocked his account after a period of one year and consequential steps have already been taken - As far as unblocking of the account, the issue has come to an end. With regard to search was conducted on 14.01.2021 - HELD THAT:- The matter is being adjourned to 14.02.2023, so as to enable the counsel for respondent No.1 to find out after the issuing the summons (Annexure P17), what further steps have been taken till date.
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Income Tax
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2023 (4) TMI 202
Provision of obsolescence of inventory - Tribunal concluded that the assessee has made scientific calculation for making provision based on commercially acceptable methods and valuation of the cost to be in accordance with AS-2 issued by the ICAI being one of the standards recognised u/s 145(2) wherein the closing stock is to be value at lower of cost or not realizable value - HELD THAT:- Tribunal took note of the decision of CIT vs. Hotline Teletube Components Ltd [ 2008 (8) TMI 6 - HIGH COURT DELHI ] wherein the Court took note of the more or less identical factual circumstances and dismissed the appeal filed by the revenue on the ground of no substantial question of law arises for consideration as the Tribunal has returned the finding of fact. Tribunal having examined the factual position and rendered a decision, we are of the view that no substantial questions of law arises for consideration in so far as substantial questions of law as suggested by the revenue and accordingly the same are rejected. Provision for warranty - Tribunal has examined the relevant clause in the terms and conditions and found that the warranty clause is in-built in the guarantee clause itself as the assessee, in the event of any defective supply within a period of 5-1/2 years has to replace the meters and in the event of the meters not getting replaced, the assessee has to pay twice the cost of meters. Tribunal on facts concluded that the assessee had agreed for both warranty (i.e., replacement of defective meters) as well as the guarantee (paying twice the cost of meters if meters are not replaced). Thus, the learned Tribunal was convinced on facts that the clause in the terms and conditions has an in-built warranty clause. No substantial question of law arises on the said issue as the Tribunal has decided in favour of the assessee by returning finding of fact .
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2023 (4) TMI 201
Black Money (Undisclosed Foreign Income and Assets) - Proceedings triggered pursuant to the notice issued under Section 10(1) of the 2015 Act - information with regard to the fact that the petitioner was, perhaps, holding undisclosed assets in the British Virgin Islands came to light sometime in 2013 on account of an investigation carried out by the International Consortium of Investigative Journalists - Whether once the petitioner s declaration under Section 59 of the 2015 Act was considered ineligible, then proceedings under the 2015 Act cannot be triggered - when did the respondents/revenue acquire tangible information with regard to the fact that the petitioner had held undisclosed assets? - HELD THAT:- The date on which the respondents/revenue acquired knowledge would then trigger the guidelines that the CBDT framed on 23.01.2018, which required it to issue notice under Section 10(1) of the 2015 Act within thirty (30) days of the end of the FY when it acquired such knowledge. Whether provisions of the 2015 Act would apply to those undisclosed assets which had been acquired prior to 01.07.2015? - Petioner at this stage, says that there are several other issues/grounds that the petitioner would want to put forth for consideration of this court. Mr Vohra says that the additional grounds find place in the writ petition. Matter requires further examination. List the matter on 27.04.2023.
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2023 (4) TMI 200
Admitting new evidence under Rule 46A(1) of the Income Tax Rules - Whether CIT(A) and the ITAT were justified in admitting new evidence being the order issued by the Director General (Exemption)? - HELD THAT:- If in the facts of the present case, CIT(A) was of the opinion that the Assessee was prevented from sufficient cause in producing the exemption Order before the AO which is relevant to any ground of appeal, we do not find error with this approach adopted by the CIT(A). The exemption Order was made only after the Order of the AO. No merit in the contention of the Appellant that CIT(A) has not recorded reasons in writing for admission of new evidence. CIT(A) has recorded that as a result of the exemption Order, the Appellant has been taken out of the mischief of Section 3 by the first proviso to Section 4 of the E.T. Act and, therefore, the Appellant is not liable to be charged for E.T. for Assessment years under appeal. Sub-rule(4) of Rule 46-A starts with an obstante clause empowering the CIT(A) to direct the examination of any witness and production of any document to enable him to dispose of the appeal. The exercise of power by the CIT(A) in allowing admission of the exemption Order in support of the Appellant's case, cannot be said to be arbitrary or perverse exercise to warrant interference. CIT(A) having held that the additional evidence in the form of order of exemption, goes to the very root of the ground of Appeal i.e. the charge of the E.T. in the Assessee's case, the CIT(A) was justified in its approach in admitting such exemption Order while allowing the Appeal. The requirements for admitting additional evidence stands satisfied.
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2023 (4) TMI 199
Reopening of assessment u/s 147 - Reason to believe - whether there was tangible material available with the A.O. for formation of his reason to believe that the income had escaped assessment? - HELD THAT:- Only if reasons had been furnished to the Petitioner that one could ascertain whether there was tangible material available with the A.O. for formation of his reason to believe that the income had escaped assessment. In the absence of any new tangible material and assuming that there was any material with the A.O. though not disclosed, in the absence of and on account of the failure of the A.O. establishing a live link with such a tangible material, it cannot be said that the jurisdictional condition had been satisfied by the A.O. while proceeding to issue a notice u/s 148 - issuance of a notice u/s 148 in the absence of any new tangible material was nothing but an attempt to review the earlier order of assessment passed by the A.O. Alternate remedy available to the Petitioner under the Act - The exceptions to the rule of alternate remedy where a writ Court may exercise its jurisdiction under Article 226 of the Constitution of India, are cases where statutory authority has not acted in accordance with the provisions of an enactment in question, or has acted in defence of the fundamental principles of judicial procedure, or has resorted to invoke the provisions which are repealed, or when an order has been passed in violation of the principles of natural justice. Reference in this regard can be made to CIT others V/s. Chhabil Dass Agarwal [ 2013 (8) TMI 458 - SUPREME COURT ] In the present case, we do not wish to relegate the Petitioner to the alternate remedy as provided under the Income Tax Act for the simple reason that not only had the A.O. failed to satisfy the jurisdictional conditions for invoking its power under Sections 147/ 148 of the Act, but had also failed to comply with the directions of GKN Driveshafts (India) Ltd. [ 2002 (11) TMI 7 - SUPREME COURT ] - the petition is allowed. The notice for reopening are hereby set aside.
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2023 (4) TMI 198
Validity of reopening of assessment - Notice issued to a non-existent assessee - merger of companies concluded - HELD THAT:- As following the decision of the Supreme Court in Maruti Suzuki [ 2019 (7) TMI 1449 - SUPREME COURT ] we have no hesitation in holding that the impugned notice issued by the AO u/s 148 of the Act to a non-existent assessee would be legally untenable. Consequently the same is set aside and quashed. Decided in favour of assessee.
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2023 (4) TMI 197
Reopening of assessment u/s 148 - original assessment was completed u/s 143(3) - change of opinion - HELD THAT:- We are of the view that reopening of assessment in this case was entirely on account of change of opinion by the assessing officer. In the initial assessment proceedings u/s 143(3) of the Act, he had accepted the claim of the appellant that the outstanding RD Cess was a liability and accordingly did not make addition of the same to the income of the assessee. AO, upon change of opinion, had sought to rectify the assessment under Section 154 of the Act but that was given up when objection was raised. Thereafter, he had issued the notice u/s 148 of the Act and carried out the reassessment under Section 147 of the Act. In our opinion, this is clearly impermissible. Decided in favour of assessee.
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2023 (4) TMI 196
Unexplained creditors - AO denied afford an opportunity to the appellant to cross-examine the transporters and for disbelieving the evidence adduced such as TDS certificates - Tribunal discredit the documentary evidence i.e. the TDS certificate and annual return of deduction of tax filed in Form No.26 (c) by the assessee and rely upon the oral evidence of the sundry creditors given behind the back of the assessee - HELD THAT:- Revenue authorities had relied upon statements and evidence made by the creditors adverse to the appellant, which were not furnished to the appellant. That apart, claim of the appellant to cross-examine the transporters who according to the appellants had issued confirmation letters about the outstanding credits but subsequently retracted was denied. Revenue had evidently relied upon the sworn statement of Mr. Kuldip Vasta recorded u/s 131(1)(b) of the Act which was adverse to the appellant. Therefore, the appellant should have been afforded an opportunity to rebut the same by cross-examining the deponent for extracting the truth. Failure to provide such an opportunity amounted to violation of the principles of natural justice which vitiated the order of the Tribunal. As following the decisions of the Supreme Court in M/s. Kishinchand Chellaram [ 1980 (9) TMI 3 - SUPREME COURT] and Andaman Timber Industries [ 2015 (10) TMI 442 - SUPREME COURT] we are of the considered opinion that findings rendered by the revenue authorities stood vitiated for failure on their part to afford an opportunity to the appellant to cross-examine the transporters and for disbelieving the evidence adduced such as TDS certificates. Decided in favour of the assessee.
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2023 (4) TMI 195
Lease equalization charge claimed as a deduction from gross lease rentals received by the assessee in respect of finance lease of assets - accounting standards prescribed by the ICAI - additions to lease rental income recognised by assessee in compliance with the mandatory accounting standard AS 19 read with accounting standard No.1 notified U/s.145 (2) - HELD THAT:- As decided in own case [ 2022 (12) TMI 1285 - TELANGANA HIGH COURT] this issue is no longer res integra as the same has been answered by the Supreme Court in Commissioner of Income Tax-VI v. Virtual Soft Systems Limited [ 2018 (4) TMI 1472 - SUPREME COURT ] as held that method of accounting followed as derived from ICAI Guidance Note is a valid method of capturing real income based on the substance of finance lease transaction. The rule of substance over form is a fundamental principle of accounting. The bifurcation of the lease rental is, by no stretch of imagination, an artificial calculation and, therefore, lease equalisation is an essential step in the accounting process to ensure that real income from the transaction in the form of revenue receipts only is captured for the purposes of income tax. No express bar in the IT Act which bars the bifurcation of the lease rental. This bifurcation is analogous to the manner in which a bank would treat an EMI payment made by the debtor on a loan advanced by the bank. No force in the contentions of the Revenue that the accounting standards prescribed by the Guidance Note cannot be used to bifurcate the lease rental to reach the real income for the purpose of tax under the IT Act. Rule of interpretation says that when internal aid is not available then for the proper interpretation of the statute, the court may take the help of external aid. If a term is not defined in a statute then its meaning can be taken as is prevalent in ordinary or commercial parlance. Thus bifurcation of lease rental as per the accounting standards prescribed by the ICAI to be allowed. Moreover, there is no express bar in the IT Act regarding the application of such accounting standards. Following the above questions framed is decided in favour of the assessee.
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2023 (4) TMI 194
Capital gain - real owner - person/s in whose hands income on sale of land is to substantially assessed - quantum of capital gains - HELD THAT:- The matter was examined from the stand-point of both the ownership of the subject land by the assessee, in whose hands substantive assessment stands made, as well as the quantum of the capital gains. Qua the latter aspect, in the absence of any finding per the impugned order, reliance was placed by the assessee-respondent on the order by the first appellate authority, being incidentally the same person, in the assessee s own assessment for AY 2007-08 (refer para 4.2), which in turn stands followed by the first appellate authority for the current year in case of the ostensible sellers, assessed protectively. There is, however, no specific finding therein as to ownership, being sans any finding qua the relevant aspects viz. the validity of the agreement dated 03/01/2007; it s cancellation; retraction; utilisation of sale proceeds, etc. Our examination, which is, as is to be the case, on the basis of the material on record, leads to a unequivocal finding of the assessee being the owner of the subject land, a contiguous piece; the executor of it s sale per a single transaction; and the beneficiary of the sale proceeds. The common factor between all the four sellers is the assessee; they being employees in his different concerns, or that of his son - The capacity (to purchase) by the sellers, absence of which is apparent, is completely un demonstrated, with two (of four) being transferred land by the assessee at less than 10% of the obtaining price, with a view to, as stated, help them! In the absence of any explicit or implicit authority, his sole presence in the negotiation with the buyers, being represented by Dr. Abdul Majeed, is a significant indicator of the de facto ownership of the land. Of no less import is not-knowing any of the other sellers by the three brokers, who would rather contact them in the first place. The statement of the brokers, as indeed the sellers themselves, are a complete give-away; the latter having little clue of the transaction, much less of its finer details. The retractions, months later, are unsubstantiated nor backed by corroborative material, i.e., are factually and legally untenable, as opposed to that by the principal buyer, duly cross-examined, bringing parity between the different statements. There being a complete absence of money trail, the sellers have been found to be puppets. So much for the collective bargaining power, stated to be the reason for all of them, including the assessee who admittedly owns the land that fronts the road, and through which access to the land of other four could be had, for coming together for the sale of land. Not surprisingly, the land is sold, in all four cases, on the same date, i.e., 25/8/2007 . Contrast this with, and in any case, it needs to be noted that this land was subsequently sold at Rs. 6.70 lacs per cent, i.e., in February, 2010 The return of the capital gain by two sellers is of no consequence; the same being only be give effect to the benami transitions (refer: ITO v. Rattan Lal [ 1983 (8) TMI 1 - SUPREME COURT ]; Jamnaprasad Kanhaiyalal [ 1981 (5) TMI 1 - SUPREME COURT ]. Why, the money to pay the tax is itself either unexplained (Rs. 3.45 lacs) or comes from the assessee (or his family member) (Rs. 6.40 lacs), who stands the benefit by off-loading his tax liability. Scrutiny of the material led to demonstrate utilization of sale proceeds, not banked, reveals it to be sans evidence; rather, an attempt to mislead. Though, therefore, liable to be ignored to the extent it stands adduced as additional evidence, having been admitted without recording any satisfaction of the conditions of admissibility, the same, intertwined with other material, has been considered, finding it as not assisting and, rather, defeating the assessee s case. Claim u/s. 54B, made for AY 2009-10, the same stood denied by the AO stating the same as applicable only where the agricultural land purchased is subsequent to the transfer of the land being used for agricultural purposes by the assessee, while in the instant case the same stands purchased earlier on 17/04/2007. This would equally apply for the current year; the subject land having been sold on 25/8/2007. We state this as, where otherwise valid, we would have, despite absence of any claim for the current year, restored the matter to the file of the AO for an examination thereof on merits, i.e., in the interest of justice. This is as, without doubt, it is a correct income that is liable to be assessed and brought to tax NTPC v. CIT [ 1996 (12) TMI 7 - SUPREME COURT ]. This, despite the fact that there is nothing on record to show, nor even a claim at any stage, that the subject land, located at a commercially prime location in Thrissur, had been used in the two years prior to it s sale for any agricultural activity. That would form the subject matter of adjudication on merits. Working of the capital gain in the case of Shri P. Manoj Shri K.J. Thomas would not be as short-term capital gain, as made in their protective assessments, but as long-term capital gains, ignoring the purchase dated 18/12/2006, i.e., substituting it with the actual cost (and date) of acquisition by the assessee (TGC). We, in view of the foregoing, find no merit in the assesse s case, while surely in that of the Revenue, both as regards the beneficial owner of the subject land, the capital asset, as well as the quantum of the sale consideration, which thus finds our approval, vacating the findings per the impugned order. Appeal by the Revenue is allowed.
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2023 (4) TMI 193
Validity of assessment u/s. 153A r.w.s 143(3) - addition u/s 68 - Whether no search u/s 132 was undertaken in this case? - HELD THAT:- As decided in assessee own case [ 2022 (8) TMI 784 - ITAT DELHI ] the warrant is said to be rightly issued and search on the assessee has been correctly took place - It is not necessary that warrant has to be issued only at /on the premises of the registered office of the company or corporate office, factory or godown but a warrant can be authorized to any other place where the issuing authority satisfies and reasons to suspect that the material/evidences pertaining to the assessee have been kept and are to be found. The ld. CIT(A) ignored the provisions of Section 132(1), the proviso under clause (B), provisions of (1A) which clearly deal with the jurisdiction, the premises and the actions that can be taken by the revenue authorities. Hence, we hold that the decision of the ld. CIT(A) that no search was conducted on the assessee and summarily nullifying the proceedings u/s 153A as exfacie illegal is devoid of any merit and cannot be sustained. No distinguishing feature in the facts of the present case and that of A.Y. 2011-12 [supra] has been pointed by the assessee. In such a situation we for the reasons given by the co-ordinate bench while deciding the appeal of the assessee for A.Y. 2011-12 and for similar reasons restore the issue back to the CIT(A). Since CIT(A) had not adjudicated the grounds on merits and since the matter is being restored back to the CIT(A).
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2023 (4) TMI 192
Revision u/s 263 - as per CIT the exemption u/s 54F has been wrongly allowed to assessee and by not declaring notional income from properties under Income from house property head, there was underassessment of taxable income - HELD THAT:- To address this query of Bench, Ld. AR sought adjournments from time to time to bring on record the bank statement from which investment would have been made in the impugned property. But, however, ultimately the Ld. AR admitted inability of assessee to submit the same. Therefore, we have no option except to conclude that since the flat at Pune is appearing in the Balance-Sheet of assessee, the investment had also been made by assessee. That means, the assessee was owner of at least 2 residential houses, viz. one at S.No. (iii) admitted by assessee; and another at S.No. (ii) being the flat at Pune . Having found that the assessee was owner of at least 2 residential houses, we are in agreement with the twin-issues raised by Ld. PCIT i.e. (i) the exemption u/s 54F has been wrongly allowed to assessee; (ii) by not declaring notional income from properties under Income from house property head, there was underassessment of taxable income. Therefore, the Ld. PCIT has rightly termed the assessment-order as erroneous in so far it is prejudicial to the interest of revenue.Decided against assessee.
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2023 (4) TMI 191
TP Adjustment - comparable selection - include Agricultural Finance Corporation Ltd., as a comparable entity - HELD THAT:- It is a fact on record that Apitco Ltd is a Government company which has been included as a good comparable by the ld. TPO. It is also pertinent to note that inclusion of a Government company as a good comparable i.e. Apitco Limited is not disputed by the assessee before us. While this is so, the ld. DR before us cannot try to make out a new case beyond what has been done by the ld. TPO/AO. Hence, rejection of Agricultural Finance Corporation Ltd as a good comparable cannot be done merely because it is a Government company in the peculiar facts and circumstances of the instant case. There is absolutely no dispute that Agricultural Finance Corporation Ltd is functionally comparable with that of the assessee. Hence, we hold that the ld. CIT(A) has rightly included Agricultural Finance Corporation Ltd as a good comparable in the facts and circumstances of the instant case. TPO/AO is directed to include the same as a comparable. Inclusion of Office Care Services Ltd as comparable - It is not in dispute that the annual report of the said comparable company does not specify the nature of functions performed by that company. Hence, even at the time of benchmarking done by the assessee itself, the assessee had not bothered to obtain any other evidence to bring on record the nature of functions performed by the said comparable company to include the same in the list of comparables. It is very well settled that the information mentioned in the website of any company is only for their performance and cannot be relied upon by any statutory authority or by any Court. Hence, we are in agreement with the argument advanced by the DR on this issue. Accordingly, we hold that the ld. CIT(A) was justified in rejecting this company as a good comparable with the assessee for want of details of functions performed by the said comparable. Hence, the ground raised by the assessee in its cross objections is dismissed. Inclusion of Vatika Marketing Ltd has been rightly rejected in the final list of comparables as it is engaged in providing project maintenance services and segmental details are not available. Exclusion of notional foreign exchange loss incurred by the assessee while considering the actual cost on which margin of 10% has been added by the assessee for recovery from the AE - HELD THAT:- The entire exchange fluctuation risk is to be borne only by the AE and not by the assessee. The assessee is merely a pass through entity of collecting the US$ from ONGC and passing on the same to AE pursuant to back to back arrangement. Since this exchange loss is purely notional, the assessee has chosen not to get it reimbursed from its AE during the year under consideration. AR also stated that any exchange loss incurred actually by the assessee at the time of actual settlement of bills has been duly reimbursed by the AE to the assessee. Hence, we hold that assessee was duly justified in not adding mark-up of 10% on this exchange loss considering the fact that it is purely notional in nature in the peculiar facts and circumstances of the instant case. Accordingly, the ground No.9 raised by the assessee in its cross objections is allowed. Determining the ALP on account of reimbursement and recovery of expenditure by adding 10% mark-up thereon - HELD THAT:- CUP method chosen by the assessee considering the nature of transaction and degree of comparability as the Most Appropriate Method, is hereby upheld. We find that either way all these expenses have been duly included in the total expenses included by the assessee on which mark-up of 10% has been claimed by the assessee from its AE. Hence, the action of the ld. TPO in determining the ALP of this transaction at Nil is absolutely without any basis and the adjustment proposed in the sum is hereby directed to be deleted. Recovery of expenses represent expenses incurred by the assessee company on behalf of AE towards Bid bond expenses. These expenses were also recovered by the assessee from its AE with markup of 10%. Hence, the reasoning given by us hereinabove for reimbursement of expenses would apply for this issue of recovery of expenses also. Hence, we dismiss the action of the ld. TPO in determining the ALP of this transaction at Nil and consequentially direct for deletion of adjustment made towards recovery of expenses. Accordingly, the ground No.10 raised by the assessee in its cross objection is allowed.
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2023 (4) TMI 190
Late payment of employees contribution of provident fund - CIT-A allowed claim of assessee - HELD THAT:- Now honourable Supreme Court has decided this issue in Checkmate services private limited [ 2022 (10) TMI 617 - SUPREME COURT ] holding that non-deposit of employees contribution within the due date prescribed under the respective statute is disallowable u/s 36 (1) (BA) r.w.s. 2 (24) (x) of the act. Therefore decision of CIT A is unsustainable in law - Decided in favour of revenue. Disallowance made on the director's salary and administrative facility - As per AO 50% of the director's office expenses should not be capitalized to the cost of project - claim of the assessee is that according to accounting standard 2 it is not permissible and submitted those administrative costs, which are not related to bringing the inventory to the present location, cannot be included in the cost of the project - HELD THAT:- The identical issue decided in case of Hiranandani Palace Gardens private limited [ 2015 (12) TMI 1649 - ITAT MUMBAI ] following the order of Lodha Plaza [ 2014 (12) TMI 1272 - ITAT MUMBAI ] held that such costs are not included in the cost of work in progress. Identical issue arose in [ 2019 (4) TMI 259 - ITAT MUMBAI ] wherein held that expenditure pertaining to employee cost, administrative expenses and selling and marketing expenses debited to the profit and loss account are to be allowed in the year in which those are incurred. Decided Against revenue. Disallowance u/s 14 A - necessity of recording satisfaction - HELD THAT:- In absence of satisfaction the learned assessing officer was not authorized to make the disallowance u/s 14 A - See case of Maxopp investment Ltd [ 2018 (3) TMI 805 - SUPREME COURT ] Accordingly, additional ground fire by the assessee are allowed and AO is directed to delete the disallowance -Consequently, the addition to the book profit under section 115 JB of the act is also not sustain - Decided in favour of assessee. TP Adjustment - arm's-length price of the guarantee commission at the rate of 0.3523 percentage instead of 1.25% - HELD THAT:- The rate of guarantee commission is required to be determined on the basis of credit rating of the issuer company, comparison of interest rates without guarantee and with guarantee. The difference of the two is required to be shared between the issuer as well as the guarantor. The proper database for credit rating was used. The database for scanning of various deals was used. The tenor adjustments were also made. No reasons were shown for sharing of the interest saving not properly applied. As in some of the cases the honourable Bombay High Court has also applied guarantee commission rate at 0.20% i.e. Asian paints limited [ 2014 (1) TMI 16 - ITAT MUMBAI ] and Everest Kanto cylinders limit Ltd [ 2015 (5) TMI 395 - BOMBAY HIGH COURT ] In case of Reliance industries Ltd [ 2013 (9) TMI 567 - ITAT MUMBAI ] the coordinate bench has adopted the guarantee commission rate at 0.38%. In view of this, we do not find any infirmity in the order of the learned CIT A in holding that arm's-length price of the guarantee commission is 0.3523 percentage. Adjustment to the brokerage expenses - HELD THAT:- We find that the impugned transaction is sale of property to the non-resident Indians. The property is situated in India, the brokerage is paid for the sale of property to the non-resident. Mauritius AE as well as the uncontrolled independent parties in a different location does not make any difference. Even otherwise, the action of the learned TPO to adopt brokerage at the rate of only 1% as arm's-length price is also not supported by any data or transaction. For the purpose of transfer pricing, only transaction is to be compared with a transaction. There is no transaction at the rate of 1% used by the learned TPO for benchmarking the brokerage paid. The comparables shown by the assessee as internal cup cannot be found fault with. No reason to disturb the order of the CIT A. TP Adjustment - 10% mark up on the reimbursement of expenses paid by Lodha developers UK Limited to the assessee company - HELD THAT:- These are the amount paid on behalf of Lodha developers UK Limited starting from 4 June 2015 2/29 of March 2016. As on 31st of March 2016, respective bills for prepared stating that these are reimbursement expenses paid on behalf of the UK entity. The fully agree with the orders of the learned lower authorities that no independent party would have kept on paying on behalf of somebody else and as on the last date of the accounting year, the bills raised for reimbursement. For the purpose of reimbursement of the expenditure, firstly the associated entity should have given an authority to the assessee to incur such expenditure on its behalf. In absence of that, it cannot be said that these are merely reimbursement of expenditure. The fully concur with the orders of the lower authorities. Decided against assessee. Appeal of Revenue and assessee are partly allowed.
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2023 (4) TMI 189
Assessment u/s 153A - Addition u/s 14A pertaining to expenditure incurred for earning the exempt income - HELD THAT:- Assessee had suo motu only made disallowance under section 14A of the Act to the extent of Rs.2,501/-. However, the assessee had earned exempt income during the year under consideration to the amount of R.20,19,580/- only. Under the circumstances, after following the decision of Hon ble Supreme Court in the case of State Bank of Patiala [ 2018 (11) TMI 1565 - SC ORDER] and CIT vs Joint Investments Pvt Ltd [ 2015 (3) TMI 155 - DELHI HIGH COURT] It is settled that the disallowance is to be restricted to the extent of exempt income earned by the assessee - we direct the Assessing Officer to restrict the disallowance to the extent of exempt income earned by the assessee, since assessee itself had not made disallowance more than the exempt income earned by it. Therefore, the ground of appeal of the Revenue stands dismissed and the cross objection filed by the assessee is partly allowed. Deduction u/s 80IB(10) - AO observed that assessee has violated the condition for claiming deduction under section 80IB(10) of the Act in respect of the said project since built up area of the flat was exceeding 1000 sq.ft. - CIT(A) has allowed the claim of deduction under section 80IB(10) on prorate basis - HELD THAT:- As perused the decision of Models Construction Pvt Ltd [ 2020 (12) TMI 88 - BOMBAY HIGH COURT] wherein allowing of deduction under section 80IB(10) on prorate basis was upheld - no infirmity in the decision of Ld.CIT(a). Accordingly, grounds 3 4 of the Revenue are dismissed. Disallowance u/s 14A - HELD THAT:- Appeal of the assessee are partly allowed by directing the Assessing Officer to restrict the disallowance to the extent of exempt income earned by the assessee. Disallowance of Work-in- Progress (WIP) - HELD THAT:- As the assessee has failed to provide relevant supporting evidence to substantiate that M/s Jitnat Infrastructure Pvt Ltd has provided project management services during the year. Even during the course of appellate proceedings before us, the assessee has not furnished any supporting evidences to demonstrate that the said party has rendered the project management services to justify the claim of payment. In this regard we further notice that co-ordinate bench of the ITAT in the case of assessee itself [ 2022 (11) TMI 413 - ITAT MUMBAI] has also sustained the disallowance made by the Ld.CIT(A) for want of relevant supporting evidence for rendering of service to the assessee. Accordingly, this ground of appeal of the assessee stands dismissed. Disallowance u/s 40(a)(ia) - non compliance of TDS provisions in computation of income for A.Y. 2011-12 - HELD THAT:- These facts were disclosed by the assessee in the original return of income. However, inadvertently, the same remained to be claimed in the revised return of income filed for A.Y. 2012-13. After following the decision of Hon ble Supreme Court in the case of NTPC [ 1996 (12) TMI 7 - SUPREME COURT] as relied upon by the Ld.Counsel for the assessee, we restore this issue to the file of the Assessing Officer to allow the claim of the assessee after verification of the relevant materials and after affording due opportunity of being heard to the assessee. Therefore, this ground of appeal of the assessee is allowed for statistical purpose. Levying penalty under section 271(1)(c) - invalid notice issued u/s 274 - HELD THAT:- On perusal of the copy of the notice under section 274 read with section 271(1)(c) of the Act it is clear that Assessing Officer has not specified whether the penalty is being levied on account of concealment of income or furnishing of inaccurate particulars of income. As relying in assessee s own case for A.Y. 2005-06 [ 2022 (10) TMI 1160 - ITAT MUMBAI] since the issue on hand being squarely covered, following the principle of consistency, we find merit in the submission of the assessee and direct the Assessing Officer to delete the penalty since the notice issued under section 274 read with section 271(1)(c) of the Act was bad in law.
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2023 (4) TMI 188
TDS u/s 195 - Disallowance u/s. 40(a)(i) - non-deduction of TDS on interest Paid and on legal charges paid - HELD THAT:- The assessee cannot be denied the TDS Exemption on the ground that the original certificate was not produced by the assessee. D.R. could not produce before us any evidences to uphold the disallowance made by the AO. At the same time the Ld. D.R. could not produce contra findings of the Ld. CIT(A). We uphold the order passed by CIT(A) deleting the additions made u/s. 40(a)(i) for non deduction of Tax on interest paid and agency charges paid to BLB. Disallowance u/s 40(a)(i) - not deducting TDS on interest payment paid to Kreditanstat Fur Wiedraufbau (KFW) - HELD THAT:- We found that the ld. CIT(A) after calling for a Remand Report that the A.O. accepted the payment made to KFW is as per certificate issued by Central Government vide letter dated 5 December, 1994. Further in the subsequent Assessment Year 2010-11 though a show cause notice was issued to make such disallowance, but no disallowance were made by the Assessing Officer while passing an assessment order for the Assessment Year 2010-11. Therefore the ld. CIT(A) was justified in deleting the disallowance made by the Assessing Officer. Disallowance u/s 40(a)(i) - non-deducting TDS for interest paid to BNP Paribas, Mumbai - contention of the Assessing Officer that BNP is a foreign bank and exemption provided u/s 194A(3) do not apply to foreign bank. Thus assessee ought to have deducted TDS on payments made to the bank - Though the Assessing officer accepted this view in the Remand Report but however submitted original certificate not produced before the A.O. HELD THAT:- We are of the considered view, this cannot be a good ground to denying the exemption given by the Department to the assessee. Therefore the disallowance made by the Assessing officer is liable to be deleted since no disallowance made by the AO on similar payments. Thus the grounds raised by the Revenue is hereby devoid of merits and the same is liable to be dismissed. Non-deduction of TDS on interest payment paid to IFCL Limited - Assessee has referred to provisions of Section 194A and contended that provision of sub-section (1) requiring deduction of tax at source from payment of interest other than interest on security shall not apply, if payment is made to any financial corporation established by Central, State or Provincial Act. - HELD THAT:- We found that the AO has not accepted IFCL is covered by any financial corporation established by Central, State or Provincial Act but made a disallowance u/s. 40(a)(i) for interest paid to IFCL Ltd. CIT(A) held that IFCL is a public financial institution and necessary amendment was made by Central Government in its notification and for the Assessment year 2010-11, the AO has not made any such disallowance. Therefore he deleted the disallowance made under section 40(a)(i) for the present assessment year 2009- 10. This factual things are not disputed by the Ld. CIT-DR. Therefore when the Assessing Officer in his Remand Report accepted that IFCL is a public financial institution, the question of disallowance made u/s. 40(a)(i) does not arise. Therefore the grounds raised by the Revenue is devoid of merits and the same is liable to be dismissed. Non-deduction of TDS for legal and professional charges paid to Solomon Solomon - AO in the assessment order has observed that payment made to above party is for technical services and Assessee was required to deduct TDS on such payment - HELD THAT:- CIT(A) in the appellate proceedings u/s 201(1) and 201(1A) read with Section 195 held that the scope work included for remittance of Rs.19,59,688/- made to Solomon Solomon and came to conclusion that no technical knowledge, skill, experience, knowhow or process is made available to assessee Company in terms of Article 12(b) of the India-US Treaty and Assessee has not defaulted in deducting TDS u/s 195 of the Act. Therefore the disallowance is unwarranted. D.R. could not produce before us, the Revenue is on appeal before the Tribunal as against the appellate order passed by the Ld. CIT(A) in the 201(1) and 201(1A) proceedings - disallowance made by the Assessing Officer is liable to be deleted. Reimbursement of assessee s tax liability - HELD THAT:- Assessing Officer was not justified in making separate addition of such amount on the ground that the assessee has not offered income on mercantile basis. It is further noticed that the A.O. in subsequent two years accepted such consistent accounting policy of the assessee and has not made any additions. Thus the grounds raised by the Revenue is devoid of merits and the same is liable to be dismissed. Disallowance of rebate given by assessee to its customer - Assessee has reiterated its contention as raised before Assessing Officer and argued that it was only cash discount which cannot be treated as payment of interest - HELD THAT:- As in this case there is no deposit of principal by the recipient of discount with the appellant therefore, there is no question of allowing interest the payments under reference made by the appellant is discount only and the same cannot be termed as interest as wrongly held by the A.O. In view of this, neither the provisions of sec. 194A are applicable nor the provisions of sec. 40(a)(ia) of the Act are attracted on such payments would be invoked. Therefore, the disallowance made by the AO is hereby deleted. Disallowance u/s 14A - HELD THAT:- Disallowance u/s. 14A is to be restricted to the extent of dividend income earned by the assessee and during the assessment year and the orders of the Lower Authorities is modified to the extent of disallowance of Rs. 50,000/- only u/s. 14A read with Rule 8D of the Rules.
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2023 (4) TMI 187
Condonation of delay - delay of 93 days in filing the present appeal - HELD THAT:- When the impugned order was not served on the assessee either by postal mode or by email then the reasons explained by the assessee constitute a reasonable cause for delay in filing the present appeal. Ex-parte order - Unexplained investment in the property - mode of service of notices - assessment order was passed by the AO u/s 144 of the Income Tax Act as the assessee could not appear before the AO for want of service of notices - as per assessee could not appear before the CIT(A), as the notices were issued online on the e-portal or on the e-mail which were not come to the notice of the assessee as she was not aware about the mode of service of notices - HELD THAT:- Appeal of the assessee was dismissed for non-prosecution and was not decided on merits. Accordingly, the impugned order of the CIT(A) is set aside. Since, the assessment order was also passed u/s 144 of the Act therefore, the relevant record and explanation to be filed by the assessee requires proper verification and examination at the level of the AO. Accordingly, the matter is remitted to the record of the Assessing Officer for deciding the same afresh after giving an opportunity of hearing to the assessee. Appeal of the assessee is allowed for statistical purposes.
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2023 (4) TMI 186
TP Adjustment - Business Support Services - HELD THAT:- AO is directed to re-compute ALP taking into consideration the comparable excluded by the Tribunal. Transfer Pricing Adjustment - Recovery of Expenses - DRP determined a 15% mark-up on the amount of such recovery treating the same to be support services rendered by the assessee to its AEs and computed an adjustment - HELD THAT:- A mark-up of 8% instead of 15% is considered to be reasonable. The AO is directed to re-compute the ALP. The appeal of the assessee on this ground is allowed for statistical purpose. Disallowance u/s 37(1) - Expenditure on doctors - addition solely on application of CBDT Circular No. 5/ 2012 dated 1 August 2012 read with clause 6.8 of Medical Council of India (MCI) - HELD THAT:- We find that the payments made by the assessee to the Doctors in a different form as training and consultancy is another form devised to camouflage the real purpose. The deduction of TDS doesn t give any credence or legalize the payments which are in contravention with the law laid down in M/S APEX LABORATORIES PVT. LTD [ 2022 (2) TMI 1114 - SUPREME COURT] - Hence, we hold that the payments made by the assessee have been rightly disallowed by the Revenue. The appeal of the assessee on this ground is dismissed. Disallowance on account of Depreciation - mandation of ownership of such machines in name of the assessee - assessee has claimed depreciation on fixed assets lying with various hospitals/ distributors - disallowance of claim assessee is not the actual user of the machinery - HELD THAT:- The said equipment in question is the property of the assessee is not meant for sale and is being issued for regular follow up of pacemakers and post implant programming support. Thus, the first condition i.e. the ownership of such machines in name of the assessee is clearly established and is in fact also not disputed by the tax department. As regards the second condition, it is clearly evident that these machines are used solely for the purposes of business of the assessee for providing pre-sales and postsales activities i.e. servicing/ follow-up monitoring/ feasibility evaluation etc. in relation to its products i.e. pacemakers and stents. A cursory reading of definition Section 2(c) of The Hire Purchase Act, 1972 makes it evident that a hire purchase agreement is one where the hirer has an option to purchase the goods in accordance with terms of the agreement and the property in the goods pass on to such person on the payment of the last installment. Thus the allegation of the revenue is on a totally wrong appreciation of facts. The appeal of the assessee on this ground is allowed. Clinical trial expenses - Allowable business expenses or not? - HELD THAT:- We hold that clinical trials are an integral part of the feedback system on efficiency of the products of the assessee and hence it is intricately connected with the business of the assessee and hence it cannot be said that the expenses have not been incurred solely and exclusively for the business purpose.
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2023 (4) TMI 185
Unexplained jewellery - objection of the assessee that the AO failed to consider the explanation offered by the assessee and without confronting with the real owner of the jewellery he, in an arbitrary manner, made the addition - HELD THAT:- Before the Assessing Authority as stated that the jewellery found in the locker belonged to third party. We find merit in the contention of the assessee that without confronting third party who had herself confirmed about the ownership of the jewellery CIT(Appeals) was not justified in sustaining the addition - direct AO to delete the impugned addition. Hence, the ground of appeal is allowed. Addition u/s 69A on account of cash found during the search - In respect of this addition it is stated that a sum of Rs. 3,31,200/- belonged to the company namely M/s Dolsun Containers Pvt. Ltd. in which the assessee was a director. The agreement to sell is also placed on record. Considering the same as considered view that this evidence ought to have been considered and same could not be brushed aside. Therefore, the addition of Rs. 3,31,200/- out of Rs. 5,00,000/- in respect of cash found during the course of search is deleted. Remaining addition is sustained.
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2023 (4) TMI 184
Deduction u/s 80P - interest earned by the appellant from investment in District Co-operative Bank - Income from other sources or income from business income - HELD THAT:- As decided in own case [ 2022 (10) TMI 1161 - ITAT COCHIN] as held lower authorities have no benefit of judgement of Hon ble Apex Court in the case of The Mavilayi Service Cooperative Bank Ltd. Ors. vs. CIT [ 2021 (1) TMI 488 - SUPREME COURT] we are of the view that in the interest of justice and equity the issue of deduction u/s 80P(2)(a)(i) of the Act needs to be examined de novo in the light of the judgement of the Hon ble Apex Court, referred supra. Therefore, the issue raised on merits is restored to the files of the AO - we remit the issue back to the AO with similar directions. Decided against revenue.
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2023 (4) TMI 183
Assessment u/s 153C - addition u/s 28(iv) - CIT(A) had deleted the addition on the pretext that the documents seized during the search and seizure operation carried out u/s 132 do not pertain to assessment year under consideration - HELD THAT:- As from the perusal of Memorandum of Understanding dt.22.02.2007, it is abundantly clear that the MOU was spread over to various years including A.Y. 2010-11 before us. Therefore, the findings recorded by the ld.CIT(A) is non-est and against the record. The order of the Ld. CIT(A) is required to be set aside as being contrary to facts on record. CIT(A) had granted the relief to the assessee on the technical ground that the incriminating material does not pertain to the year under consideration and had refrained from deciding the grounds on merit. As we have decided the legal ground against the assessee and in favour of the revenue, therefore, we deem it appropriate to direct the Ld.CIT(A) to decide the remaining grounds of appeal on merits. Accordingly , the appeal of the Revenue is allowed for statistical purposes.
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2023 (4) TMI 182
Bogus LTCG claimed u/s 10(38) in the ROI held to be income from undisclosed source - CIT(A) found that the increase in the share price from Rs. 500/- to Rs. 6,12,867/- is not justifiable and he confirmed the action of the AO as to reopening of the assessment and also confirmed the addition as income from undisclosed sources by denying exemption u/s 10(38) - HELD THAT:- Bench taking into consideration of all the aspects discussed by the lower authorities hereinabove finds that the assessee has neither furnished any details of purchasing of shares nor details of the source of such purchases alongwith copy of demat account when the shares came into demat account of the assessee in order to justify the claim u/s 10(38). Hence, in the absence of these details, the Bench feels to restore the issue to the file of the AO to decide it. Thus the appeal of the assessee is allowed for statistical purposes.
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2023 (4) TMI 181
Revision u/s 263 - Validity of jurisdiction assumed by the PCIT u/s 263 - scope of elaborate discussion - unexplained loan creditors - HELD THAT:- The assessee has referred to the queries raised by the AO in notice u/s 142(1) of the Act. The assessee has also drawn our attention to the acknowledgment of the replies uploaded during assessment proceedings. From perusal of the aforesaid replies it emanates that the assessee has time and again given details of the loan creditors. The documents on record clearly shows that the AO has examined the issue during scrutiny assessment proceedings. Merely for the reason that the AO has not given any finding in the assessment order would not mean that the issue was not examined by the AO in scrutiny assessment. As in the case of CIT vs. Gabriel India Ltd. [ 1993 (4) TMI 55 - BOMBAY HIGH COURT] has held that where the claim of the assessee was allowed by the AO on being satisfied with the explanation of the assessee, the assessment order cannot be held to be erroneous simply because in the assessment order, he did not make an elaborate discussion in that regard. Thus documents placed on record by the assessee explicitly indicates that the AO had made some enquiries with regard to unsecured loans during the relevant period. The jurisdiction u/s 263 cannot be invoked - Decided in favour of assessee.
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2023 (4) TMI 180
Estimation of profit on purchase and sale transactions - statement given during the course of survey - importance to the retraction statement of the assessee - HELD THAT:- We notice that the Ld CIT(A) has put the responsibility upon the AO and has observed that the AO has not brought on record any corroborative evidence, which is not justified. Accordingly, we are of the view that the retraction of statement by the assessee is liable to be rejected. There is one more reason for rejecting retraction, i.e., the reasoning given by the assessee for giving cheques to S R Co also defies logic. On the one hand, it is stated that the cheques were given to S R Co, so that the same can be used to strike good deal in diamond purchase. On the other hand, it is stated that the concerned bank accounts did not have enough bank balances. If the bank accounts did not have enough balances, how S R Co could have used the cheques to purchase diamonds on behalf of the assessee. Hence the reasoning given in the retraction statement about the cheques defies logic and hence on this count also retraction is liable to be rejected. The assessee could not bring any material to contradict the statement so given. On the contrary, the cheques were found with S R Co. Hence the legal principle that the statement given during the course of survey does not have evidentiary value will not apply to the facts and circumstances of the present case. There is merit in the submission made by the assessee before Ld CIT(A), i.e., mere mobilization of money on the security of cheques will not give rise to any income transaction liable to be taxed. The statement given by the assessee is that he has purchased diamonds by using the cash so mobilized and sold the same. Accordingly, the profit, if any, generated from the above said purchase and sale transactions is liable to be taxed. Profit generated from the above said purchase and sale transactions is required to be estimated in the facts and circumstances of the case. The normal profit rate adopted for diamond business is around 3% of the sale value. Profit from the sale of diamonds purchased out of the balance may be estimated @ 3% and the same, in our view, will meet the ends of justice. Appeal filed by the revenue is partly allowed.
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2023 (4) TMI 179
Validity of CIT(A) action for not calling for remand report from the AO and not furnishing copies new evidences provided by the assessee during the appellate proceedings for rebuttal - HELD THAT:- Factual recording by the ld.CIT(A) has not been controverted by the Revenue before us nor furnished any evidence to compel us to find any merit in the allegations of the Revenue. In the absence of the same, particularly when the ld.CIT(A) has given opportunity to the AO to contradict the submissions of the assessee, we are unable to accept the allegation of the Revenue that the AO has not been provided with proper opportunity to submit remand report or opportunity to rebut the new evidences furnished by the assessee during the appellate proceedings. Thus, we find the grounds raised by the Revenue in both the appeals being devoid of any merits, the same are rejected in both the appeals. Undisclosed income - differential amount of sale proceeds - addition on account of difference of value of the property as per stamp duty valuation authority and sale consideration received by the assessee on sale of shops - HELD THAT:- We find that all the documents furnished by the assessee during the assessment as well as appellate proceedings were sufficient to justify claim of the assessee. On the contrary, the findings of the lower authorities were not based any documentary evidences, but based on some presumption that the assessee has concealed sale of plot, and thereby earned undisclosed income which action of the AO was not justified by any documentary evidence and therefore not in accordance with law. On such presumption, burden to establish concealment of income indeed was with the AO with some incriminating material. In the absence of the same, we are unable to find any merit in the impugned order of the ld.CIT(A), which we set aside, and allow the grounds of appeal of the assessee.
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2023 (4) TMI 178
Addition u/s 56(2)(vii)(b) - Assessee argument that they had not actually received any exclusive right or title or domain over the land in question - statutory compensation of the land as cquired by the National Highways Authority of India NHAI - HELD THAT:- Learned counsel could not dispute in light of the clinching provisions that once the three taxpayers before us had received the statutory compensation of the land strictly to the extent of their respective share acquired by the National Highways Authority of India NHAI as per the above statute, they can very well be presumed to have also received the corresponding right or title in the land itself so as to attract sec.56(2)(vii)(b) of the Act. Mr. Joshi could not throw any light as to how these assessees could receive compensation qua their exact share of 12% and 11% (supra) despite the alleged revenue entries having gone against them. Nor has he placed on record the assessee s corresponding compensation applications / petitions filed by all these assessees before the land acquisition authorities. This act only gives rise to our adverse inference against them. We thus are of the view that the mere fact that some stray revenue entries have gone against the assessees or no sale deed had been executed in their favour would not amount to them having not actually received the land in issue once they have received the corresponding exact compensation of their respective shares under the land acquisition law. Faced with the situation, we find merit in the Revenue s contentions that the Assessing Officer had rightly invoked sec.56(2)(vii)(b) of the Act in the given facts and circumstances before us. The CIT(A) s findings treating the agreement dt 12.08.1997 in absence of any corroborative evidence stand reversed. Applicability of first and second proviso to sec.56(2)(vii)(b) of the Act that in case the dates of sale deed and date of agreement are not the same, stamp value as on the date of latter s day may be adopted under this sub-clause provided that whole or part thereof had been paid by any mode other than cash on or before the date of agreement - We find part merit in learned counsel s arguments at the same time that these assessees has indeed made payment of the alleged additional compensation as well as sale price on 04.10.2014 which has not been found to have been factually disputed even on 09.09.2015 (Bharna Pavati) as well as 06.02.2016 [registration of the alleged agreement dated 12.08.1997], respectively. This is also not the Revenue s case that these assessees or their co-vendees had not made the said payments as on 04.10.2014 by way of compensation of Rs.42 lakhs by prescribed mode. Faced with the situation, we direct the AO to adopt stamp price of the land in issue in S.No.883/1/1, Nashik as on 04.10.2014 as the actual sale price in light of sec.56(2)(vii)(b) read with 1st and 2nd proviso therein than taking the fair market value as per the ready reckoner in issue (supra) as on 06.02.2016 and calculate the impugned addition as per these assessees respective share of 12% and 11% each (supra) is assessee s case, respectively. Assessing Officer may thereafter re-compute the impugned addition after referring the issue to the DVO u/s 56(2)(vii) 3rd proviso as per law preferably within three effective opportunities of hearing. Department has not made any addition in other co-vendees hands u/s.56(2)(vii)(b) - We find no merit in the instant last half-hearted argument once it has been found as per our preceding detailed adjudication that the impugned statutory provision is indeed applicable in the given facts and circumstances of the case(s) (supra). Faced with the situation, we partly accept all these three assessees and Revenue s six cross-appeals for statistical purposes and direct the learned Assessing Officer to adjudicate the instant sole issue afresh in light of our foregoing specific directions. Appeal partly allowed.
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2023 (4) TMI 177
Application of NP rate of 8.16% on the differential receipt reflected in Form 26AS - Assessee has not shown the receipt on which TDS u/s 194H has been deducted - HELD THAT:- Since the assessee was very much aware regarding deduction of TDS under section 194H on payment by the parties/companies, even then no effort was made to get the same corrected from the said companies. Therefore, at this stage assessee cannot point out the defects in the orders passed by the revenue authorities. Arguments of the ld. A/R that at the most the addition could have been restricted to profit earned @ 8.16% in respect of these receipts - As this argument of the ld. A/R could not be upheld because of the simple reason that as per the provisions of section 44AD(6) provisions of this section are not applicable on a person earning income in the nature of commission. Thus the said argument of the ld. A/R is not tenable. Since the revenue authorities have rightly appreciated the facts and considered the said receipts as income from other sources but still in these circumstances assessee was entitled to deduction of expenditure incurred against such receipts. Therefore, the AO is at liberty to verify the expenditure, if so claimed by the assessee within 30 days from the date of receipt of this order. With these observations, we partly allow the grounds raised by the assessee. Appeal of the assessee is partly allowed.
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2023 (4) TMI 176
Addition u/s 68 - unexplained cash credit - no proof/evidence of sale of crops - scrutiny assessment for the reason Large agricultural income shown in the return and large cash deposit during demonetization period - HELD THAT:- It is not in dispute the assessee s income from agriculture of Rs. 16,95,356/- as against which the assessee could able to produce sale bills to the extent of Rs. 12,93,117/- as pleaded by the assessee being as aged factor and Senior Citizen is involved in the agriculture activities not by himself but with the help of agricultural labourers, who look after assessee s agricultural land and carried out agriculture activities on behalf of the assessee. Assessee also produced necessary documents namely Form No. 7/12 and 8A extracts which clearly states the assessee is owner of 96 bighas of agricultural land. For the earlier assessment year 2016-17 AO passed the assessment order u/s. 143(3) accepting the returned agricultural income without making any disallowances. AO has not justified in simply making the addition u/s. 68 - In our considered opinion, the AO has disbelieved the statement of the assessee and the nature of trend in the agriculture sector wherein proper sale records could not be maintained by the small time agriculturist. For all these reasons, the addition made by the A.O. u/s. 68 is not sustainable in law - Decided in favour of assessee.
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2023 (4) TMI 175
TP adjustment - reimbursement of the out of pocket expenses - HELD THAT:- Appellant had not furnished third-party invoices or other supporting documents for 22% out of pocket expenses reimbursed. TPO/Assessing Officer has not pointed out any defect/discrepancy in the bills/supporting documents furnished .by the Appellant as the same have been examined and accepted. Accordingly, adopting the reasoning given by the Tribunal in the order of the Tribunal for the Assessment Year 2008-09 [ 2022 (11) TMI 681 - ITAT MUMBAI] and following the decision of the Tribunal for the Assessment Year 2010-11 [ 2022 (11) TMI 1341 - ITAT MUMBAI] we delete the transfer pricing addition made in relation to reimbursement of out of pocket expenses to AE. Accordingly, Ground No. 2 raised in the appeal is allowed TP Adjustment - reimbursement of software maintenance expenses (connectivity charges) - HELD THAT:- In view of the fact that transfer pricing addition in respect of identical reimbursements to AE having been deleted by the Tribunal in appeal for the Assessment Year 2010-11[ 2022 (11) TMI 1341 - ITAT MUMBAI] we deleted the disallowance by respectfully following the aforesaid decision of the Tribunal. Disallowance of lease rental payment in terms of 'Agreement For Provision For Warehousing Services' - HELD THAT:- A perusal of financial statements for the relevant previous year shows that identical disclosures have been made. Payments of lease rentals have also been made in terms of the same agreement. Accordingly for Assessment Year 2011-12 also the issue is remanded back to the file of the Assessing Officer for adjudication afresh after giving the Appellant a reasonable opportunity of being heard. In view of the aforesaid directions Ground disposed off. Computation of Book Profit u/s 115JB - DR submitted that while passing the Final Assessment Order AO has not reduced the brought forward loss from the net profits shown in the Profit Loss Account while computing Book Profits u/s 115JB - HELD THAT:- A perusal of the Profit and Loss Account pertaining to the financial year ending on 31.03.2011 relevant to the Assessment Year 2011-12 shows that the Appellant had brought forward losses. Further, in Notes to Return enclosed with the Computation of Taxable Income, the Appellant had also furnished details of brought forward loss and depreciation. As per Explanation 1 to Section 115JB of the Act, for computing Book Profits, the amount of profits shown in Profit Loss Account are to be reduced by the amount of unabsorbed losses or depreciation whichever is less as per the books of accounts. Assessing Officer is directed to verify the amount of unabsorbed losses and depreciation as per the books of accounts and compute Book Profits as per Section 115JB read with Explanation 1.
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Customs
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2023 (4) TMI 174
Absolute Confiscation - Smuggling - gold coins - silver granules - Indian currency - purity of seized gold bars - Retracted statement - statement of co-accused without any corroborative evidence - burden of prove - notified items under Section 123 of the Customs Act, 1962 - HELD THAT:- During the course of investigation, the gold was seized, which is deemed to be believed as foreign origin and the currency seized is to be believed the sale proceeds of smuggled gold of foreign origin. It is the fact on record that there is no mark found on the gold seized. Moreover, purity of gold was also found 99.5% and not 99.9%. Further, during the course of investigation, the Noticee No.(1) has made a statement stating that the source of procurement of the said gold is made from an old jewellery purchased in exchange of cash during the long period of time and due and the stock of gold was melted through the said old jewellery and converted into gold bars. The said fact has not been verified by the Revenue. As the noticees have explained the source of procurement of gold, which is not denied by the Revenue, further having no mark on the gold and purity of gold is also not in conformity of the foreign gold, the benefit of doubt goes in favour of the notices. As the Noticee No.(1), (2) (3) have submitted the smuggled/procured gold in question is made out of old jewellery purchased in cash and the said fact has not been denied by the Revenue by any cogent evidence, therefore, it is held that the gold in question is not liable for confiscation and hence, the same is required to be released - Revenue has failed to establish the fact that the cash recovered from the Noticee No.(1) (2) (3) are the sale proceeds of the smuggled gold, therefore, the cash seized cannot be confiscated - No penalties are imposable on the Noticee No.(1), (2) (3). The proceedings initiated by the impugned show-cause notices are set aside - Appeal allowed - decided in favour of appellant.
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Corporate Laws
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2023 (4) TMI 173
Abuse of dominant position in contravention of the provisions of Section 4(2)(a)(i), Section 4(2)(b)(ii), Section 4(2)(c), Section 4(2)(d) and Section 4(2)(e) of the Competition Act, 2002 - pre-installation of entire GMS suite under MADA - amounts to imposition of unfair condition on the device manufacturers and thereby infract provisions of Section 4(2)(a)(i) and Section 4(2)(d) of the Act or not - Revenue Share Agreement (RSA) - Doctrine of proportionality. Whether for proving abuse of dominant position under Section 4 of the Competition Act, 2002 any effect analysis of anti-competitive conduct is required to be done? And if yes; what is the test to be employed? - HELD THAT:- For proving abuse of dominance under Section 4, effect analysis is required to be done and the test to be employed in the effect analysis is whether the abusive conduct is anti-competitive or not. Whether the order of the Commission can be said to be replete with confirmation bias? - HELD THAT:- The Commission proceeded to consider the materials on the record and submissions of the parties with respect to each of the market and recorded findings and conclusions after considering the evidence on record. Hence, we are unable to accept the submission of the learned Senior Counsel for the Appellant that the order of the Commission is replete with confirmation bias. Whether pre-installation of entire GMS Suite amounts to imposing of unfair condition on OEMs which is an abuse of dominant position by the Appellant resulting in breach of Section 4(2)(a)(i) and 4(2)(d)? - Whether the Commission, while returning its finding on breach of Section 4(2)(a)(i) and 4(2)(d), has not considered the evidence on record and has not returned any finding regarding the Appellants conduct being anti-competitive? - HELD THAT:- Pre-installation of entire GMS Suite amounts to imposing of unfair condition on OEMs which is an abuse of dominant position by the Appellants resulting in breach of Section 4(2)(a)(i) and 4(2)(d) - The Commission while returning its finding on breach of Section 4(2)(a)(i) and 4(2)(d) has considered the evidence on record and has returned finding that the conduct of the Appellant harms the competition. Whether the Appellants by making pre-installation of GMS Suite conditioned upon signing of AFA/ACC for all Android Device Manufacturers (OEMs) has reduced the ability and incentive of the OEMs to develop and sell devices operating on alternative versions of Android i.e., Android Fork and thereby limited technical and scientific development which is breach of the provisions of Section 4(2)(b)(ii) of the Act? - Whether the Commission while returning its finding on breach of Section 4(2)(b)(ii) has not considered the evidence on record and has not returned any finding regarding the Appellants conduct being anti-competitive? - HELD THAT:- The Appellant by making pre-installation of GMS suite conditional to signing of AFA/ACC for all Android devices manufacturers, has reduced the ability and incentive of devices manufacturers to develop and sell self-device operating or alternative version of Android and Android Forks and thereby limited technical and scientific development, which is breach of provisions of Section 4(2)(b)(ii) of the Act - The Commission while returning its finding has considered the evidence on record in respect of Section 4(2)(b)(ii) and has also returned finding on anti-competitive conduct of the Appellant. Whether Appellant has leveraged its dominant position in Play Store to protect its dominant position in Online General Search in breach of Section 4(2)(e) of the Act? - Whether the Commission while returning its finding on breach of Section 4(2)(e) in reference of above has not considered the evidence on record and has not returned any finding regarding the Appellants conduct being anti-competitive? - Whether Appellant has abused its dominant position by tying up of Google Chrome App with Play Store and thereby violated provisions of Section 4(2)(e) of the Act? - Whether the Commission while returning its finding on breach of Section 4(2)(e) in reference to tying of Google Chrome with Play Store has not considered the evidence on record and has not returned any finding regarding the Appellants conduct being anti-competitive? - Whether Appellant has abused its dominant position by tying up of YouTube App with Play Store and hereby violated provisions of Section 4(2)(e) of the Act? - Whether the Commission while returning its finding on breach of Section 4(2)(e) in reference to tying of YouTube with Play Store has not considered the evidence on record and has not returned any finding regarding the Appellants conduct being anti-competitive? - HELD THAT:- Appellant has leveraged its dominant position in Play Store to protect its dominant position in Online General Search in breach of Section 4(2)(e) of the Act. Commission while returning its finding on breach of Section 4(2)(e) in reference of above has considered the evidence on record and has also returned finding regarding the Appellants conduct being anti-competitive - Appellant has abused its dominant position by tying up of Google Chrome App with Play Store and thereby violated provisions of Section 4(2)(e) of the Act. Commission while returning its finding on breach of Section 4(2)(e) in reference of above has considered the evidence on record and has also returned finding regarding the Appellants conduct being anti-competitive - Appellant has abused its dominant position by tying up of YouTube App with Play Store and thereby violated provisions of Section 4(2)(e) of the Act. Commission while returning its finding on breach of Section 4(2)(e) in reference of above has considered the evidence on record and has also returned finding regarding the Appellants conduct being anti-competitive. Whether the investigation conducted by the Director General was in violation of Principles of Natural Justice? - Whether the investigation conducted by the Director General is vitiated due to DG framing leading questions to elicit information? - HELD THAT:- Investigation conducted by the Director General did not violate the principle of natural justice - Investigation conducted by the Director General cannot be said to be vitiated due to the Director General framing leading questions to elicit information. Whether order of Commission is vitiated since the Commission did not have any Judicial Member? - HELD THAT:- The impugned order by the Commission is not vitiated on the ground that the Commission did not consist of a Judicial Member. Whether the order passed by the Commission in exercise of its power under Section 27(a) is beyond the findings recorded by the Commission and is not in accordance with law? - HELD THAT:- There is no dispute that preinstalled Apps can be disabled by the users in no time. The OEMs are also not obliged to install all 11 suite of Apps of Google, thus the OEMs are free to not preinstall any of the Apps. All the Apps, which are preinstalled can be disabled as per the users choice, disabling all the Apps by user serve the purpose of disappearing the Apps from the screen and not performing any functions. The Apps can be enabled, if user so decides. Uninstallation will preclude option of the user to disable and enable the particular App as per its choice - direction in paragraph 617.7 is uncalled for and deserve to be set aside. Whether the penalty imposed on the Appellants by the Commission in exercise of its power under Section 27(b) was not based on relevant turnover of the Appellants, disproportionate and excessive? - HELD THAT:- Google has not provided the financial information as sought by the CCI vide its order dated 6.10.2021, and reiterated in its later order dated 17.10.2021. The inadequacy of the data supplied by Google has been mentioned in detail in paragraphs 630, 631, 632, 633 and 634, whereafter the CCI points out to significant inconsistencies and wide disclaimers in presentation of the requisite data by Google. In such a situation, CCI has carried out the best estimation on the basis of a financial statements and information submitted by Google - in a conservation approach, the CCI has taken the lower of these two figures as turnover for the FY 2020-221 and imposed a penalty @ 10% of its average of relevant turnover for the last three FYs 2018-19, 2019-20 and 2020-2021. We uphold the amount of penalty imposed by CCI on Google. Regarding the issue of imposition of provisional penalty consider the argument of the Learned Senior Counsel of the Appellant that there is no provision in the Competition Act for imposing a provisional penalty, with the possibility of revising it on receipt of further information data. We are of the view that the section 27(b) of the Competition Act, 2002 provides for imposition of penalty, which shall not be more than 10% of the average turnover for the last three preceding years upon enterprises, which are parties to such agreements or abuse. Once the CCI has derived the best estimate of the relevant turnover for the last three preceding financial years, and imposed a penalty of 10% of the average of such turnover, we are of the opinion that further revision of this penalty on the basis of financial information or data that may come to light in future will not be in keeping with law. Appeal is thus disposed off in following manner: (i) The impugned order of the Commission dated 20th October, 2022 is upheld, except as indicated at direction (ii) below; (ii) Direction issued in paragraphs 617.3, 617.9, 617.10 and 617.7 are set aside. Rest of the directions under paragraph 617 and fine imposed by paragraph 639 are upheld. (iii) The Appellant is allowed to deposit the amount of penalty (after adjusting the 10% amount of penalty as deposited under order dated 04.01.2023) within a period of 30 days from today. (iv) The Appellant is allowed 30 days time to implement the measures as directed in paragraph 617 (to the extent upheld by this order).
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Insolvency & Bankruptcy
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2023 (4) TMI 172
Reduction of claim amount - appellant contends that Resolution Professional has no jurisdiction to change/reduce the claim amount after he has once admitted the claim - HELD THAT:- The Resolution Professional has calculated the claim of the Appellant as per the award dated 19.01.2018. Appellant who has himself initiated the Arbitration Proceeding cannot deny that he is bound by the award which was delivered in his favour. Claim calculated on the basis of the award can neither be said to be incorrect nor against the materials on record. The Adjudicating Authority has rightly taken the view that no error has been committed by the Resolution Professional in reducing the amount of the claim of the Appellant. Appeal dismissed.
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PMLA
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2023 (4) TMI 171
Seeking grant of bail - Validity of Look Out Circular - money laundering - predicate offence - scheduled offences - Section 50(2) of the P.M.L.A. - HELD THAT:- The Ministry of Home Affairs relying upon certain decisions of the Delhi High Court in SUMER SINGH SALKAN VERSUS ASSTT. DIRECTOR ORS. AND COURT ON ITS OWN MOTION VERSUS STATE VS. GURNEK SINGH ETC. [ 2010 (8) TMI 1083 - DELHI HIGH COURT] has issued an Office Memorandum dated 27.10.2010 in the context of the issue of L.O.C.s. This O.M. provides that recourse to L.O.C. should be taken in cognizable offences under I.P.C. or other penal laws. The details regarding the reason for the opening of L.O.C. invariably be provided in the prescribed format, without which the subject of L.O.C. should not be arrested/detained. In cases where there is no cognizable offence under the I.P.C. or other penal laws, the L.O.C. subject cannot be detained/arrested or prevented from leaving the country. The originating agency can only request that they be informed about the arrival/departure of the subject in such cases. The reply on behalf of the Respondent refers to L.O.C. being issued consistent with the M.H.A. guidelines. However, the response does not elaborate upon whether the safeguards provided in the O.M. have indeed been complied with. This was necessary because no prosecution complaint was filed against the Petitioner under Section 45 of the P.M.L.A. Further, scheduled offences have not been invoked in the charge sheet filed by the Crime Branch against the Petitioner. The charge sheet is only for offences punishable under Sections 3 and 4 of the Goa, Daman and Diu Public Gambling Act, 1976. For the reasons, including but not restricted to the circumstance that no prosecution complaint is filed against the Petitioner and even the charge sheet which is filed in F.I.R. No.10/2022 is only limited to the offence under Sections 3 and 4 of the Goa, Daman and Diu Public Gambling Act, 1976 and not to any of the scheduled crime under the P.M.L.A., the impugned L.O.C. will have to be quashed. Moreover, in this case, there is no allegation of any non-cooperation by the Petitioner. The Petitioner is enlarged on bail. The Court considered and modified the bail conditions for traveling outside the State after hearing the learned Public Prosecutor. Any material does not support the apprehension expressed on behalf of the Respondent. Even the affidavit in reply is quite vague, and details necessary to support such apprehension are not even stated in this affidavit. The impugned L.O.C. dated 04.02.2022 is quashed - petition allowed.
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Service Tax
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2023 (4) TMI 170
Taxable services or not - providing corporate guarantee to its group companies without consideration - banking and other financial services or not - HELD THAT:- This was a case where the assessee had not received any consideration while providing corporate guarantee to its group companies. No effort was made on behalf of the Revenue to assail the above finding or to demonstrate that issuance of corporate guarantee to group companies without consideration would be a taxable service. In these circumstances, in view of such conclusive finding of both forums, there are no reason to admit this case basing upon the pending Civil Appeal No. 428 @ Diary No.42703/2019, particularly when it has not been demonstrated that the factual matrix of the pending case is identical to the present one. Appeal dismissed.
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2023 (4) TMI 169
Invocation of extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act 1994 - suppression of facts or not - case of Department is that the appellant was providing works contract service but had not paid service tax as a result of which the premises of the appellant was visited on 26.03.2015 by the Officers - HELD THAT:- It is apparent that even on 05.04.2012 the Department was aware of the nature of the activities carried out by the appellant and, therefore, for the period from October 10 to June 12 there was no reason for the Department to wait till 16.03.2016 to issue show cause notice. The show cause notice could have been issued immediately after the returns were filed by the appellant for the period 2010 to 2012. In such circumstances the Department could not have taken shelter of the third party information, as it was possessed of all the information necessary for the said period. The Commissioner completely failed to appreciate this position and held that the invocation of the extended period of limitation was justified because the appellant had suppressed information in the service tax returns. The invocation of the extended period of limitation cannot be sustained and needs to be set aside and is set aside. As the entire demand is for the extended period of limitation, it would not be necessary to examine the issue on merits. Appeal allowed.
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2023 (4) TMI 168
Recovery of Service tax - Broadcasting Services - appellant collected full transaction value on these service fees including broadcasting agency charges as well as service tax on the said charges from their clients - case of the department is that since the appellant have collected the service tax from their client by raising the bills, the same service tax was liable to be recovered under Section 73(A) of the Finance Act, 1994 - HELD THAT:- The facts which is not under dispute is that the electronic media company namely M/s. Sahara (India) Pvt. Ltd are raising bill for broadcasting service to the appellant and appellant in turn without providing any other service recovering the amount from their client along with service tax which was paid by electronic media. The demand in the present case was raised under Section 73(A) on the ground that the appellant have collected the service tax from their client and not deposited to the Government Exchequer. There is no dispute that the service tax amount collected by the appellant from their client already stand deposited to the Government Exchequer by the electronic media company namely M/s. Sahara (India) Pvt. Ltd therefore, the provision of Section 73(A) cannot be invoked in the facts of the present case. The impugned orders are set aside - Appeals are allowed.
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2023 (4) TMI 167
Export of service - Place of provision of services - analysis and identification of genetic patterns of a disease/ailment -reports are sent to the clients electronically - Applicability of Rule 3 of the Place of Provision of Services Rules, 2012 - HELD THAT:- Undisputed fact of the case is, payment of services received by assessee from foreign clients as a service provider is convertible foreign exchange. Rule 6A of the Service Tax Rules specifies the conditions to be satisfied for treating a service provided as export of service. The CESTAT has rightly recorded that assessee has clearly satisfied the conditions required for treating the service as export of service - the services provided by the assessee is an export of service under Rule 6A of the Service Tax Rules, and thus cannot be chargeable to service tax. Appeal dismissed.
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Central Excise
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2023 (4) TMI 166
CENVAT Credit on clean energy cess levied on coal - recovery of interest with penalty - HELD THAT:- The issue involved in this appeal is identical to the issue involved in respect of the same appellant in [ 2019 (6) TMI 1192 - CESTAT NEW DELHI ]. It was held in the final order that the appellant was not entitled to Cenvat credit on the clean energy cess paid by it and accordingly the appeal was dismissed. As the issue involved in this appeal is identical to the above, there are no reason to take different view in this appeal. Respectfully following the precedent decision of this Tribunal, it is held that the appellant was not entitled to Cenvat credit of the clean energy cess paid - appeal dismissed.
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2023 (4) TMI 165
CENVAT Credit - capital goods or not - foundation bolts would fall under Chapter 73 or not - time limitation - suppression of facts or not - Rule 2 (a) of the Cenvat Credit Rules, 2004 - HELD THAT:- Admittedly the foundation bolts have been received and used by the Appellant in their factory where they are manufacturing dutiable goods. As the vendor has classified the goods under CET 8455, the Appellant has taken the Credit on the foundation bolts as Capital goods, taking the Cenvat Credit in two different years. Even otherwise as per the definition of inputs in terms of Rule 2 (k) of CCR, 2004 as it stood at the material time, any item which is used in or in relation to the manufacturing activity directly or indirectly will qualify for Cenvat Credit. In the case law of A.C.C. Ltd. cited supra, the Tribunal has held that the assessee will be eligible for the Cenvat Credit for the foundation bolts purchased by them. For coming to this conclusion, they have relied on the case law of RELIANCE INDUSTRIES LTD. VERSUS COMMISSIONER OF C. EX., SURAT [ 2005 (10) TMI 203 - CESTAT, MUMBAI] . Time Limitation - HELD THAT:- It is an admitted fact that the Cenvat Credit taken on the foundation bolts has been reflected by them in their ER-1 Returns in 2007 and 2008. They have also enclosed copies of RG-23C records, wherein the Credit taken for the foundation bolt has been shown clearly. Therefore, the Department cannot claim that assessee has indulged in any suppression. The Show Cause Notice has been issued on 27/04/2011 for the Credit taken in 2007 and 2008. Since all the details of Cenvat Credit have been properly recorded by the Appellant in the ER-1, the question of suppression will not be sustainable - the present confirmed demand for the extended period is legally not sustainable even on account of limitation. Appeal allowed.
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CST, VAT & Sales Tax
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2023 (4) TMI 164
Assessment of turnover of the applicant as per Section 4(3) of the Value Added Tax Act or as per Rule 9 of the Value Added tax Rules - applicability of provision of Section 4(3) of the VAT Act in the case of work contract - estimation of value of goods imported out of State on the basis of pro-rata basis against the actual import provided under Rule 9(1) and Clause (e) of the U.P. VAT Act Rules, 2008 - HELD THAT:- The combined reading of Rule 8 and 9 establishes that Rule 8 prescribes the methodology for computation of taxable turnover for all classes of dealer while Rule 9 is applicable for determination of taxable turnover of sales of tax involved in execution of works contract and specifies deductions only for the dealers who are involved in execution of works contract, thus, provisions of Rule 9 are considered to be grant of deductions. This leads to an inevitable conclusion that levy of tax on turnover of sale has to be done in the manner provided in Section 4(3) of the Act and Rules 8 and 9 do not restrict the power of the assessing authority in doing so. Section 4(3) read in harmony with Rule 8 and 9 and the interpretation given by the Tribunal while extending the benefit of Rule 9(1)(e) to the dealer and denying the benefit of computation of tax as per the formula provided under Section 4(3) of the Act does not hold good. The finding recorded by the Tribunal to the extent of non-applicability of Section 4(3) of the Act is hereby set aside and the revisions filed by the assessee/dealer challenging the order passed by the Tribunal are hereby allowed. The revisions filed by the Revenue challenging the benefit extended to the dealer/assessee under Rule 9(1)(e) stand dismissed - matter is remitted back to the Tribunal to compute the tax component as per Section 4(3) of the Act giving the benefit to the dealer/assessee under Rule 9(1)(e) - the question of law raised through these revisions stands answered i.e. in favour of the assessee and against the revenue.
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2023 (4) TMI 163
Validity of assessment order - rejection of claim for input tax credit on the purchase of capital goods - levy of penalty on the appellant under the KVAT Act for the assessment years 2016-17 and 2017-18 - whether the learned Single Judges were justified in relegating the appellant to its alternate remedies under the KVAT Act against the orders impugned in the writ petitions? HELD THAT:- The power of judicial review is traceable to Articles 32 and 226 that confer on the Supreme Court and the High Courts the power to issue prerogative and like writs to protect the citizens from state action that infringes upon their rights. The Constitution being the supreme law of our land, and the rule of law being one of its basic features, the exercise of statutory power has to conform, inter alia , to the requirements of fairness, non-arbitrariness and reasonableness, all of which are integral aspects of the rule of law. Thus, when a litigant approaches a writ court, alleging a breach of his rights be it a constitutional right, a statutory right or a common law right by an authority empowered by the State, the court examines the manner in which the decision was arrived at, and in exceptional cases, the decision itself, to see whether it conforms to the requirements mandated by the rule of law. The writ jurisdiction being a discretionary jurisdiction, it is for the constitutional courts to decide whether or not they should exercise their discretion to entertain a writ petition. In that context, it would be apposite to point out that there is a subtle distinction that exists between instances when a court dismisses a writ petition as not maintainable and when it exercises its discretion against entertaining it. The former is a case where the court finds that the circumstances are such that it is rendered incapable of even receiving the lis for adjudication whereas the latter is a case where the court finds that, while it is competent to adjudicate the lis , the adjudication is better left to other forums that are more suited for the same - Justification refers to the principle that the exercise of public power must be justified, intelligible and transparent, not in the abstract, but to the individuals subject to it. Demonstrated expertise refers to the requirement of the decision maker establishing the reasonableness of his decision by demonstrating therein his experience and expertise. Is the exercise of Judicial Review warranted in these cases? - HELD THAT:- A reading of the assessment orders and penalty orders that are impugned in these cases would reveal that the assessing officer has interpreted the terms of the contract entered into between the appellant assessee and BPCL as requiring the appellant to transfer the property in the plant put up by them on land leased from BPCL and also to sell to BPCL the gases manufactured in that plant - What the assessing officer completely overlooks, however, is the fact that there has been no transfer of the property in the goods involved in the execution of the works contract. The taxable event under the KVAT Act is not the execution of a works contract but the transfer of the property in the goods involved in the execution of the works contract. The latter aspect being absent in the transaction between the appellant and BPCL, as evident from the findings of the Intelligence Officer in the penalty orders, based on which the assessing officer rendered similar findings in the assessment orders, the assessing officer virtually usurped to himself the jurisdiction to tax a works contract by erroneously assuming the existence of the jurisdictional fact/taxable event that would have conferred him with such a jurisdiction. It is deemed appropriate to observe that in matters of assessment under a taxing statute, the requirement of fairness, that is an integral aspect of the rule of law in our country, mandates that an assessing authority should apply its mind to the various factors that influence an assessment and give sufficient indication in the assessment order of having done so. This would necessitate his/her giving reasons for the finding regarding the existence of the taxable event that attracts the charge of tax as also other factors that result in a demand from an assessee of more tax than what has been admitted by him/her as payable. The profile of an assessing authority can no longer be that of a stern and unreasonable automaton that is programmed solely to collect the tax that the revenue department feels is due from an assessee. The right of an assessee to seek justification of state action would mandate that this court step in to correct unreasonable orders of assessing authorities so as to uphold the culture of justification that legitimizes state action. Appeal allowed.
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2023 (4) TMI 162
Validity of reassessment Orders - primary grievance is that the impugned reassessment orders are without a fair and complete opportunity - violation of principles of natural justice - HELD THAT:- The petitioner on receipt of the photocopies of the documents has made a request for further time citing third party information and the volume of the documents as reasons. This request is admittedly made on 27.02.2023 i.e., before the expiry of the time allowed by the endorsement dated 17.02.2023. But the same is not received, as canvassed on behalf of the petitioner, on the ground that separate requests had to be made. The petitioner has persisted with its request for further time by filing a further request on 28.02.2023. In fact, the petitioner's case is that its representative was present with the respondent's office both on 27.02.2023 and 28.02.2023 and the request is received at the fag end of the second day. There could be failure by the petitioner to respond immediately to the Call Notices or the Proposition Notices, but for the purposes of the present case, it would not decisive especially when the petitioner is furnished with the copies of the documents on 17.02.2023. If the petitioner has been given photocopies of the documents [including the statement of third parties] on 17.02.2023 and the documents are third party documents and voluminous, this Court is of the considered view that the request on 27.02.2023 for further time [of course, with the statutory constraints in mind] should have been considered. There must be interference with the impugned assessment orders with the proceedings being restored to the respondent for conclusion of the assessment proceedings with opportunity to the petitioner to file detailed objections with a request for cross examination of the witnesses to be considered by the respondent, if permitted in law. The impugned reassessment orders for the tax periods viz., April 2015 to March 2016, April 2016 to March 2017 and April 2017 to June 2017, which are produced as Annexure-A in each of the writ petitions, are quashed and the corresponding proceedings are restored to the respondent for reconsideration - Petition allowed.
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2023 (4) TMI 161
Disallowance of Input Tax Rebate (ITR) in-respect-of the GST purchases made from few of the companies - dis-allowance primarily was on the ground that the sellers were bogus dealers who have not deposited the tax collected from the petitioner herein - HELD THAT:- Both these Writ Petitions in-fact are squarely covered by the decision of the Division Bench of this High Court in the case of the STATE OF CHHATTISGARH AND OTHERS VERSUS TATA TELESERVICES LIMITED [ 2022 (12) TMI 264 - CHHATTISGARH HIGH COURT] where it was held that Invocation of Section 22 is permissible only when assessment of a dealer (a) has been under assessed or has escaped assessment or (b) has been assessed at a lower rate or (c) any wrong deduction has been made while making the assessment or (d) a rebate of input tax has incorrectly been allowed while making the assessment or (e) is rendered erroneous and prejudicial to the interest of revenue consequent to or in the light of any judgment or order of any Court or Tribunal, which has become final. The aforesaid conditions precedent cannot be countenanced in absence of an order of assessment in writing and in that view of the matter, in respect of deemed assessment, recourse cannot be taken under Section 22 of the VAT Act. The issue involved in the present Writ Petitions since it stands squarely covered by the decision of the Division Bench and which is not in dispute in-terms-of the submission made by the Counsel for the State itself. This Court is of the firm view that under the circumstances, the question of relegating the petitioner to avail the statutory alternative remedy available to the petitioner would not be proper and justified at this juncture. This Court is also inclined to allow the present two Writ Petitions on the legal ground that is involved in the Writ Petitions so far as there being no assessment order passed by the respondent. Further without there being an assessment order as is otherwise required under Section 21(1) of the Chhattisgarh Vat Act, there could not have been any re-assessment proceedings drawn under Section 22(1) of the VAT Act initiated by the authorities concerned - the impugned orders passed by the Commercial Vat Tribunal dated 01.09.2021 and the order of the Appellate Authorities dated 14.12.2017 and the order of reassessment dated 26.03.2016 are set aside. Petition allowed.
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Indian Laws
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2023 (4) TMI 160
Dishonour of Cheque - insufficient funds - compounding of offence u/s 147 of NI Act - HELD THAT:- Since in the instant case, the petitioner-accused after being convicted under Section 138 of the Act, has compromised the matter with the complainant-Bank, vide separate statements of authorized representative of the complainant-Bank and the petitioner-accused, annexed with the petition and in terms thereof, the petitioner-accused has already paid the entire amount of compensation, prayer for compounding the offence can be accepted. The present matter is ordered to be compounded and the impugned judgment of conviction dated 21.02.2019 and order of sentence dated 26.02.2019 passed against the petitioner-accused by learned Additional Chief Judicial Magistrate, Nalagarh, District Solan, H.P., and affirmed by learned Additional Sessions Judge, Nalagarh, District Solan, H.P., vide judgment dated 16.06.2022, are quashed and setaside and the petitioner-accused is acquitted of the charge framed against him under Section 138 of the Act. Bail bonds, if any, stand discharged. Petition disposed off.
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2023 (4) TMI 159
Scope of RTI - private unaided educational institution - Information sought under threat - imposition of penalty upon the Principal and compensation under the provisions of the Act as well as de-recognition of the college by the AICTE, New Delhi - HELD THAT:- Undoubtedly, the co-operative societies were constituted under the State Co-operatives enactments. However, they were neither owned nor substantially financed by the State. The question of whether the societies were controlled by the State was discussed extensively from paragraphs 36 onwards of the SCC report. The Court held that the meaning of the expression control must be tested in the context of the RTI Act and not in any other context i.e., neither in the context of the expression State under Article 12 of the Constitution of India nor in the context of maintainability of the writ petition against a body or authority under Article 226 of the Constitution of India. Since the term control/controlled has not been defined in the RTI Act, they proceed to understand the scope of the expression set in context of the prior and subsequent terms i.e. in the context of a body owned and substantially financed . The overarching conclusion that has been arrived at by the Courts is thus to the effect that private unaided schools do not constitute public authorities that are amenable to the provisions of the RTI Act. There is however, a caveat - It cannot be disputed that educational institutions, whether private or public, perform a critical public function, being the dissemination of education. Hence, there must be, and the Court agrees with R1 on this, scrutiny of the manner and mode of such dissemination, and the quality maintained by the institutions. For this purpose, though not a public authority, they would still come within the ambit of the RTI Act, although by strict application of the provisions of Section 11 of the Act. Thus the caveat is answered to state that where information sought for by a querist, relates to an authority that is not a public authority , but a private one rendering public functions or in respect of which a public information officer holds information, such a request may be considered at the discretion of the officer, strictly in line with the procedure set out under Section 11 of the Act - the impugned order is set aside. This writ petition is allowed.
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