TMI Tax Updates - e-Newsletter
May 13, 2023

Case Laws in this Newsletter:

GST Income Tax Customs Securities / SEBI Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. NATURE, OBJECTIVES, CONDITIONS AND APPROVAL PROCESS OF TRUST SET UP FOR BENEFIT OF EMPLOYEES

   By: GEETANJALI PANDEY

2. Payment of High rental would not mean transfer of property is involved

   By: Bimal jain

3. GIFT OF IMMOVABLE PROPERTY TO SISTER IS NOT TAXABLE

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. CBIC rolls out Automated Return Scrutiny Module for GST returns in ACES-GST backend application for Central Tax Officers

2. Dr Vivek Joshi, Secretary, DFS, chairs review meeting of financial performance of Regional Rural Banks (RRBs)

3. DRI seizes 5.480 kg Heroin worth Rs. 38.36 crore approx. in international market value of from Integrated Check Point, Attari, Amritsar

4. Shanghai Cooperation Organisation (SCO) Startup Forum 2023

5. Business is not just about numbers but about building relationships, partnership, collaborating, learning, technology and innovation: Shri Goyal

6. Over 5.25 crore subscribers enrolled in APY marking 8 years of successful implementation

Notifications

Companies Law

1. G.S.R. 354 (E) - dated 10-5-2023 - Co. Law

Application for removal of name, before ROC - to be filed only after filing of pending / overdue Financial Statements and Annaul Returns - Companies (Removal of Names of Companies from the Register of Companies) Second Amendment Rules, 2023

Customs

2. 37/2023 - dated 10-5-2023 - Cus

Seeks to allow imports of Crude Soya-bean Oil and Crude Sunflower Oil at zero Basic Customs Duty and zero Agriculture Infrastructure and Development Cess for TRQ license holders for FY 2022-23 up to the 30th June, 2023.

GST - States

3. 05/2023- State Tax (Rate) - dated 9-5-2023 - Bihar SGST

Amendment in Notification No. 11/2017-State Tax (Rate), dated the 29th June, 2017

4. 38/1/2017-Fin(R&C) (5/2023-Rate)/3430 - dated 9-5-2023 - Goa SGST

Amendment in Notification No. 38/1/2017-Fin(R&C) (11/2017-Rate) dated the 30th June, 2017

5. ERTS(T) 65/2017/Pt.III/419 - dated 31-3-2023 - Meghalaya SGST

Amendment in Notification No. 27/2022-State Tax, dated the 26th December, 2022

6. ERTS(T) 65/2017/Pt.III/417 - dated 31-3-2023 - Meghalaya SGST

Revocation of cancellation of registration where registration has been cancelled on or before the 31st day of December, 2022

7. F.12 (11)FD/Tax/2023-Pt-I-16 - dated 9-5-2023 - Rajasthan SGST

Seeks to amend Notification No F.12(56)FD/Tax/2017-Pt-I-49 dated 29.06.2017 to insert the proviso regarding Goods Transport Agencies (GTAs)

Income Tax

8. 26/2025 - dated 10-5-2023 - IT

Exemption from specified income U/s 10(46) - notifies ‘Food Safety and Standards Authority of India’, New Delhi an Authority established by the Ministry of Health and Family Welfare, Government of India

9. 25/2023 - dated 10-5-2023 - IT

Exemption from specified income U/s 10(46) - notifies ‘Pune Metropolitan Region Development Authority’ constituted by the state government of Maharashtra

Highlights / Catch Notes

GST

• Court Orders Review of Bus Operator's Turnover Records by State for Tax Assessment Validity Check.

  Case-Laws - HC : Validity of Assessment Order - Determination of turnover - plying passenger buses in different States - bifurcation of AC and NON-AC tickets - - Matter restored back - petitioner to submit the relevant records showing the turnover relating to his bus business separately for the States of Andhra Pradesh, Telangana, Tamilnadu and Puducherry for the relevant period - HC
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• Court Grants ITC Refund on Export Services, Rejects Revenue's Intermediary Services Claim; Orders Refund with Interest.

  Case-Laws - HC : Refund of Input Tax Credit availed on inputs / input services - Export of services - zero rated supply - intermediary services or not - It cannot be accepted that the Revenue can ignore the orders passed by the appellate authority mainly on the ground that it proposes to file an appeal - petition allowed. - Refund allowed with interest - HC
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• Court Annuls Registration Cancellation Due to Non-Speaking Order; Emphasizes Right to Know Decision Reasons.

  Case-Laws - HC : Cancellation of registration of petitioner - non-speaking order - Right to know reasons is a legitimate right for a litigant. Absence of reasons is deprivation of reasonable opportunity as well, inasmuch as the person against whom the order is passed would not know as to on which consideration, the order is founded. - HC
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• Court Reviews Petition on Constitutional Validity of GST Anti-Profiteering Section 171; No Urgency for Interim Order Found.

  Case-Laws - HC : Anti profiteering - Stay on the order of the authority - Constitutional validity of Section 171 - There could not be any urgency for granting any interim order since the petitioner was sitting over the aforesaid impugned adjudication order for the last six months. - Since the constitutional validity of the aforesaid provisions of law has been challenged, this writ petition is entertained. - HC
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Income Tax

• Supreme Court Upholds ITAT and HC Ruling: Loan to Indian Subsidiary by Foreign Company is a Capital Asset u/s 2(14.

  Case-Laws - SC : Capital asset u/s 2(14) - Scope of the term Asset / property - "interest of every kind" - whether loan given to its subsidiary in India, by the foreign company constitute capital asset - ITAT and HC has given strong reasons for holding that the concerned transaction would come in the meaning of Section 2(14) of the Income Tax Act - SLP by Revenue dismissed - SC
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• High Court Urged to Remand Case for New Order Under Income Tax Act Section 144B Due to Procedural Errors.

  Case-Laws - SC : Validity of assessment u/s 144B - Revenue ought to have been given some leverage to correct themselves - the High Court ought to have remanded the matter to the AO to pass a fresh order in accordance with law, after following the due procedure, as required under the law, namely, more particularly, under Section 144B of the Act. - SC
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• Supreme Court Sends Faceless Assessment Order Case Back to High Court to Reassess Impact of Section 144B(9) Omission.

  Case-Laws - SC : Validity of Faceless assessment order u/s 144B - Effect of omission of Section 144B (9) on the merits of the impugned judgment and order passed by the High Court - The matter is remitted back to the High Court to consider the same afresh to consider the effect of the omission of Section 144B(9) of the Act, which has been omitted w.e.f. 01.04.2021 - SC
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• Supreme Court: Microsoft's software licenses in India not taxable as royalty u/s 9(1)(vi) and DTAA Article 12.

  Case-Laws - SC : Income deemed to accrue or arise in India - licensing of software products of Microsoft in the Territory of India by the Respondent was not taxable in India as Royalty under Section 9(1)(vi) read with Article 12 of the Indo US DTAA - this is not Royalty liable to be taxed in India - Revenue appeal dismissed - SC
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• HUF Gifts Exempt from Income Tax: Section 56(2)(VII) Allows Karta to Gift Property for Pious, Legal, Family Needs.

  Case-Laws - AT : Addition as gift from assessee HUF which was exempted u/s 56(2)(VII) - The amount spent may be more than that the member may have gotten on the partition of the 'HUF'. The Karta of the 'HUF', even can gift the 'HUF' property for pious purpose and even he can contract a debt for the legal necessity and for family purposes and can bind the other members to the extent of their interest in the family property.- Additions u/s 56(2)(vii) deleted - AT
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• Court Allows Set-off of Unabsorbed Business Losses Against Income Declared Late u/s 139(3); Revenue Appeal Dismissed.

  Case-Laws - AT : Settlement of case - Set off the unabsorbed business loss - filing of belated return - Indeed, the assessee disclosed the income declared in the settlement commission but has given the set off of the brought forward losses/unabsorbed depreciation against such income which eventually make the taxable income at Rs. Nil. - there is no prohibition to adjust the brought forward losses against the income declared belatedly in the return of income under the provision of section 139(3) - Revenue appeal dismissed - AT
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• High Court Quashes Notice u/s 148 for Improperly Increasing Escaped Income Over Rs. 50 Lakh Threshold.

  Case-Laws - HC : Validity of orders and notices issued u/s 148 - Quantum of escaped income - determination of period of limitation - There is a complete non-application of mind. The payment of loan by the petitioner could not have been added to the loan amount, which the petitioner claims, was received from unrelated parties - the attempt appears to be to, somehow, take the amount which, according to the AO, escaped assessment, over the threshold limit of Rs. 50 lakhs. - Notice and order quashed - HC
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• Non-resident service payments not taxable in India; no TDS deduction needed u/s 40(a)(ia) per CIT(A) ruling.

  Case-Laws - AT : TDS u/s 195 - non deduction of TDS on expenses paid/remitted abroad - Fee for Technical Services (FTS) - We endorse the findings of the Ld. CIT(A) that the payments made to the non-resident service providers by the assessee are not chargeable to tax in India and thus no disallowance under section 40(a)(ia) of the Act is called for - AT
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• Forfeited advance payments in property sales adjust acquisition cost under Income Tax Act Section 51, impacting capital gains.

  Case-Laws - AT : Liability under the head short term/ long term capital gain - forfeiture of advanced amount against sale of property - provision of section 51 of the Act are applicable and the amount proportionately forfeited by the assessee would be deducted from the cost of acquisition of the asset or fair market value as the case may be at the time of actual transfer of such asset in future. - AT
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• No Penalty for Late E-Verification of Income Tax Return Due to Health Issues u/s 271F.

  Case-Laws - AT : Penalty levied u/s 271F - Return of income (ITR) was filed in time but could be e-verified due to health issues - Since the delay in doing E-verification/filing belated return is neither willful nor wanton and the assessee was prevented by reasonable cause, no penalty - AT
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• Bogus Sale Proceeds Reclassified as Short Term Capital Loss u/s 68; Additions Deleted by Authorities.

  Case-Laws - AT : Bogus sale proceeds as undisclosed income - addition u/s 68 - all these transactions were through banking channels only and in that process assessee has suffered loss. - AO mechanically applied the informations received from investigation wing and proceeded to disallow the loss claimed by the assessee as well as proceeded to make the sale proceeds as undisclosed income. - Additions deleted - Claim allowed as Short Term Capital Loss - AT
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• Disallowance of Rent Paid to Director Upheld Due to Lack of Evidence Differentiating Flats u/s 40A(2)(b.

  Case-Laws - AT : Addition made in respect of rent paid for flat - Assessee has paid rent to Director of the assessee who is a person specified u/s. 40A(2)(b) - assessee has not been able to give any concrete evidence differentiating the two flats in terms of area or other amenities and thus upheld the disallowance made by the ld. AO. - Additions confirmed - AT
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• Section 10(38) Exemption Denied for LTCG Due to Bogus Penny Stock Transactions; SEBI Suspends Inflated Stocks.

  Case-Laws - AT : Disallowance of exemption claimed u/s. 10(38) - Bogus LTCG - Penny stock transactions - The SEBI has suspended the penny stock of those companies, who involved in ragging of prices of penny stocks companies - Additions confirmed - AT
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Customs

• Importer Admits Misdeclaration of Cut Rails as Scrap; Commissioner (Appeals) Rules in Favor of Revenue Despite Admission.

  Case-Laws - AT : Valuation of imported goods - misdeclaration of goods - Commissioner (Appeals) allowed the appeal of the Importer / respondent - product was correctly classifiable under Heading 7302, when assessee itself in a letter to Department admitted misdeclaring imported cut Rails as heavy melting scrap and requested for condonation of misdeclaration and admitted value declared to be under lower side and accepted its value for rectification. - Decided in favor of revenue in an ex-parte order with the help of Amicus Curiae - AT
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• Global Container Carrier Granted Immunity from Penalties Under Customs Act Sections 114(iii) and 114AA After Importers' Relief.

  Case-Laws - AT : Levy of penalty u/s 114 (iii) of the Customs Act, 1962 and u/s 114 AA of the Act - Global container carrier (shipping line) and provides liner shipping services worldwide. - Seeking relief on the ground that, the importers/exporters have been granted immunity from prosecution, fine and penalty - immunity granted - AT
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• CHA Cleared: No Penalty for M/s KVS Cargo in Forged Export Documents Case, Order Set Aside.

  Case-Laws - AT : Levy of penalty on CHA - duty drawback making fraudulent export of readymade garments - The allegations that the appellant did not verify the KYC documents of Exporter which was a bogus firm created with forged documents and that he abetted the export of readymade garments are unsustainable in as much as the allegations of forging the documents is solely on the proprietor of bogus and no connivance of the appellant in that regard has been pointed out by the Department - no penalty can be imposed on M/s KVS Cargo and, therefore, the impugned order is hereby set aside. - AT
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• Customs House Agent Cleared: No Evidence of Misconduct in Exporters' Fraud Case; Penalties Overturned.

  Case-Laws - AT : Levy of penalty on CHA - allegation of abetting some unscrupulous exporters - mens rea - The CHA are merely but processing agent on documents of clearance of goods through Customs House. They are not the Inspector to inspect the genuineness of transactions nor they have any allegation to look into the information receive from the exporter/importer. - it is clear that there is no such evidence on record which may prove knowledge with the appellants about the alleged mis-declaration. In such circumstances, the order imposing penalties upon the appellants is now sustainable - AT
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• Customs broker's license suspension overturned due to expired timeframe and ignored procedural requirements. License restored.

  Case-Laws - AT : Continuation of suspension of ‘customs broker’ licence - such instances of suspension should be followed by proceedings, including issue of chargesheet within the prescribed timeframe, for it to be bona fide exercise of authority. The time limit for initiating such action in all, and any, circumstances has also lapsed. The pre-condition for invoking the power of suspension, viz., that of temporary detriment pending initiation and conclusion of proceedings for revocation, did not appear to have been intended to be complied with at all. - The suspension is set aside and the licence restored for operation - AT
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• Imported Non-Texturized Polyester Fabric Classification Under Customs Tariff Act, 1975: Sub-heading 5407 61 Explained.

  Case-Laws - AT : Classification of imported goods - non-texturized polyester fabric - The declaration of goods as polyester fabric has not been controverted. Woven fabrics containing less than 85% by weight of textured polyester yarn and woven fabrics containing more than, as well as less than, 85% by weight of non-textured polyester yarn are covered with sub-heading 5407 61 of First Schedule to Customs Tariff Act, 1975; by no stretch can a later sub-heading be adopted for ‘woven fabrics from polyester’, except on composition less than 85%, without compromising the General Rules for the Interpretation of Import Tariff in Customs Tariff Act, 1975. - AT
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• Cryptogenic Devices Misclassified; Eligible for Duty Exemption Under Sr. 8 of Amended Notification 24/2005-Customs.

  Case-Laws - AAR : Classification of goods proposed to be imported - Cryptogenic Devicc/Token (ProxKey and ProxKey PRO) - Applicant has incorrectly quoted and claimed eligibility to avail benefit under benefit under Sr. 2 of Notification No 24/2005- Customs - the 'Cryptogenic Device/Token' (ProxKey and ProxKey PRO) fall under Tariff entry 8471 80 00: Other units of automatic data processing machines of chapter 84 of the first schedule of the Customs Tariff Act, 1975. Said goods are eligible for duty exemption under serial number 8 of the notification. No. 24/2005- Customs amended from time to time. - AAR
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Corporate Law

• Company Name Removal Requires Filing All Pending Financial Statements and Returns Per 2023 Amendment Rules.

  Notifications : Application for removal of name, before ROC - to be filed only after filing of pending / overdue Financial Statements and Annaul Returns - Companies (Removal of Names of Companies from the Register of Companies) Second Amendment Rules, 2023 - Notification
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Indian Laws

• Arbitration invoked pre-2015 Amendment Act uses old rules, even if arbitrator appointed post-2015.

  Case-Laws - SC : Arbitration proceedings - Effects of the amendments in the act through Amendment Act, 2015 - In a case where the notice invoking arbitration is issued prior to the Amendment Act, 2015 and the application under Section 11 for appointment of an arbitrator is made post Amendment Act, 2015, the provisions of pre-Amendment Act, 2015 shall be applicable and not the Amendment Act, 2015 - SC
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• High Court Rules Non-Compliance with Condition to Deposit 20% Fine Justifies Vacating Suspension of Sentence in Cheque Dishonor Case.

  Case-Laws - HC : Dishonour of Cheque - payment of 20% of amount of fine - Merely because the condition to deposit 20% of the fine amount was not imposed upon the petitioners at the time of suspension of sentence by the learned Appellate Court, it cannot be held that the vacation of order of suspension of sentence upon non-fulfilment of such a condition imposed subsequently by the learned Appellate Court was bad in law. - HC
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• Arbitral Award Validity: "Actual" Taxes Include Only Those Paid; Contract Doesn't Distinguish Between Parties' Tax Liabilities.

  Case-Laws - HC : Validity of Arbitral Award - reimburse the Taxes, Excise Duty and CST. - The expression “actual” in this context refers the taxes, duties and levies actually paid to the exchequer.” Therefore, as per the contract, there is no distinction between the respondent and the sub-contractor. The Schedule 7 does not in any way affect the tax liability of the petitioner towards the respondent. The Schedule 7 merely stated an estimate amount which may be paid to the petitioner and was not based on the actuals. - HC
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IBC

• Supreme Court: Transfers to Related Parties by Corporate Debtors Face 2-Year Look-Back Under IBC Section 43(2.

  Case-Laws - AT : Preferential Transaction or Fraudulent Transaction - creation of the security interest by way of mortgage - The Hon’ble Supreme Court has thus held that if there is a transfer of property or interest thereof of the corporate debtor for the ‘benefit of related parties’ and not necessarily be the corporate debtor, then the look back period would be two years and such a transaction will be considered as a transaction which infringes sub-section (2) of section 43. - AT
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PMLA

• Section 24 PMLA presumption challenge limited to trial phase; property connection examined at trial, not discharge.

  Case-Laws - HC : Money Laundering - proceeds of crime - predicate offence - The presumption u/s 24 of PML Act can be rebutted only at the stage of trial and not at the stage of framing of charge. Nexus if any, between the properties acquired in the name of this petitioner and the proceeds of crime is a question of fact to be looked into at the stage of trial and not at the stage of discharge. - HC
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SEBI

• Court Finds Freeze Order on Company's Properties Unnecessary, Not Linked to Alleged Crime or Mentioned in FIR.

  Case-Laws - SC : Validity of Second Freeze Order - Since the appellant company is not connected to the alleged crime, and has not found mention in the FIR or the chargesheet, the freeze order against the appellant company’s properties is redundant qua the investigation, since the appellant company itself is not necessary for the conclusion of the investigation. - SC
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Central Excise

• Valuation Rule 11 Applied for Unique Case Involving Related Party Sales and Captive Consumption Not Covered by Other Rules.

  Case-Laws - AT : Method of valuation - Rule 11 is adopted when the situation is not covered by any of the other methods of valuation prescribed from Rule 4 to 10A. The method of valuation adopted by the Appellant under Rule 11 of the Valuation Rules is the appropriate method in this case because the situation of part sale to related person and part captive consumption is not covered by any of the other Rules in the Valuation Rules 2000. - AT
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• Court Rules Notification Clarifies Dispute Period Before February 2009 Amendment; Applicable from Inception Date.

  Case-Laws - AT : Date on which notification becoming effective - The period under dispute in this appeal is before introduction of such an amended provision in February, 2009 but going by the entire text of the Notification, it can be said that the same is clarificatory in nature, that can be applied from the day of its inception - AT
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• Cigarettes Sent to Duty-Free Shop Exempt from Duty; Customs Bonded Warehouse u/s 58, Customs Act 1962.

  Case-Laws - AT : Manufactured Goods cleared to duty free shop at airport claiming benefit of exemption - cigarettes - cigarettes were consigned directly to duty free shop, which was a Customs Bonded Warehouse licensed u/s 58 of the Customs Act, 1962 - Once it is admitted that the goods cleared by the appellant were received in the warehouse, demand cannot be sustained - AT
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VAT

• Order Invalid from Start Cannot Be Fixed Later; Appellate Authority Erred in Remanding Without Nullifying Review Order.

  Case-Laws - HC : Validity of initiation of review proceedings - It is a trite law that an order, which is bad from its inception itself, cannot be cured by subsequent action. In the present case, before the Appellate Authority, the Judgment of this Court in the case of Tata Steel Ltd. was duly placed on record, but despite the said fact, the Appellate Authority, instead of setting aside the order of review as not sustainable in the eye of law, has remanded the matter back to the Assessing Authority for reconsideration. This cannot be endorsed, as reviewing authority cannot be clothed with jurisdiction which it, otherwise, did not have at the time of initiation of review proceedings. - HC
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Case Laws:

• GST

• 2023 (5) TMI 506
  Validity of Assessment Order - Determination of turnover - plying passenger buses in different States - bifurcation of AC and NON-AC tickets - no personal hearing was accorded to the petitioner before passing such order - violation of principles of natural justice or not - whether the information obtained by the 1st respondent from the third parties i.e., is confined to the turnover of the petitioner relating to A.P. State or it includes the remaining three States also? HELD THAT:- It is deemed apposite to give an opportunity to the petitioner to furnish the relevant data showing the turnover of the petitioner relating to A.P, Tamilnadu, Telangana and Puducherry separately for appreciation of the Authorities and to make fresh assessment in accordance with law. The impugned Assessment Order dated 15.12.2022 passed by 1st respondent under SGST /CGST Acts, 2017 for the tax periods 2017-18, 2018-19 and 2019- 20 (up to November, 2019) is hereby set aside and liberty is given to the petitioner to submit the relevant records showing the turnover relating to his bus business separately for the States of Andhra Pradesh, Telangana, Tamilnadu and Puducherry for the relevant period - Petition allowed.

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• 2023 (5) TMI 505
  Refund of Input Tax Credit availed on inputs / input services - Export of services - zero rated supply - rejection on the ground that the services provided by the petitioner were intermediary services and did not qualify for export of services - non-furnishing of Foreign Inward Remittance Certificate (FIRC) - Revenue ignored the orders passed by the appellate authority mainly on the ground that it proposes to file an appeal - HELD THAT:- Mr. Singla, learned Counsel for the respondent, fairly states that fresh applications for refund or Show Cause Notices would not be necessary, considering that the proceedings emanated from the petitioner filing applications for refund which was culminated in Orders-in-Appeals passed by the appellate authority - Undisputedly, the Revenue is entitled to file an appeal under Section 112 of the CGST Act, however, the said appeal is required to be filed within a period of three months. The said period has been extended as the Appellate Tribunal has not been constituted as yet. It cannot be accepted that the Revenue can ignore the orders passed by the appellate authority mainly on the ground that it proposes to file an appeal - petition allowed.

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• 2023 (5) TMI 504
  Cancellation of registration of petitioner - non-speaking order - petitioner submitted that the notice seeking to cancel the registration was too vague to be countenanced and that no details were furnished as to what weighed with the authorities in proceeding to cancel the GST registration of the petitioner - principles of natural justice - HELD THAT:- It is to be observed that a mere perusal of the show-cause notice as well as the impugned order would indicate that the notice was vague and was without any particulars. The order did not disclose any reason for cancellation of registration. A nonspeaking order which does not disclose the reason and does not specify the grounds on which the decision is rested could be said to be amounting to breach of natural justice. Right to know reasons is a legitimate right for a litigant. Absence of reasons is deprivation of reasonable opportunity as well, inasmuch as the person against whom the order is passed would not know as to on which consideration, the order is founded. As the impugned order suffers from the vice of being cryptic and non-speaking, it is liable to be set aside only the said ground alone. The impugned order dated 07.05.2022 is hereby set aside - petition allowed.

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• 2023 (5) TMI 503
  Anti profiteering - Stay on the order of the authority - Constitutional validity of Section 171 of the GST Act and the Rules contained in Chapter XV of the GST Rules relating to anti profiteering - HELD THAT:- There could not be any urgency for granting any interim order since the petitioner was sitting over the aforesaid impugned adjudication order for the last six months. Also, it is a well established principle of law that every piece of legislation should be treated as a valid piece of legislation till the same is declared unconstitutional by any court of law and every action taken under such law should be deemed to be valid by an authority so long it is not declared unconstitutional. Since the constitutional validity of the aforesaid provisions of law has been challenged, this writ petition is entertained. Any interim order of stay of the aforesaid impugned adjudication order dated 30th September, 2022 cannot be granted in view of the facts and circumstances of this case as appears from record and by considering the submission of the parties. List this matter for final hearing in the monthly list of July, 2023.

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• Income Tax

• 2023 (5) TMI 508
  Deduction u/s. 80IA - Disallowance of claim as assessee had set up its business prior to 01/04/1995 and assessee has been formed by way of splitting up / re-construction of business - HELD THAT:- The above issues have already been decided by the Tribunal in appeal by the Department in assessee s case for assessment year 2005-06 [ 2022 (12) TMI 28 - ITAT MUMBAI] has held that the assessee started telecommunication services after 01/04/1995 and hence, eligible for deduction u/s. 80IA(4) of the Act. The Coordinate Bench further held that even if the assessee s undertaking is formed after merger/re-construction there would be no impediment to claim deduction u/s. 80IA of the Act in the light of CBDT Circular No. 5 of 2005.Ground No. 1 of appeal is allowed. Deduction u/s. 80IA in respect of income from Other Incomes - Tribunal [ 2022 (12) TMI 28 - ITAT MUMBAI] in appeal by the assessee for 2005-06 has accepted assessee s claim of deduction u/s. 80IA of the Act on other incomes viz. interest income and miscellaneous income, by placing reliance on the decision in the case of Bharat Sanchar Nigam Limited [ 2015 (12) TMI 1531 - ITAT DELHI] . Hence, ground No. 2 of the present appeal is allowed for parity of reasons. Depreciation on ARC obligation capitalized - Assessee first proposition is, that the same be considered as capital in nature and the assessee be allowed depreciation on capitalized amount - HELD THAT:- This proposition has already been rejected by the Delhi Bench of Tribunal in assessee s group concern M/s. Vodafone Essar Digilink Ltd. [ 2018 (6) TMI 1029 - ITAT DELHI] Though the assessee has filed appeal against the decision of Tribunal before Hon ble Delhi High Court, the appeal of the assessee has been admitted, however, no stay is operative against the Tribunal order. Therefore, the first proposition of the assessee is rejected. Second proposition is that the provision on ARC be allowed as expenditure u/s. 37 - Liability is fasten on the assessee to restore the leased premises to the original condition in case of any damage caused due to installation work at the time of executing licence agreement The liability is ascertained however, the same would be crystallized only in the year of vacating the leased premises. It is a well settled principle that the provision has to be created on some reliable /rational basis. Assessee has purportedly furnished the basis on which provision has been created before the Assessing Officer, however, the same has not been examined by AO and has been rejected at threshold. In the case of Rotork Control India Pvt. Ltd. [ 2009 (5) TMI 16 - SUPREME COURT] on which both sides have placed reliance it has been held that the provision has to be made on some reliable estimates in respect of present obligation. Thus, what is essential for allowing the provision as revenue is (i) it should be for the purpose of business exclusively; (ii) the provision is for present obligation; and (iii) based on reliable estimates. In the present case the assessees has been able to substantiate that condition (i) (ii) above are satisfied. The assessee has purportedly furnished working of provision before the AO - The assessee s method of determining provision was not examined by the AO. We deem it appropriate to restore this issue back to the file of Assessing Officer to examine the same, in accordance with law. The ground No. 3 of the appeal is thus, partly allowed for statistical purpose. Disallowance u/s. 14A - assessee submits that during the period relevant to assessment year under appeal, the assessee has not received any income exempt from tax on the investments made - HELD THAT:- It is an unrebutted fact that during the period relevant to the assessment year under appeal, the assessee has not earned any income exempt from tax on the investments. It is no more resintegra that no disallowance u/s. 14A of the Act is warranted where the assessee has not earned any exempt income during the relevant period. We further observe that the Assessing Officer has made disallowance invoking provisions of Rule 8D. The provisions of Rule 8D are effective from assessment year 2008-09. In the impugned assessment year Rule 8D has no application.[Re. Godrej Boyce Mfg. Co. Ltd. [ 2010 (8) TMI 77 - BOMBAY HIGH COURT] . Hence, ground of the appeal is allowed. Interest on loan to subsidiaries - assessee submits that the assessee and its subsidiaries are engaged in the business of providing mobile telecom services PAN India, there is significant inter-dependance between the assessee and its group companies for providing cellular services in different telecom circles - Therefore, loan advanced by the assessee to its group concerns were driven by commercial expediency - HELD THAT:- The Hon ble Supreme Court of India in S.A Builders Ltd. [ 2006 (12) TMI 82 - SUPREME COURT] has held that once it is established that interest free loans has been advanced to sister concerns on account of commercial expediency, the interest paid on such loans by assessee cannot be disallowed. In so far as the objection of Revenue regarding advancement of loans to a loss making group concern, we hold that it is the assessee who has the exclusive right to take a call regarding advancing of loans to the group concern, the AO cannot sit in the arm chair of the assessee and decide to whom loan is to be extended or at what rate of interest loan is to be extended. Once the assessee has been able to establish commercial expediency for extending the loan, which in our considered view the assessee has been successful in the present case, the interest expenditure cannot be disallowed. The assessee has further shown that to cover the interest free loans advanced to Vodafone South Limited and Vodafone Digilink Limited aggregating to Rs. 830 crores, the assessee has sufficient own funds to cover the investment. In the case of Reliance Utilities and Power Limited [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] has held that, where the assessee is having mixed bag of interest free funds and interest bearing funds and the assessee has made investment out of such common pool of funds, the presumption would be that the investments are made out of interest free funds available with the company provided the said funds are sufficient to meet the investments. Thus, assessee succeeds. Disallowance of interest on Capital Work-in-Progress and on ECB - assessee submits that the assessee has acquired fixed assets from the borrowed capital during the year relevant to the assessment year under appeal - HELD THAT:- The investment in assets / Plant Machinery/ Network equipment by the assessee have improved the quality of services, this may have resulted in increase of the subscriber base to some extent. Increase in volume of subscriber base within the same territory of operation cannot be termed as extension of business. No merit in the observations of the Assessing Officer that the interest u/s. 36(1)(iii) of the Act has to be disallowed. Reason for rejecting assessee s claim of interest expenditure on ECBs is that interest in respect of borrowed capital can only be allowed from the date on which such asset is first put to use . It is an admitted fact that ECB loans were not utilized upto 31/03/2006. In so far as other borrowed funds the Assessing Officer has not raised any such objection. In the preceding part of the order, we have held that the borrowed funds have been utilized for the purpose of business. Once it is established that the funds are used wholly and exclusively for the purpose of business interest paid on such borrowed funds is allowed u/s. 36(1)(iii) of the Act. In the case of ECBs, it is not the case of Revenue that ECB loan was diverted for non-business purpose. The assessee has received ECB loans on 10/03/2006, the funds were available with the assessee, even if, ECB loan was not utilized, interest paid thereon would be allowable. Hence, ground of the appeal are allowed. Expenditure on raising of loans - AO disallowed expenditure on raising of loan for the reason that loan has been disbursed for capital expenditure and not for augmentation of the working capital and loan funds have been utilized for non-business considerations - Whether secured and unsecured loans were raised purely for business exigencies? - HELD THAT:- While deciding the preceding grounds we have held that the loans have been utilized by the assessee for the purpose of business. The loans that have been advanced to the group concern are on account of business exigencies Hon ble Apex Court in the case of India Cements Ltd. [ 1965 (12) TMI 22 - SUPREME COURT] has held that expenditure on raising of loan is revenue in nature, hence, allowable. The nature of expenditure on raising of loan does not depend upon nature and purpose of loan. Hence, we have no hesitation in holding that the expenditure incurred for raising of the loan is allowable u/s.37(1) of the Act. The ground of the appeal is thus, allowed. Disallowance of roaming cost u/s. 40(a)(ia) - assessee submits that during the year under consideration the assessee incurred expenses on roaming charges - HELD THAT:- One of the issue in the case of Vodafone East Ltd. [ 2015 (9) TMI 1358 - ITAT KOLKATA] was with respect to deduction of tax at source in respect of roaming charges paid by the assessee to other telecom operators. The Co-ordinate Bench after analyzing the facts of the case and various decisions held that the payment of roaming charges does not fall under the ambit of TDS provision either u/s. 194C or 194J of the Act, hence, addition made u/s. 40(a)(ia) of the Act was deleted. We find that the facts and the reason for making disallowance u/s. 40(a)(ia) of the Act in the impugned order are similar to the case of Vodafone East Ltd. [ 2015 (9) TMI 1358 - ITAT KOLKATA] No distinction has been pointed by the Revenue in the present case. Thus, for parity of reasons, disallowance u/s. 40(a) (ia) of the Act is directed to be deleted. The assessee succeeds on ground No. 9 of appeal. MAT book profit u/s 115JB - disallowance of deduction of provision for doubtful debts while computing book profit u/s. 115JB - HELD THAT:- It is not in dispute that the provision made for doubtful debts amounting to Rs. 218.31 million has been added back by the Assessing Officer while computing book profits u/s. 115JB of the Act by applying clause (i) of Explanation -2 to section 115JB(2) of the Act. When the assessee chose to write back the provision for doubtful debts by creating it in its P L Account, which in the present case is Rs. 326.79 million, the same would obviously be outside the ambit of provision of section 115JB of the Act. In fact, this is specifically provided in clause (i) of Explantion-1 to section 115JB(2) of the Act under expression as reduced by while computing book profit u/s. 115JB of the Act. In view of this, we direct the Assessing Officer to reduce Rs. 326.79 million towards provision for doubtful debts written back while computing book profits u/s. 115JB of the Act. The assessee succeeds on this ground.

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• 2023 (5) TMI 507
  Disallowance of depreciation - investment made in Wing Turbine Generation (WTG) cannot be equated with activities in the nature of trade or business or adventure - principle of resjudicata or principles of consistency - HELD THAT:- As per the main object clause the company invests or provides finance to companies engaged in generating power and that investment in own power generation unit (i.e. windmill) should also get covered within such object clause - assessee had acquired the windmill in the financial year 2009-10 relevant to AY 2010-11 and income from generation of power and sale of such power was offered to tax as business income which has been accepted by the predecessor AO in the preceding year. As AO rejected the explanation of the assessee by saying that the principle of resjudicata does not apply to income tax proceedings. No doubt the principle of res-judicata does not apply to tax proceedings but this rule is subject to the expectation of consistency where there are no fresh facts as held in several judgements including the judgment of CIT vs. Durga Prasad More [ 1971 (8) TMI 17 - SUPREME COURT] AO has overlooked the rule of consistency despite there being no fresh facts. We, therefore, do not find any substance in the argument advanced by the Ld. DR. Disallowance u/s 14A - HELD THAT:- The investments were out of assessee s own funds and no borrowed funds were used to acquire investments. There was no interest expenditure which could be directly or indirectly attributable to the exempt income - investments were strategic investment as per the assessee and the same should be excluded for calculating disallowance under Rule 8D. As per Rule 8D(2)(i), the assessee made disallowance under the head strategic investment and has taken 20% of employee cost and 5% of administrative cost. Thus, the findings given by the CIT (A) is just and proper. Assessee had borrowed funds which was used for business purposes and was paying interest on these funds and this fact was not controverted through any of the documents on the record by the Assessing Officer as well as by the Revenue at the time of hearing before us. Appeal of the Revenue is dismissed.

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• 2023 (5) TMI 502
  Notice of demand - benefit of the Kar Vivad Samdhan Scheme 1998 already availed - No Due certificate was issued for the relevant period - HELD THAT:- Having regard to the impugned order which barely contains any reason much less the facts or advertance to the contentions of the parties, this Court is of the opinion that the matter has to be considered afresh on its merits. The impugned order is accordingly set aside.The Allahabad High Court shall proceed to hear and dispose of Writ Tax [ 2018 (7) TMI 2309 - ALLAHABAD HIGH COURT] on their merits expeditiously preferably within a year. SLP disposed off.

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• 2023 (5) TMI 501
  Capital asset u/s 2(14) - Scope of the term Asset / property - interest of every kind - whether loan given to its subsidiary in India, by the foreign company constitute capital asset - ITAT and HC has given strong reasons for holding that the concerned transaction would come in the meaning of Section 2(14) of the Income Tax Act - HELD THAT:- In any case, the interpretation given by the Tribunal as well as the High Court is only with regard to a particular transaction. As such, we are not inclined to interfere with the impugned order under the extra ordinary jurisdiction of Article 136 of the Constitution of India. SLP dismissed.

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• 2023 (5) TMI 500
  Assessment u/s 153C - Scope of amendment brought to Section 153C introduced vide Finance Act, 2015 w.e.f. 01.06.2015 - Division Bench of the High Court [ 2019 (8) TMI 461 - GUJARAT HIGH COURT] has quashed the notice under Section 153C - HELD THAT:- Revenue preferred Appeal with other allied Appeals and by a common judgment [ 2023 (4) TMI 296 - SUPREME COURT] this Court has allowed the appeals preferred by the Revenue and has quashed and set aside the judgment and order passed by the High Court, which has been relied upon while passing the impugned judgment and order. In that view of the matter, the present Appeal stands disposed of in terms of the judgment and order passed by this Court above.

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• 2023 (5) TMI 499
  Deduction u/s 80IA - Applicability of section 79 - No positive profit available for deduction after considering the losses of the previous years to be set off against the income of the current year - As per HC application of section 80IA( 5) of the Act to deny the effect of provisions of section 79 of the Act cannot be sustained as per the Scheme of the Act,1961. When the loss of earlier years have already lapsed, then the same cannot be notionally carried forward and set off against the profit and gains of the assessee s business for the year under consideration in computing the quantum of deduction under section 80IA(1) HELD THAT:- This Court is of the opinion that no interference is called for. However, the issue of eligibility of claim, set off of losses for subsequent assessment years (2002-2003 to 2004-2005) is however kept open. The special leave petition is dismissed subject to the above observations.

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• 2023 (5) TMI 498
  Validity of assessment u/s 144 r.w.s. 144B - HC [ 2021 (10) TMI 750 - BOMBAY HIGH COURT ] concluded that assessment made shall be non-est if such assessment is not made in accordance with the procedure laid down under this section and the order impugned being non-est, the Assessing Officer may take such steps as advised in accordance with law - HELD THAT:- Leave granted.Appeal stands disposed of in terms of the signed order. Validity of assessment order - Breach of the provisions of the Faceless Assessment Scheme, 2019 - non granting of personal hearing - non furnishing of draft assessment order - HC [ 2021 (9) TMI 1108 - BOMBAY HIGH COURT ] said assessment order not having been passed in conformity with the requirements of the Faceless Assessment Scheme, 2019 has to be treated as non-est and shall be deemed to have never been passed - HELD THAT:- Leave granted. The Appeal stands disposed of in terms of the signed order. Penalty u/s 274 r.w.s. 270A - assessment order itself has been passed in breach of the mandatory requirements u/s 144B - As decided by HC [ 2021 (9) TMI 1489 - BOMBAY HIGH COURT ]as provided in Sub-Section 9 of Section 144B of the Act, the assessment order will be non-est - HELD THAT:- Today, when the present Special Leave Petition is taken for further hearing, assessee has pointed out that, during the pendency of the present Special Leave Petition and pursuant to the liberty reserved by the High Court in the impugned judgment and order, fresh proceedings have been initiated against the assessee and therefore, according to the learned counsel for the assessee, the impugned judgment and order passed by the High Court has been implemented by the Department. Petitioner is, as such, not in a position to dispute the above, however, has requested that if this Court is inclined to dispose of the Special Leave Petition, in that case, liberty be reserved in favour of the Revenue to revive the present Special Leave Petition, in case of the difficulty and necessity so arises - we dispose of the present Special Leave Petition, in view of the subsequent development - liberty is reserved in favour of the Revenue to revive the Special Leave Petition in case of difficulty and/or necessity so arises. With this, the Present Special Leave Petition stands disposed of. Faceless Assessment - procedure for making assessment - HC [ 2021 (10) TMI 235 - BOMBAY HIGH COURT ] said final assessment order is not made in accordance with the procedure laid down u/s 144B (xvi)(b) of the Act as inspite of the variation being prejudicial to the interest of assessee, no opportunity has been provided to the assessee by having him served with a show cause notice as well as draft assessment order - ASG, has submitted that, in that case, the High Court ought to have remanded the matter to the AO for a fresh order - HELD THAT:- As required to be noted that, in para 16(b), the High Court itself has reserved the liberty in favour of the Revenue to take such de novo proceedings as required in accordance with law, even if the matter is not remanded to the Assessing Officer, it will always be open for the Department to initiate fresh assessment proceedings in accordance with law and setting aside the Assessment Orders shall not come in the way of the Revenue. With this clarification and observation, the Special Leave Petition stands disposed of. Pending applications, if any, also stand disposed of. Penalty notices issued u/s 270 A and 271 AAC (1) - Respondent did not comply with the mandatory requirement prescribed u/s 144 B (1) (xvi) (b) - HC [ 2021 (9) TMI 1488 - BOMBAY HIGH COURT ] held set aside the impugned assessment order, the consequential notice of demand and penalty notices as the order, as provided under Sub section (9) of Section 144B is non est - ASG, has drawn our attention that subsequently Section 144B(9)has been omitted w.e.f. 01.04.2021 and therefore, the basis on which the High Court has passed the impugned order has gone - HELD THAT:- As assessee is not before the Court and the omission of Section 144B(9) w.e.f. 01.04.2021 was not before the High Court, we deem it appropriate to allow the Revenue to file a review application before the High Court to press into service the omission of sub-section (9) of the Section 144B which has been omitted w.e.f. 01.04.2021 and its effect of omission on the impugned judgment and order passed by the High Court. If such a review application is filed within a period of 6 weeks from today, High Court to consider the same in accordance with law and on merits and, more particularly, the effect of omission of sub-section (9) of Section 144B which has been omitted w.e.f. 01.04.2021 for which, as such, this Court has not expressed anything on merits in favour of either parties and it is ultimately for the High Court to take a call on the aforesaid in accordance with law and on its own merits and after hearing both the parties. Special Leave Petition stands disposed of. Pending applications, if any, also stand disposed of. Validity of assessment u/s 144B - Assessment Order has been passed without following principles of natural justice and without even issuing a show-cause notice with a draft Assessment Order as mandatorily required u/s 144B [ 2021 (10) TMI 1407 - BOMBAY HIGH COURT ] - HELD THAT:- Leave granted. Appeal stands disposed of in terms of the signed order. Pending applications, if any, stand disposed of. Assessment u/s 144B - no draft assessment order was served - As per HC [ 2021 (10) TMI 1213 - BOMBAY HIGH COURT ] assessment order has been issued without following the mandatory procedure prescribed under Section 144B of the Act, in as much as, if the review unit of respondents had reviewed the draft assessment order, it should have followed the procedure laid down under sub clause (b) of clause (xvi) of sub-Section (1) of Section 144B - HELD THAT:- Leave granted.Appeal stands disposed of in terms of the signed order. Pending applications, if any, stand disposed of. Validity of National Faceless Assessment - HC [ 2021 (11) TMI 822 - BOMBAY HIGH COURT ] held non compliance with the mandatory procedure laid down u/s 144B, the assessment order is also non est - HELD THAT:- As AOR, has stated at the Bar that he has instructions to appear appearing on behalf of the respondent and he shall file his vakalatnama. He is permitted to file vakalatnama within a period of two weeks from today. Leave granted. Appeal stands disposed of in terms of the signed order.

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• 2023 (5) TMI 497
  Faceless Assessment - Validity of assessment order u/s 144B - Non follow of due procedure - mandatory requirement u/s 144B, namely, the show cause notice with a draft Assessment Order was not issued and served upon the assessee - HELD THAT:- Assessment Order was passed without issuing a show cause notice with a draft Assessment Order as was mandatorily required u/s 144B as such, it cannot be said that the High Court has committed any error. However, at the same time, considering the fact that the Faceless Assessment Scheme has been introduced recently and therefore, the Revenue ought to have been given some leverage to correct themselves and take the corrective measures and therefore the High Court ought to have remanded the matter to the Assessment Officer to pass a fresh order in accordance with law, after following the due procedure as required under the law, namely, more particularly, under Section 144B of the Act. We modify the impugned judgment and order passed by the High Court and remand the matter to the Assessment Officer to pass a fresh Assessment Order, after following due procedure in accordance with law under Section 144B of the Act.

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• 2023 (5) TMI 496
  Faceless Assessment - Validity of assessment order u/s 144B - Non follow of due procedure - Order was passed without issuing a show cause notice with a draft Assessment Order as was mandatorily required u/s 144B - HELD THAT:- Considering order passed by the High Court and considering the fact that the Assessment Order was passed without issuing a show cause notice with a draft Assessment Order as was mandatorily required u/s 144B of the Act, as such, it cannot be said that the High Court has committed any error. Aonsidering the fact that the Faceless Assessment Scheme has been introduced recently and therefore, the Revenue ought to have been given some leverage to correct themselves and take the corrective measures and therefore the High Court ought to have remanded the matter to the Assessment Officer to pass a fresh order in accordance with law, after following the due procedure as required under the law, namely, more particularly, under Section 144B of the Act. We modify the impugned judgment and order passed by the High Court and remand the matter to the Assessment Officer to pass a fresh Assessment Order, after following due procedure in accordance with law under Section 144B of the Act.

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• 2023 (5) TMI 495
  Validity of assessment u/s 144B - show cause notice with a draft Assessment Order was not issued and served upon the assessee - HELD THAT:- As Assessment Order was passed without issuing a show cause notice with a draft Assessment Order, as was mandatorily required, under Section 144B of the Act, as such, it cannot be said that the High Court has committed any error. Considering the fact that the Faceless Assessment Scheme has been introduced recently and therefore, the Revenue ought to have been given some leverage to correct themselves and take corrective measures and therefore the High Court ought to have remanded the matter to the AO to pass a fresh order in accordance with law, after following the due procedure, as required under the law, namely, more particularly, under Section 144B of the Act. We modify the impugned judgment and order passed by the High Court and remand the matter to the Assessment Officer to pass a fresh Assessment Order, after following due procedure, in accordance with law under Section 144B of the Act.

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• 2023 (5) TMI 494
  Validity of Faceless assessment order u/s 144B - Effect of omission of Section 144B (9) on the merits of the impugned judgment and order passed by the High Court - HELD THAT:- We deem it appropriate to set aside the impugned judgment and order passed by the High Court and remand the matter to the High Court to consider the effect of omission of Section 144B (9) of the Act, which has been omitted w.e.f 01.04.2021 on para 3 of the CBDT Circular dated 13.08.2020. Not expressing anything on merits in favour of either parties on the omission of Section 144B(9) of the Act w.e.f. 01.04.2021, the impugned judgment and order passed by the High Court is set aside. The matter is remitted back to the High Court to consider the same afresh to consider the effect of the omission of Section 144B(9) of the Act, which has been omitted w.e.f. 01.04.2021 and the effect of such omission on para 3 of the CBDT Circular dated 13.08.2020 which, as such, prima facie seems to be pari materia to Section 144B(9) of the Act.

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• 2023 (5) TMI 493
  Validity of assessment order u/s 144 r.w.s. 144B - Special Leave Petition has been preferred only for the purpose of expunging the remarks made by the High Court in para 9 - HELD THAT:- As sub-section (9) of Section 144B of the Act has been omitted subsequently and which was not before the High Court, we permit the Revenue to file a review application before the High Court and to point out the subsequent development and omission of sub-section (9) of Section 144B and as and when such a review application is filed within a period of six weeks from today, the High Court to consider the same in accordance with law and on its own merits and without raising the issue with respect to limitation, however, subject to giving an opportunity to the assessee. So far as the observations made in para 9 of the impugned judgment and order passed by the High Court are concerned, we are of the opinion that the observations made in para 9 are unwarranted and not required. Accordingly, the observations made in para 9 of the impugned order are ordered to be expunged. With this, the present Appeal stands disposed of.

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• 2023 (5) TMI 492
  Income deemed to accrue or arise in India - licensing of software products of Microsoft in the Territory of India by the Respondent was not taxable in India as Royalty under Section 9(1)(vi) read with Article 12 of the Indo US DTAA - it was held by the High Court that this is not Royalty liable to be taxed in India under the provisions of the Income Tax Act, 1961 and DTAA - HELD THAT:- The issue raised by the Revenue in the present special leave petition is covered against them in ENGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LIMITED VERSUS THE COMMISSIONER OF INCOME TAX ANR. [ 2021 (3) TMI 138 - SUPREME COURT] where it was held that the amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in section 195 of the Income Tax Act were not liable to deduct any TDS under section 195 of the Income Tax Act. SLP dismissed.

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• 2023 (5) TMI 491
  Correctness/validity of an order u/s 127 - power of transfer of case - case transferred from Kolkata to New Delhi - Validity of order passed by the Principal Commissioner of Income Tax, Kolkata- 9 (PCIT) - HELD THAT:- We find no merit in the special leave petition ; it is dismissed. However, the observations in the impugned order shall be construed only as a prima facie expression and have no reflection on the merits of the case. All pending applications are disposed of.

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• 2023 (5) TMI 490
  Survey proceedings u/s 133A - Authenticity of the data contained in the pendrive seized from the possession of Shri Riyaz, one of the assessee s employee - Whether the appellate Tribunal should not have found that the survey conducted at the residential house of Sri Riyaz violated the provisions of Section 133A? - As decided by HC according to the explanation, a place (a) where a business or profession or activity for charitable purpose is carried on, (b) shall also include any other place where any business or profession and activity for charitable purpose is carried on or not. Therefore, explanation includes a place where any one of the three activities is carried on therein or not. Excluding residence by the construction now commended to this Court would completely take away from the scope of the survey - HELD THAT:- We are not inclined to interfere with the impugned order and judgment of the High Court. The special leave petitions are dismissed. Pending application(s), if any, are disposed of.

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• 2023 (5) TMI 489
  Denying exemption u/s 11 - violation of Section 13(1)(c) has been alleged is based mainly on the salary/remuneration paid to two trustees of the assessee - as per HC alleged breach of Section 13(1)(c) of the Act based on the factors is baseless, wholly untenable - HELD THAT:- We have heard learned counsel for the petitioner. We do not find any good ground to interfere with the impugned judgment and order passed by the High Court. Accordingly, the Special Leave Petition is dismissed. Pending application(s), if any, stand disposed of.

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• 2023 (5) TMI 488
  Cognizance/summoning order u/s 276C (2) r.w.s. 278E of I.T.Act - application u/s 482 Cr.P.C praying to quash the Criminal Complaint - As directed by HC applicant appears and surrenders before the court below within 30 days from today and applies for bail, his prayer for bail shall be considered and no coercive action shall be taken against the applicant till then - HELD THAT:- We are not inclined to interfere with the impugned judgments and orders passed by the High Court. The special leave petitions are, accordingly, dismissed.

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• 2023 (5) TMI 487
  TDS u/s 195 - royalty payments as defined under Explanation II to Section 9(1)(vi) - amounts paid by the concerned persons resident in India to non-resident, foreign software suppliers - As per HC amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in section 195 were not liable to deduct any TDS u/s 195 - HELD THAT:- The impugned judgment has been passed by the High Court relying upon the decision of this court in the case of Engineering Analysis Centre of Excellence Private Limited Vs. Commissioner of Income Tax and Anr. [ 2021 (3) TMI 138 - SUPREME COURT] We are informed that the Review Petition titled as Commissioner of Income Tax International Taxation and Anr. Vs. Engineering Analysis Centre of Excellence Private Limited is pending. We are also informed that another Division Bench in Civil Appeal [ 20(10) TM22I 665 - SC ORDER] has disposed of the said appeals by giving liberty to the petitioner that in case any order is passed in the review proceedings, it will be open to the parties to rely upon the said order. We also dispose of the petition on the same terms and it shall be open to the parties herein to initiate appropriate proceedings relying upon the said order passed in review.

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• 2023 (5) TMI 486
  TP Adjustment - comparable selection - ITAT excluding M/s Eclerx Services Pvt. Ltd, TCS E-Serve Ltd, BNR Udyog Ltd. and Excel Infoways Ltd as comparables for determining arm s length price - High Court has observed that perusal of the impugned order reveals that the ITAT has given cogent reasons for excluding the aforesaid four companies as comparables. HELD THAT: - In view of the matter and in the peculiar facts and circumstances of the case, we see no reason to interfere with the impugned judgment and order passed by the High Court. The Special Leave Petition stands dismissed. However, the question of law on the powers of the High Court to consider the findings recorded by the Transfer Pricing Officer and/or the ITAT are kept open. The present Special Leave Petition is considered on the peculiar facts of the case and the question of law on the aforesaid is kept open.

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• 2023 (5) TMI 485
  TP Adjustment - ALP of corporate guarantee provided to the Overseas Associated Enterprises - As in own case for earlier AYs matter has been remitted to the Assessing Officer for de-novo adjudication after due and reasonable opportunity of hearing to the assessee as accepted by HC - HELD THAT:- We are not inclined to entertain the present special leave petition in view of the observations recorded by the Income Tax Appellate Tribunal. Recording the aforesaid, the special leave petition is dismissed.

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• 2023 (5) TMI 484
  TP Adjustment - ALP on the corporate guarantee - Tribunal has considered the controversy and remanded the matter to the AO for denovo adjudication - HELD THAT:- We are not inclined to entertain the present special leave petitions in view of the observations recorded by the Income Tax Appellate Tribunal. Recording the aforesaid, the special leave petitions are dismissed.

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• 2023 (5) TMI 483
  Reopening of assessment u/s 147 - validity of notice u/s 148 - Capital gain on sale of land - assessee sold the land by lower rate than which was prevailing - HELD THAT:- While going though the valuation report, rate of the said land was Rs.12,250/- per sq. mtr., (open land rate) and applying rate of land furnished by the Sub-Registrar-8, Rander, Surat the value of the land area of 9424.02 sq.mtr., comes to Rs.11,54,44,245/-. So the land in question is assumed to be open land and despite agriculture which relates to agricultural land and determination of stamp paid is accepted by the stamp valuation authority, there appears to be a fundamental error of fact by the authority as it reflects from the records. Respondent authority is trying to assume valuation beyond the value which has been prescribed by the stamp valuation authority and further the sale document is clearly indicating that pursuant to the compromise which has taken place, the sale has been made effective of 23% of the overall land for amount of Rs.5,13,61,000/-. Thus, it appears that once this issue has been gone into by the respondent authority, it would not be open for the respondent authority to re-open the issue relating to long term capital gain. Whether re-opening is permissible after audit party expresses opinion? - Re-opening of the case on the basis of factual error pointed out by the audit party is permissible, we may revert back to the decision delivered in the case of Reckitt Bencksier Healthcare India (P.) Ltd., ( 2016 (9) TMI 338 - GUJARAT HIGH COURT] wherein it has been propounded that it is settled position of law that reason to believe need to be of the assessing officer alone and same cannot be substituted based upon receiving objection from the Audit Department and as such, considering the aforesaid situation which is prevailing on record, and having found this fundamental error as indicated above, we are of the opinion that a case is made out by the petitioner. Decided in favour of assessee.

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• 2023 (5) TMI 482
  Capital gain or business income - conversion of the subject shares from stock-in-trade to investment - HELD THAT:- The error pointed out by the CIT(A) and the Tribunal in the approach of the AO was correct. The error in the AO s approach was that he had based the addition in the respondent/assessee s taxable income on the presumption that business income had arisen in its favour. Clearly, there is no finding of fact returned by the AO that there was a sale of the shares. The quantification of business income i.e., the sum referred to hereinabove was not, as noticed both by the Tribunal and the CIT(A), respondent/assessee s real income. To our minds, as and when the subject shares are sold, as per the provisions of the Act, income arising from sale, if they are still held as investment, will, perhaps, be amenable to tax as capital gains. We find that there is no error either in law or on facts in the approach adopted by the CIT(A) and the Tribunal. Therefore, the second issue is also decided against the appellant/revenue and in favour of the respondent/assessee.

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• 2023 (5) TMI 481
  Rectification u/s 154 - tax levied u/s 115BBE - AO recorded that the additional income was to be taxed at flat rate at 30% u/s 115BBE instead of slab rates - HELD THAT:- In the absence of such a satisfaction, if an order under section 143(3) of the Act is passed accepting the return of income, then it is difficult to presume that such an order was passed in respect of any income determined u/s 68, section 69, section 69A, section 69B, section 69C or section 69D of the Act or that the tax has to be levied u/s 115BBE of the Act. Unless and until such a compliance is there in the assessment order, it cannot be said that there was any mistake apparent from record or that the proceedings are amenable to the jurisdiction of the learned Assessing Officer under section 154 of the Act. Having not recorded any such satisfaction as required under law, AO cannot be allowed to contend that the provisions of section 115BBE of the Act are applicable to the case of the assessee and, therefore, the error in respect of leviable rates has to be rectified u/s 154 of the Act. Consistent view taken by the Co-ordinate Benches of this Tribunal referred to above is applicable to the facts of the case on hand on all force. Accordingly, hold that exercise of jurisdiction under section 154 of the Act by the learned AO is bad in law and consequently the proceedings under section 154 of the Act are liable to be quashed.

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• 2023 (5) TMI 480
  Addition as gift from assessee HUF which was exempted u/s 56(2)(VII) - AO noted that assessee has shown gift from Ranjibhai D. Panchal (HUF), wherein the assessee is a Karta (Manager) of such HUF - AO disallowed and added back the gift to the total income of assessee by taking view that HUF does not fall in the list of relative - HELD THAT:- If a member does not opt to receive his share out of the profits of the firm and opts that the same be added towards his capital in the firm, even then, when the said partner either on dissolution of the firm or otherwise receives back his capital, the said capital is not taxable as an income of the partner, rather, the same is taken as a capital receipt. In the case of HUF , or to say in the strict sense in case of coparcenary , the individual members receive their share on partition. However, during the subsisting coparcenary or to say broadly HUF , no member is entitled to receive any definite share out of the income of the HUF . It is left to the prudence and wisdom of the manager who has to manage the affairs of the HUF , he may spend the money or property of the HUF in the case of a need of a member, such as on the marriage of a unmarried female member or in case of certain treatment of any disease of the member or in case of educational needs of any children in the HUF . The amount spent may be more than that the member may have gotten on the partition of the HUF . The Karta of the HUF , even can gift the HUF property for pious purpose and even he can contract a debt for the legal necessity and for family purposes and can bind the other members to the extent of their interest in the family property. Thus, in view of the above factual and legal discussion and respectfully following the decision in Pankil Garg [ 2019 (9) TMI 337 - ITAT CHANDIGARH] direct AO to delete the addition u/s 56(2)(vii). Ground of appeal raised by the assessee is allowed.

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• 2023 (5) TMI 479
  Settlement of case - Set off the unabsorbed business loss or depreciation from out of the total income assessed when no such provision exists for allowing set off of brought forward losses against additional income offered before Hon ble ITSC - filing of belated return - HELD THAT:- Once the petition got rejected, the only recourse available with the revenue to consider such amount disclosed in the settlement petition as the income under normal computation of income. Indeed, the assessee disclosed the income declared in the settlement commission but has given the set off of the brought forward losses/unabsorbed depreciation against such income which eventually make the taxable income at Rs. Nil. Once income has been determined under normal computation of income then it implies that all the other provision including the provision of setting off loss/unabsorbed depreciation will equally be applicable as per the law. In other words, the assessee is entitled set off the brought forward losses/ unabsorbed depreciation against the income subject to the provisions of law. It is also important to note that the assessee has filed the return of income belatedly for the year under consideration but there is no prohibition to adjust the brought forward losses against the income declared belatedly in the return of income under the provision of section 139(3) - DR has not brought anything on record contrary to the findings of the ld. CIT-A. In view of above, we do not find any infirmity in the order of the CIT(A). Hence, the ground of appeal of the Revenue is hereby dismissed.

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• 2023 (5) TMI 478
  Addition u/s 69A - being the amount of cash deposited in Bank Account - assessee being into the business of beauty parlor and tuition work deposited demonetization currency notes - HELD THAT:- Assessee has offered income under section 44AD at 8% on cash receipts. It is the case of the assessee that she was having sufficient income year on year basis and drew the attention of the Bench towards cash book opening balance, bank statement, cash book pertaining to the subsequent years. The assessee has duly explained the cash in hand having been collected from her beauty parlor business and tuition work. All these evidences were there before the AO as well as the CIT(A) but they have brushed aside the same without examining the same and proceeded to make the addition. Since the cash deposit of demonetization currency by the assessee is duly explained the addition made by the AO and confirmed by the CIT(A) is not sustainable. Identical issue was decided in case of DCIT vs. Anuya Jayant Mhaiskar [ 2022 (8) TMI 438 - ITAT MUMBAI] and Nemchand Vasanji Chheda [ 2021 (7) TMI 1412 - ITAT MUMBAI] wherein it is held that when sufficient unutilized funds in the books are available with the assessee no addition can be made. So the closing balance or cash in hand with the assessee is certainly disclosed income and opening balance cannot be considered as undisclosed income. Moreover, the assessee has been regularly filing return of income and has duly shown her income in the preceding as well as succeeding years earned in cash.Appeal filed by the assessee is allowed.

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• 2023 (5) TMI 477
  Reopening of assessment - Registration of bogus long term capital gains, by trading in stock of reputed entities - , the foundation of the allegation is also that the petitioner/HUF is a non-filer - HELD THAT:- Having regard to the fact that the AO has failed to notice that the petitioner/HUF had in fact filed its return, the matter would require re-examination by the AO. This is more so as when notice under Section 148A(b) of the Act was issued, the petitioner/HUF had sought accommodation, and in this context, had uploaded a communication dated 22.03.2023. The request for accommodation was reiterated on 29.03.2023. In this behalf, our attention has been drawn to Annexure P-8 and P-9 appended to the case file - It appears that the AO, without acting on the aforementioned requests for accommodation, proceeded to pass the impugned order dated 30.03.2023 under Section 148A(d) of the Act. The impugned order and notice are set aside - The AO will, however, have liberty to carry out a de novo exercise. - Petition disposed off.

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• 2023 (5) TMI 476
  Stay of demand - deposit of 20% of the outstanding demand - HELD THAT:- It is the stand of the petitioner, that expenses have also been disallowed by the AO, on the ground that there was no explanation, although, the petitioner claims that these very expenses were added back by the petitioner on its own, and therefore, no explanation was required. These are the aspects, which in our view, are inter alia referred to in the application for stay, which the concerned authority should have dealt with, while dealing with the petitioner s application for grant of stay. AO has merely gone by the aforementioned CBDT instructions and granted stay, on deposit of 20% of the outstanding demand. In our opinion, if the demand is likely to get scaled down for the reasons adverted to in the petitioner s application, these aspects will have to be taken into account by the concerned authority, while dealing with the application for stay. The concerned authority also needs to bear in mind, the dicta of the Supreme Court in PCIT vs. M/s LG Electronics India Pvt. Ltd. [ 2018 (7) TMI 1905 - SC ORDER] . Requirement to deposit 20% of the demand is not cast in stone. It can be scaled down in a given set of facts. We are inclined to set aside the order dated 08.04.2023. PCIT, as suggested by Mr Hossain, will carry out the de novo exercise, and take a decision on the application for stay preferred by the petitioner. PCIT will grant personal hearing to the authorised representative of the petitioner. In this behalf, the PCIT will issue notice to the petitioner, indicating the date and time of the hearing. PCIT will also pass a speaking order and deal with the assertions made by the petitioner in the stay application. Petitioner would like to make a concession, which is that the amount which is lying to the credit of the petitioner in the subject bank account could be remitted to the concerned authority, subject to the debit-freeze being lifted. Given this position, a direction is issued, to the effect that the entire amount which is available in the subject bank account shall stand remitted to the PCIT. In the event the amount presently available is remitted, for the moment, the debit-freeze ordered by the concerned authority shall stand lifted. We make it clear, that notwithstanding the fact, that the application for stay is required to be heard by the PCIT, the same would not come in the way of the NFAC hearing and disposing of the pending appeal preferred by the petitioner qua the assessment order.

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• 2023 (5) TMI 475
  Exemption u/s 11 and 12 - Charitable activity u/s 2(15) - HELD THAT:- The proviso is suggestive of the fact that advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity. A finding of the fact has been returned by the Tribunal to the effect that the assessee is not engaged in trade, commerce and business, and its dominant and prime objective is charitable in nature and, thus, the activity in which it is engaged falls within the scope and ambit of Section 2(15) of the Act. As recorded in the aforementioned order assessee is an important constituent of the Central Government: a facet that perhaps lends weight to the finding returned by the Tribunal. No substantial question of law arises.

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• 2023 (5) TMI 474
  Validity of orders and notices issued u/s 148 - Quantum of escaped income - determination of period of limitation - Unsecured loans taken from related and unrelated parties during FY 2014-15 - dispute with regard to the quantum of loan - HELD THAT:- Strangely, the AO while noticing the reply filed by the petitioner, has adverted to the amount said to have been repaid by the petitioner to the Jain brothers - This aspect of the matter emerges by reading together both paragraph 8.1 of the order passed under Section 148A(d) and the order dated 16.03.2023, whereby the objections filed by the petitioner were disposed of by the AO. There is a complete non-application of mind. The payment of loan by the petitioner could not have been added to the loan amount, which the petitioner claims, was received from unrelated parties - the attempt appears to be to, somehow, take the amount which, according to the AO, escaped assessment, over the threshold limit of Rs. 50 lakhs. The impugned order passed under Section 148A(d), the consequential notice issued under Section 148 of the Act and the order dated 16.03.2023 cannot be sustained - Petition disposed off.

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• 2023 (5) TMI 473
  Penalty order u/s 41 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 - HELD THAT:- According to us, the second aspect of the matter to which we have made reference hereinabove by adverting to the provisions of Section 46(4)b) of the B.M. Act, in fact, was not articulated in the reply filed by the petitioner/assessee on 09.03.2023. That being said, the petitioner/assessee s reply was on record which, for some reason, was not taken into account by the concerned officer while passing the impugned penalty order. To our minds, this alone would be sufficient to set aside the impugned penalty order, with a direction to the concerned authority to conduct a de novo exercise.It is ordered accordingly.

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• 2023 (5) TMI 472
  TDS u/s 195 - non deduction of TDS on expenses paid/remitted abroad - AO who treated the payment made outside India as Fee for Technical Services (FTS) as defined u/s 9(1)(vii)(b) - HELD THAT:- The assessee has submitted copies of invoices of payment made to non resident service providers which is placed at pages 12-32 of the Paper Book to substantiate its claim that the payments have been made on account of ad film production services. The payments made by the assessee to the foreign service providers are thus not in the nature of FTS within the meaning of explanation 2 to section 9(1)(i) of the Act and not chargeable to tax in India. The assessee characterised these services as contract work under section 194C of the Act and therefore it is to be treated as business income of the non-resident which is not taxable in India in the absence of a Permanent Establishment (PE) in India of the said service providers in terms of Article 7 of the relevant Double Taxation Avoidance Agreement (DTAA) between India and the respective countries of the non-resident service providers. The assessee therefore is not required to withhold tax from the payments made to the non-resident service providers. We agree with the finding of the Ld. CIT(A) that services provided by the non-resident service providers are not in the nature of managerial technical or consultancy services within the meaning of explanation 2 to section 9(1)(vii) of the Act. These are to be characterised as contract work under section 194C of the Act and thus partakes the nature of business income which is not taxable in India in the absence of a business connection or PE of the non-resident service provider in India. We endorse the findings of the Ld. CIT(A) that the payments made to the non-resident service providers by the assessee are not chargeable to tax in India and thus no disallowance under section 40(a)(ia) of the Act is called for on account of non-deduction of tax at source thereof - Appeal of the Revenue is dismissed.

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• 2023 (5) TMI 471
  Penalty u/s. 271AAA - undisclosed income found as a result of search - CIT- A deleted penalty levy - HELD THAT:- There is no material on record to suggest that additional income offered at the hands of Assessee is by way of any entry in respect of an expenditure recorded in the books of account or other documents maintained in the normal course. Aforesaid factual position is fortified on the assessment order itself, as Assessing Officer has not made any addition on account of the disclosure made at the time of search and seizure operation. The additions made by him in the assessment order, as discussed earlier, is on account of estimation of business profits after rejection of books of account and disallowance u/s. 14A. Aforesaid facts clearly demonstrate that the search and seizure operation conducted in case of Assessee did not unearth any undisclosed income within the definition as provided in Explanation to section 271AAA of the Act. In quantum proceedings, Assessee has got the desired relief as the addition sustained by the ld. First Appellate Authority has been deleted. In any case of the matter, on overall analysis of facts and material on record, we are convinced that there is no undisclosed income relating to specified previous year which could have enabled the Assessing Officer to invoke the provisions of section 271AAA - Decided in favour of assessee. Scope of exceptions provided in sub-section (2) of section 271AAA - Whether disclosure made at the time of search and seizure operation, cannot be construed as undisclosed? - HELD THAT:- Assessee has not only offered such income in statement recorded under sub-section (4) of section 132, but specified/substantiated the manner in which such income was derived. It is relevant to observe, while deciding Assessee s appeal against addition made in the assessment order, ld. Commissioner (Appeals) had deleted the additions. Tribunal in turn in order [ 2020 (3) TMI 115 - ITAT DELHI ] has held that additional income declared by Assessee is connected with the business activity of Assessee, hence, is in the nature of business income, which has rightly been taken into profit and loss account. Tribunal has given a categorical finding of fact that Assessing Officer has not brought any material on record to demonstrate that Assessee was doing any other business to which the surrendered income could be linked. Accordingly, the order of ld. Commissioner (Appeals) was upheld. Thus, on the basis of aforesaid facts, it is clearly established that whatever undisclosed income earned by Assessee was offered to tax in the manner specified in sub-section (2) to section 271AAA of the Act. That being the case, Assessee s case falls within the exception provided under section 271AAA (2) Revenue both appeal dismissed.

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• 2023 (5) TMI 470
  Unexplained money u/s 69A - cash deposited in the bank account of the assessee unexplained - CIT-A admitted additional evidences of the revised balance sheet submitted by the assessee - HELD THAT:- No infirmity in the order of the CIT(A) admitting the additional evidence filed by the assessee of its revised financial statements incorporating the Jalgaon Bank account. The assesses explanation that the cash deposited in the Jalgaon bank account was transferred to the Axis Bank account of the assessee in Ahmedabad, which was duly accounted for in the Books of the assessee as Sales, was verified by the AO in remand proceedings and found to be correct. Even if additional evidence in the form of revised balance sheet incorporating the Jalgoan Bank account were not admitted for adjudication, as per the AO s case also, it would not have any material difference to the factum of the cash deposits being explained or not. AO in the remand report has categorically admitted that all the cash deposited in the Jalgaon bank are reflected in the AXIS Bank account, and that they stand explained and no adverse view be taken. Therefore, CIT(A) has rightly admitted additional evidences of the revised balance sheet submitted by the assessee, and even if it was not admitted by him, it would not have made any material difference to the adjudication of the issue at hand regarding source of cash deposited in the bank account at Jalgoan bank account. CIT(A) has based his decision on certain factual finding being; that the AO himself had verified that cash deposited by the assessee in his bank account at Jalgoan was transferred to the assessee s bank account in Ahmedabad in AXIS bank and accounted for as sales in its books. AO had verified all entries in remand proceedings and had given a finding that it completely tallied and also stated that no adverse view be taken. This factual finding of the CIT(A), we find, is derived from remand report of the AO, contents of which have been reproduced above. DR has been unable to controvert the same before us. In view of the same, we see no reason to interfere in the order of the CIT(A) deleting entire addition of Rs.86.75 crores, noting that the AO himself was satisfied that the cash deposited in the bank account at Jalgoan was reflected as sales in the books of the assessee. Even otherwise we find that the AO in his remand report had accepted the assesses explanation for the entire cash deposits of Rs.86.75 Crs except that relating to cash deposits of Rs. 9.73 Crs. Therefore to the extent cash deposits were accepted by the AO as explained, of Rs.77.02(86.75 9.73),there can be no grievance of the Revenue now before us. As for the cash deposits not accepted as explained by the AO, his contention we find is that the invoices of the sales made in Jalgaon produced by the assessee did not corroborate the explanation of the assessee that the sales were made outside the Gujarat, since the invoices to the extent of Rs.9.73 crores were raised for clients in Gujarat. We agree with the ld.CIT(A)that this argument merits no consideration. The case of the Revenue is that the cash deposit of Rs.9.73 Crs in Jalgaon bank account, which apparently does not conform to the assesses explanation of being cash sales outside Gujarat, is unaccounted income of the assessee. But the fact of the matter is that all cash deposit in Jalgaon bank account was already accounted for as income by the assessee by way of sales in its Books of accounts and the sales and purchases made by the assessee was shown to tally quantitatively to the Revenue authorities. The AO found no infirmity in the quantitative tally. In the light of the same, with all the cash deposits in the Jalgaon Bank account of the assessee admittedly treated as sales by the assessee and the sales and purchases found to tally quantitatively also, there cannot be any case for treating any portion of the cash deposits as unexplained income of the assessee. Appeal of the Revenue is dismissed.

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• 2023 (5) TMI 469
  Accrual of income - Addition on account of commission income - gross commission v/s net income - CIT-A deleted the addition - HELD THAT:- There is no dispute to the fact that the assessee has earned gross income by way of commission which was reduced by the following amounts Commission given to sub- agents and Discount given to the customers. As such the assessee adjusted the gross commission against the above amount of commission given to the sub- agents and the discount given to the customers. The balance amount was shown in the books of accounts of the assessee. There was iota of doubt raised by the revenue with respect to the commission given to the sub- agents of A1,86,23,609 which was adjusted against the gross commission income. Commission income was shown net of the commission given to the sub- agents which was also accepted by the revenue. Revenue did not accept the manner of showing the gross commission income after adjusting the discount given to the customers which seems to be contrary to the stand of the revenue. It is since that the revenue accepted the commission given to the sub- agents which was not shown in the books of accounts but did not believe on the discount given to the customers despite the fact, the necessary sample invoices were furnished by the assessee having passed on discount to the customers. Genuineness of the discount offered by the assessee to the customers has nowhere been doubted by the AO. What has been doubted is that the commission income was accrued to the assessee on a gross basis, but the assessee has shown commission income in the books of accounts on a net basis i.e. after adjusting the discount given to the customers. To our understanding, it is a manner of presentation of the income of the assessee. Even, if we follow the version of the AO, then also there would not be any change in the income offered by the assessee in the income tax return as far as discount offered by the assessee to the customers is concern. As such, the assessee will show the gross income in the profit and loss account and against which it would claim the discount offered to the customers as an expense which will lead to the tax neutral exercise. Thus, we do not find any infirmity in the order of the learned CIT-A. Hence, the ground of appeal of the revenue is hereby dismissed.

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• 2023 (5) TMI 468
  Adjustment u/s 143(1)(a) - Addition u/s u/s.36(1)(va) - disallowance made for late deposit of employees share of PF/ESI contribution to the relevant funds beyond the date prescribed under the respective Acts - HELD THAT:- From the material available on the record, find that the matter is squarely covered by the decision of Emson Tools Mfg. Corp. [ 2023 (4) TMI 626 - ITAT CHANDIGARH] as CIT(A) was justified in sustaining the adjustment u/s 143(1)(a) by means of disallowance made for late deposit of employees share of PF/ESI contribution to the relevant funds beyond the date prescribed under the respective Acts. CIT(A) was justified in sustaining the adjustments u/s 143(1)(a) by means of disallowances made for late deposit of employees share of PF/ESI contributions to the relevant funds beyond the date prescribed under the respective Acts. Decided in favour of assessee.

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• 2023 (5) TMI 467
  Liability under the head short term/ long term capital gain - forfeiture of advanced amount against sale of property - Transfer of capital asset u/s 2(47) - joint owned property inherited - sale bargain was not concluded - HELD THAT:- Admittedly assessee jointly with her two sons inherited agricultural land from her husband after his death - also not in dispute that bargain was cancelled and cancellation of agreement to sale was specifically recorded on the back of the agreement to sale. These facts have not been controverted by the authorities below. AO made an addition being 1/10th share of advance amount in the hands of the assessee considering the same as sale consideration. The amount of advance was deposited in the joint bank account in the name of assessee, her son and widow wife of late. The amount as per submissions of the assessee and this quantum has not been disputed by the AO and the AO has also took note of said amount in first para of the assessment order. AO has grossly erred in taxing the advance amount under the head capital gain in peculiar circumstances when no transfer of any asset was made by the assessee and her co-owner - In the present case the assessee received advance amount on 06.09.2010 under agreement to sale, which was cancelled on 16.03.2011 and amount of advance was forfeited therefore, provision of section 51 of the Act are applicable and the amount proportionately forfeited by the assessee would be deducted from the cost of acquisition of the asset or fair market value as the case may be at the time of actual transfer of such asset in future. Decided in favour of assessee.

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• 2023 (5) TMI 466
  Deduction u/s 80P(2)(a)(i) - interest derived by the assessee on deposits with banks/institutions - Claim denied by AO on the ground that the Union Bank of India from which the assessee derived such interest is not a co-operative bank - HELD THAT:- The assessee is involved in sale of rice, kerosene, sugar etc. A perusal of the balance sheet as on 31/03/2018 does not reveal any liability towards its members in respect of payment of any dues to them. All these things clearly establish that the funds deposited by the assessee with the Union Bank of India are undoubtedly the own funds of the assessee and none of such fund represents any liability of the assessee to its members or anyone else. On a threadbare analysis of the provisions under section 80P in the light of various decisions including the decision of Totgars Co-operative Sale Society Ltd. [ 2010 (2) TMI 3 - SUPREME COURT] and CIT vs. Andhra Pradesh State Co-operative Bank Ltd[ 2011 (6) TMI 215 - ANDHRA PRADESH HIGH COURT] the Hon ble High Court reached a conclusion that if the investment is made in fixed deposits in nationalised banks from out of the own funds of the assessee, the interest derived from such investment would be from the activities listed in clause (i) to (vii) of section 80P(2)(a) of the Act and would be eligible for deduction. It is therefore, clear that the assessee being a primary agricultural co-operative society invested the own surplus funds with the Union Bank of India and, therefore, the assessee is entitled to claim the deduction under section 80P(2)(a)(i) of the Act. With this view of the matter, we direct AO to delete the addition made by disallowing the deduction claimed under section 80P(2)(a)(i) of the Act. Appeal of the assessee is allowed.

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• 2023 (5) TMI 465
  Penalty u/s.271(1)(c) - Defective notice u/s 274 - non specification of clear charge - HELD THAT:- AO proposed to impose penalty on both the limbs namely; .you have concealed the particulars of your income or furnished inaccurate particulars of such income . Irrelevant limb was not struck out. The question as to whether penalty should be imposed in such circumstances is no more res integra by virtue of the full Bench judgment of the Hon ble Bombay High Court in Mohd. Farhan A. Shaikh Anr. [ 2021 (3) TMI 608 - BOMBAY HIGH COURT] holding that if the charge in the notice u/s 274 is vague i.e. irrelevant charge has not been struck off, the penalty order u/s 271(1)(c) gets vitiated. Thus where the charge is not properly set out in the notice u/s 274 viz., both the limbs stand therein without striking off of the inapplicable limb, but the penalty has been, in fact, levied for one of the two, such a penalty order gets vitiated. We find from the notice u/s 274 of the Act that the AO did not strike out one of the two limbs, whereas the penalty is only on one addition - Decided in favour of assessee.

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• 2023 (5) TMI 464
  Penalty levied u/s 271F - Return of income (ITR) was filed in time but could be e-verified due to health issues - violation of the provisions of sub section (1) of the section 139 by not filing the return of income within the time limit - assessee has submitted that he was prevented by reasonable cause for not doing the E-verification of the return filed, thus the delay is neither willful nor wanton - HELD THAT:- The case of the assessee is that the assessee filed his return of income for the assessment year 2014-15 on 30.09.2014 through his representative CA and after few days he fell in sick, hospitalized and thereafter he expired on 17.11.2014. Copy of the death certificate was brought on record. The assessee was under bonafide belief that the CA would have filed E-verification. Only after service of notice u/s148 assessee came to know that E-verification was not done while filing the return of income on 30.09.2014. Thereafter in response to the notice under section 148 assessee once again filed the return. Since the delay in doing E-verification/filing belated return is neither willful nor wanton and the assessee was prevented by reasonable cause, we are of the considered opinion that the penalty is not liable to be levied under section 271F of the Act - Decided in favour of assessee.

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• 2023 (5) TMI 463
  Addition on account of Tenancy Vacancy Charges - HELD THAT:- As out of five parties, three have responded to the notices issued u/s 133(6) of the Act and admitted to have received the tenancy vacancy charges and only two do not respond. Since the assessee is a private limited company and following mercantile system of accounting, so the assessee has to be allowed these tenancy vacancy charges on accrual basis. The both the authorities below have not complied with the directions given by the Tribunal and simply made the addition on the ground that these payments could not be verified. In our considered view this is in complete violation of direction given by the tribunal vide order dated 23.05.2013. Non service of notice us 133(6) of the Act can not be a ground for non compliance of the tribunal direction. As examined the agreements with the tenants and also the suits filed by the purchaser in the court against the assessee. Therefore order we reverse the order of CIT(A) and direct the AO to allow tenancy vacancy charges to the assessee. Appeal of the assessee is allowed.

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• 2023 (5) TMI 462
  Bogus sale proceeds as undisclosed income - addition u/s 68 - short term capital loss claimed by the assessee - penny stock transactions - informations received from investigation wing and AO proceeded to disallow the loss claimed by the assessee as well as proceeded to make the sale proceeds as undisclosed income - HELD THAT:- We observe that during the current Assessment Year assessee has purchased the scrip of M/s. VAS Infrastructure Limited and subsequently sold the same within the same year from the recognized stock exchange and also through authorised agent - all these transactions were through banking channels only and in that process assessee has suffered loss. AO mechanically applied the informations received from investigation wing and proceeded to disallow the loss claimed by the assessee as well as proceeded to make the sale proceeds as undisclosed income. As decided in Rajiv Rameshchander [ 2023 (1) TMI 1249 - ITAT MUMBAI] AO/Ld. CIT(A) has not appreciated the facts in the right perspective and has disallowed the business loss of the assessee while trading in this scrip. It is found that Assessee is a trader in shares - as shares traded are his stock-in-trade. And once assessee is found to be a trader, the loss incurred during business need to be allowed as business loss. Thus we are inclined to delete the addition made by the AO u/s. 68 of the Act and direct the AO to allow the short term capital loss claimed by the assessee incurred during the year. Decided in favour of assessee.

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• 2023 (5) TMI 461
  Ex parte order without deciding the issue on merits - Penalty u/s 271B - HELD THAT:- The perusal of CIT(A) order reveals that CIT(A) has passed an ex parte order without deciding the issue on merits. Sub Section (6) of Section 250 mandate the CIT(A) to state the points in dispute and thereafter assign the reasons in support of his conclusion. We are of the view that by dismissing the appeal without considering the issue on merits, CIT(A) has failed to follow the mandate required in Sub Section (6) of Section 250 of the Act. It is also a well settled principle of natural justice that sufficient opportunity of hearing should be offered to the parties and no parties should be condemned unheard. In view of these facts, we set aside the impugned order of CIT(A) and restore the issue to the file of CIT(A) for re-adjudication of the issues after granting sufficient opportunity of hearing to the assessee. Assessee is also directed to furnish the details called for by the lower authorities. In view of our decision to restore the issue to CIT(A), we are not adjudicating on merits the grounds raised by the assessee. Thus the grounds of assessee are allowed for statistical purposes.

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• 2023 (5) TMI 460
  Addition made in respect of rent paid for flat - Assessee has paid rent to Director of the assessee who is a person specified u/s. 40A(2)(b) - HELD THAT:- On enquiry in respect of this expenditure, no explanation was furnished in respect of purpose of said flat taken on rent from the Director. It is also noted that in the same tower, assessee owns a similar flat which is let out to one of its group company for an annual rent of Rs.48,000/-. Thus, there is an excess payment when compared to what the assessee is receiving for a similar size of flat in the same tower. Ld. AO has also noted the fact that assessee does not have any branch office for its business activities. Before the Ld. CIT(A), it was submitted that assessee has used this flat for accommodating executives of the company during their official visit to Kolkata. Nothing corroborative is placed on record to substantial this claim. CIT(A) noted that assessee has not been able to give any concrete evidence differentiating the two flats in terms of area or other amenities and thus upheld the disallowance made by the ld. AO. Considering these facts on record, we do not find any reason to interfere with the finding given by the Ld. CIT(A). Accordingly, this ground of appeal of assessee is dismissed. Disallowance on professional fees paid by the assessee - Proof of allowable business expenditure - HELD THAT:- AO enquired about the nature of services rendered in respect of these payments as well as details of TDS thereon which remained unverified as to whether it relates to assessee s business or to earning of rental income or for acquisition of property. CIT(A) gave relief and allowed 50% of the said professional fees on estimate basis. In our view, Ld. CIT(A) has given appropriate relief to the assessee in absence of any details towards nature of service, TDS etc. and we have no reason to interfere with the same. Accordingly, ground taken by the assessee in this respect is dismissed. Disallowance towards business promotion expenses and telephone expenses - From the perusal of the observations made by Ld. AO as well as Ld. CIT(A) that these expenses could not be verified in absence of bills furnished by the assessee, we do not find any reason to interfere with the finding given by the Ld. CIT(A) and accordingly, both the grounds taken by the assessee in this respect are dismissed. Disallowance u/s. 14A - exempt dividend income and profit on sale of investment - HELD THAT:- There is no direct nexus which has been established by the Ld. AO for treating 50% of the remuneration of the Managing Director for disallowance u/s. 14A - provisions of Rule 8D under the Income Tax Rules, 1962 came into effect from 24.03.2008 by IT (5th Amendment) Rules, 2008. The case before us is in respect of AY 2005-06 and the other one being for AY 2007-08 for which Rule 8D cannot be applied. Accordingly, considering the provisions of law and the ad-hoc treatment of considering 50% of remuneration of the Managing Director towards earning of exempt income by the Ld. AO is uncalled for. Accordingly, this ground of appeal taken by the assessee is allowed. Denying the exemption on earning of agriculture income - HELD THAT:- Assessee did not furnish details in respect of wages and other expenses incurred in carrying out agriculture activity. A statement was furnished giving month wise sale of flowers and certain vegetable crops viz., Khira, Kakri, Bhindi which did not satisfy the authorities below - as noted that assessee had no assets viz., agriculture tools, irrigation facility, tractor etc. to produce the quantity of flowers and other vegetable crops on the said two lands stated to be at Delhi. Addition was made in respect of the agriculture receipts - Based on the submission made as noted in the orders of the authorities below and the material available on record, we do not find any reason to interfere with the finding given by the Ld. CIT(A) and accordingly, ground taken in this respect is dismissed.

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• 2023 (5) TMI 459
  Disallowance of exemption claimed u/s. 10(38) - Bogus LTCG - Penny stock transactions - HELD THAT:- Investigation Wing surveyed SMC global securities Ltd. and the concerned person of the said entity accepted their role in providing Accommodation Entry on syndicate. Further, the SEBI which is a premier regulatory body of share market directed BSE to suspend trading of 28 penny stock companies amongst which NCL Research finance Ltd. is one therefore, the A.O discussed the issue in detail like that of report of Investigation wing, statement of concerned person who provided accommodation entry. The order of SEBI in suspending penny stock of those companies, who involved in ragging of prices of penny stocks companies. Therefore, as relying on case of Abhishek Ashok Lohade [ 2022 (11) TMI 1061 - ITAT PUNE] , we find the order of CIT(A) is justified and in confirming the order of AO in denying exemption u/s. 10(38) of the Act. Thus, ground No. 1 raised by the assessee is dismissed. Addition made on account of entry of interest in Form No. 26AS - AR submits that the assessee does not know M/s. Rukmini Impex Pvt. Ltd. nor the assessee dealt any business transaction with the said company - HELD THAT:- DR did not report any objection in remanding the issue to the file of AO for verification in terms of submissions of ld. AR. Therefore, taking into consideration the facts and circumstances of the case and in the interest of justice, we deem it proper to remand the matter to the file of AO for its fresh consideration. Addition u/s. 68 - AR submits that the assessee could not identify the individual transaction - AO proceeded to add the said amount to the income of the assessee in the absence of any evidence that the same is credited in the books of accounts of the assessee - HELD THAT:- We find force in the arguments of ld. AR and without there being entry in the books of accounts, the addition made u/s. 68 of the Act is not maintainable. Therefore, in the interest of justice, we deem it proper to remand the issue to the file of AO for its fresh consideration.

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• 2023 (5) TMI 458
  Denial of relief u/s.10AA - AO rejected both the claims on the ground that the assessee has failed to comply with various conditions prescribed in those sections for allowing deduction - HELD THAT:- Considering the relevant findings of the coordinate bench of the Tribunal in assessee s own case for AY 2013-14 [ 2020 (8) TMI 196 - ITAT BANGALORE] it is clear that the Tribunal has rejected all the contentions of the revenue with regard to the alleged violations and restored the issue only with respect to verification of receipts of sale proceeds in convertible foreign exchange into India. For the year under consideration, it is noticed that the AO has verified these details and has given a clear finding in final assessment order, though he has not reworked the relief u/s.10AA. As relying on decision of the Tribunal in assessee s own case, we allow deduction u/s.10AA to assessee relatable to sale proceeds from export of software development services. AO is directed to compute the relief u/s.10AA and deleted the addition accordingly. This ground is allowed in favour of the assessee. Payments made to AEs and third parties without TDS - assessee submitted before the AO that these are payments towards cost to cost reimbursements and other payments on which there is no liability to deduct tax - HELD THAT:- We notice that the co-ordinate bench in AY 2013-14 [ 2020 (8) TMI 196 - ITAT BANGALORE] has remitted the entire issue of reimbursements to AEs and third parties to the file of Ld DRP and respectfully following the same we restore the issue for the year under consideration with similar directions. With regard to the reimbursement of secondment cost to the AEs Tribunal in the case of M/s. Goldman Sachs Services Pvt. Ltd vs DCIT [ 2022 (4) TMI 1444 - ITAT BANGALORE] had held that the reimbursement made by the assessee in India to overseas entity, towards the seconded employees cannot be regarded as Fee For technical Services . Therefore the DRP while considering the issue of assignee fees reimbursements is directed to consider the decision of Goldman Sachs Services Pvt. Ltd (supra). Needless to say that the assessee be given an opportunity of being heard. It is ordered accordingly. Disallowance of ESOP expenses - HELD THAT:- We notice that the coordinate bench in assessee s own case for AY 2015-16 [ 2022 (2) TMI 1367 - ITAT BANGALORE] held that the ESBP expenses incurred by the assessee is and allowable expense and the disallowance is hereby deleted. TP Adjustment - adjustment towards Advertisement and Marketing (AMP) expenses - HELD THAT:- For the year under consideration, the DRP has given a finding that the assessee has not furnished any documentation with regard to the various pleas such as AMP expenses pertain to respective segments etc. Therefore respectfully following the decision of coordinate bench on assessee s own case for AY 2015-16 [ 2022 (2) TMI 1367 - ITAT BANGALORE] we remand this issue to the AO/TPO to verify the aspect based on the documents/evidences submitted by the assessee with similar direction that in the event it is found that the expenditure is factored in net cost for computing margin, no separate adjustment needs to be made. Accordingly, this ground of appeal stands allowed for statistical purposes. Refund of excess Dividend Distribution Tax (DDT) paid - AR submitted that the Assessee is a subsidiary of IBM WTC which is a tax resident of the United States and 99.99% of the equity shares of assessee are held by IBM WTC - HELD THAT:- AR in support of reasoning, relied on a decision of Giesecke Devrient India Pvt Ltd [ 2020 (10) TMI 750 - ITAT DELHI] but correctness of the aforesaid decision has been doubted by another Division Bench at Mumbai in the case Tata Oil India (P) Ltd. [ 2021 (6) TMI 855 - ITAT MUMBAI] and an order of reference recommending constitution of a Special Bench to decide the issue has been made to the Hon ble President of the Tribunal. We find that on this issue, there has been conflicting views and the matter has been referred by the Mumbai Bench of ITAT for constitution of a larger Bench. We are of the view that it would be just and appropriate to set aside this issue to the AO for consideration afresh in the light of the law and the outcome of the decision of larger bench on the issue after affording the assessee opportunity of being heard.

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• Customs

• 2023 (5) TMI 457
  Benefit of Duty Drawback claim - requirement to file a supplementary claim under Section 75 of the Customs Act, 1962 in order to claim benefit of duty drawback - whether this is the only recourse available to the petitioner or not - HELD THAT:- A memo has been filed by the Panel Counsel that reads that Since there was a mis-match resulting in short shipment in the number of packages in the Shipping Bill No.9663177 dated 2/11/17, the above shipping bill was not processed for refund. Subsequently, the petitioner through their Customs House Agent dt.25/1/2019 requested to issue export certificates carrying out the correction which was issued on 11/02/2019. Since the Customs House Agent had not re-registered the amended/corrected export order/shipping bill within 15 days the said shipping bill / let export order purged and the refund was not processed. The petitioner relies on a decision in the case of M/S. ABI TECHNOLOGIES VERSUS THE ASSISTANT COMMISSIONER OF CUSTOMS, TUTICORIN. [ 2022 (5) TMI 1136 - MADRAS HIGH COURT] wherein the prayer was for a mandamus directing the respondents to sanction a particular sum as refund. That matter is distinguishable in light of the factual finding returned by the learned Judge to the effect that all details had been furnished by that petitioner correctly in the relevant forms and it was entitled for the refund sought. In the present case, the stuffing report admittedly contains an error. There are no legal infirmity in the impugned order - petition dismissed.

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• 2023 (5) TMI 456
  Valuation of imported goods - misdeclaration of goods - 288.300 MTS of Heavy Melting Scrap - rejection of declared value in respect of the 87.350 MTS of Rail Material Scrap and re-determination of the same - classification of impugned goods under CTH 72.04 or 73.02 - applicability of Circular No. 8/2006-Cus dated 17.01.2006 - Commissioner (Appeals) allowed the appeal of the Importer / respondent - HELD THAT:- Show cause notice was waived by the party vide their letter dated 14.05.2013 accepting mis-description. This letter was never produced before the appellate authority and therefore the Commissioner (Appeals) has been misled by them. In view of the said letter, there is a lot of factual similarity in this case with the matter of COMMISSIONER OF CUSTOMS (SEA PORT-IMPORT) CHENNAI VERSUS INDO DEUTSCHE TRADE LINKS AND ANR [ 2017 (3) TMI 488 - SUPREME COURT ] where it was held that classification under 7204 for used rails declared as Heavy Melting Scrap on importation was improper and product was correctly classifiable under Heading 7302, when assessee itself in a letter to Department admitted misdeclaring imported cut Rails as heavy melting scrap and requested for condonation of misdeclaration and admitted value declared to be under lower side and accepted its value for rectification. The order of Hon ble Supreme Court needs to be followed in the present matter - order of Commissioner (Appeals) is therefore, set aside - appeal allowed.

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• 2023 (5) TMI 455
  Levy of penalty u/s 114 (iii) of the Customs Act, 1962 and u/s 114 AA of the Act - Global container carrier (shipping line) and provides liner shipping services worldwide. - Seeking relief on the ground that, the importers/exporters have been granted immunity from prosecution, fine and penalty - Appellant urges that a settlement order ends the dispute not only with respect to the applicant before the Commission, but also qua-other co-noticees. - HELD THAT:- The dispute against the present appellant (co-noticee) stands settled in view of the aforementioned rulings of the High Court and the Hon ble Supreme Court. In a recent decision, the Hon ble Madras High Court in A.M. AHAMED CO., REPRESENTED BY ITS MANAGING PARTNER, MR. J.M. IQBAL VERSUS THE COMMISSIONER OF CUSTOMS, THE HON BLE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL [ 2022 (11) TMI 639 - MADRAS HIGH COURT] , under similar facts and circumstances, where show cause notice was issued to the importer and the CHA, the importer had settled the dispute before the Settlement Commission and paid the Additional Duty of Customs and was granted immunity from prosecution, fine and penalty. Following the rulings of the Apex Court and the Hon ble Madras High Court, as aforementioned, this appeal is allowed and it is held that the impugned order is bad. The appellant is also entitled to immunity granted by the Settlement Commission, to the main noticee - appeal allowed.

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• 2023 (5) TMI 454
  Levy of penalty on CHA u/s 114 and/or 114AA of Customs Act, 1962 - Availment of duty drawback making fraudulent export of readymade garments - bogus firm - violation of the provisions of regulation 11 (n) of the Customs Broker Licensing Regulation, 2013, (CBLR) - HELD THAT:- There is no doubt that an obligation has been cast on the CHA / CB under the CBLR so as to ensure the documents as required for the purposes of enabling the export are forwarded to the Customs. Infact they are the link between the exporter and the Customs department, therefore has an important and responsible role to play while providing their services. The evidence collected during investigation clearly shows that it was a case of well planned conspiracy by the exporter, to defraud the Government by wrongly taking the export benefits by creating a bogus firm. The manner in which he indulged in fraudulently fabricating the documents and on the basis thereof he managed to obtain bogus PAN card, IEC code from DGFT and on that basis he opened a Bank Account. Neither the Income Tax Department verified the genuineness of the election voter card before issuing the PAN card nor DGFT while issuing the IEC code raised any objections on the authenticity of the documents - In this scenario to attribute any responsibility on the CHA to have verified the authenticity of these documents or the identity of the exporter seems to be too much and unpractical. It is absolutely impossible to expect from a CHA to act with such diligence that he could ascertain the veracity of the documents which even the departmental authorities could not ascertain. There are no hesitation in arriving at a conclusion that in the facts of the present case no violation can be attributed on the appellant being a Custom House Agent. The allegations that the appellant did not verify the KYC documents of M/s Anand Enterprises which was a bogus firm created with forged documents and that he abetted the export of readymade garments are unsustainable in as much as the allegations of forging the documents is solely on Anand Sharma and no connivance of the appellant in that regard has been pointed out by the Department - no penalty can be imposed on M/s KVS Cargo and, therefore, the impugned order is hereby set aside. There are no allegations of abetment are substantiated as it is not the case of the department that they were aware of the fraud or were beneficiary of the fraud. As pointed out above, the fraud played by Anand Sharma was not even ascertained even by public officials then how is it possible for a non official entity to identity the veracity of the documents. M/s Him Logistics was merely a facilitator in forwarding Anand Sharma to KVS Cargo, hence they cannot be roped in for any violation of the provisions of CBLR and therefore the penalty imposed on M/s Him Logistics by the impugned order is untenable. The impugned orders are set aside and consequently both the appeals are allowed.

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• 2023 (5) TMI 453
  Levy of penalty on CHA - allegation of abetting some unscrupulous exporters - mens rea - Availment of fraudulent export incentives under duty drawback and FPS (benefit of Focus Product Scheme) - mis-declaration the exported goods - only allegation in the show cause notice against the appellants is that Shri Shameshwar Sharma had shown a sample of export goods to Jayant Vikram which appeared to be costing at around Rs. 300/- per piece as contrary to the value declared @ 19.80 per U.S.$ per square meter - HELD THAT:- The entire findings are based on the statement of Jayant Vikram as was recorded on 8 January 2015 where he stated that there is partnership agreement between Satyender Singh G-card holder and Shri Umesh Chand Dhyani, proprietorship of CHA. But it is observed that there is no such partnership agreement on record. Contrary thereto there has been the statement of Shri Umesh Chand Dhyani as was initially recorded on 8 January 2015 itself where he stated that he had an agreement with Jayant Vikram with regard to handling of the export consignments. He only used to manage the exporter clearance charges and other matters related to export consignment. Jayant Vikram only had handled the impugned export consignments. It is observed that later Shri Umesh Chand Dhyani vide his subsequent statement dated 23.11.2015 contradicted saying that Jayant Vikram was not the controller of his CHA firm, he was merely a part time employee engaged in marketing/soliciting business on behalf of his firm. M/s National Enterprises had tried to export 10 consignments by committing mis-declaration of description as well as the value of the goods to be exported and that the allegations have been confirmed, goods have been confiscated and the penalties have been imposed upon the exporters and their representatives. None of them have come forward to challenge the orders against them. As such the orders qua them have attained finality. But the said fact cannot be read as a ground for holding that the present appellants i.e. the CHA firm its G-card holder and its employee would have abated with the exporter. Abatement has no where been defined under Customs Act. The CHA are merely but processing agent on documents of clearance of goods through Customs House. They are not the Inspector to inspect the genuineness of transactions nor they have any allegation to look into the information receive from the exporter/importer. Though it is onus to expect CHA to enquire into and verify of import-export code given by each client for each transaction but when such code is presented there is a prima facie presumption about it to be correct because while issuing the code necessary background check should definitely has been done by the Customs Authorities - except the statements that too full of contradictions and that none of the deponents were being cross-examined by the appellant herein it is held that there is no evidence to attribute the said mens-rea with the appellants to abate with the exporter for gross mis-declaration in description and value of the consignment. Thus, it is clear that there is no such evidence on record which may prove knowledge with the appellants about the alleged mis-declaration. In such circumstances, the order imposing penalties upon the appellants is now sustainable - appeal allowed.

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• 2023 (5) TMI 452
  Exemption from CVD and SAD - silver findings which are parts of silver jewellery - N/N. 12/2012-CE dated 17.03.2012 and N/N. 21/2012-CUS dated 17.03.2012 - HELD THAT:- Identical issue was examined at length and decided in M/S. KINJAL PRECIOUS PVT. LTD., M/S. SUMANGALAM GOLD CREATIONS PVT. LTD., M/S. LALITA JEWELLERS, M/S. IRA JEWELS, M/S. PP ALLOYS AND FINDINGS SUPPLIERS AND M/S. DEREWALA INDUSTRIES LTD. VERSUS COMMISSIONER, CUSTOMS, JAIPUR [ 2023 (2) TMI 1100 - CESTAT NEW DELHI ] where it was held that An exemption notification has to be strictly construed and the burden of proving that the case falls within the parameters of the exemption clause or the exemption notification is on the assessee; and if there is any ambiguity in the notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the assessee and it must be interpreted in favour of the revenue. It was also held in the said case that Similar would be the position with regard to the SAD exemption notification. Entry at serial no. 78 of Chapter heading 7113 describes the goods as articles of jewellery and not as parts of articles of jewellery. The Commissioner (Appeals) has recorded a finding that since they are different articles, an assessee cannot claim the benefit of SAD exemption notification on import of parts of articles of jewellery. The finding recorded by the Additional Commissioner and the Commissioner (Appeals), therefore, does not suffer from any legality. Respectfully following the decision of this Tribunal in Kinjal Precious Pvt. Ltd., impugned order is upheld - appeal dismissed.

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• 2023 (5) TMI 451
  Continuation of suspension of customs broker licence - Invocation of regulation 16 of Customs Broker Licensing Regulations, 2018 - allegation of import of several articles by misdeclaration - HELD THAT:- The present dispute, appealing , as it does, against suspension of customs broker licence that appeared to have been prompted, no doubt, by facts and circumstances relating to import effected on behalf of client, does not lend itself to scrutiny beyond very limited aspect of Customs Broker Licensing Regulations, 2018. Furthermore, suspension is nothing but an interim measure and which normally does not warrant interference unless the licensing authority has, itself, breached principles of natural justice or is in circumstances in which recourse to such measure is obviously inappropriate. Regulation 16 of Customs Broker Licensing Regulations, 2018 empowers the licensing authority to suspend a customs broker licence but only upon determination of immediate reaction and as intendment of temporary deprivation preceding permanent erasure. Though the provisions do saddle such empowerment with the prerequisite of immediacy, there are no guidelines for determination of limits of immediacy and that, in our opinion, is best left to the licensing authority. It is not in dispute that the proceedings had not been initiated at the time of suspension and, in accordance with regulation 16 of Customs Broker Licensing Regulations, 2018, such instances of suspension should be followed by proceedings, including issue of chargesheet within the prescribed timeframe, for it to be bona fide exercise of authority. The time limit for initiating such action in all, and any, circumstances has also lapsed. The pre-condition for invoking the power of suspension, viz., that of temporary detriment pending initiation and conclusion of proceedings for revocation, did not appear to have been intended to be complied with at all. Consequently, the suspension of licence, ordered to be continued by the impugned order, is not in accordance with the Regulations for want of intent to be taken to legal conclusion. The suspension is set aside and the licence restored for operation - Appeal allowed.

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• 2023 (5) TMI 450
  Classification of imported goods - non-texturized polyester fabric - to be classified under tariff item 5407 6190 of First Schedule to Customs Tariff Act, 1975 or not - applicability of N/N. 36/2003-Cus dated 1st March 2003 - subsequent testing, with varying result, by the Central Revenue Control Laboratory (CRCL) - guided revisit of assessment - denial of cross-examination - proper tests as regards samples of impugned goods contained less than 85% by weight of polyester yarn, not performed - HELD THAT:- The noticees had sought cross-examination of the authors of the subsequent test reports and denial thereof had been considered by the first appellate authority to have compromised the case of customs authorities against M/s Suri Exports (P) Ltd; M/s Janta Trading is also aggrieved about denial of cross-examination of these technical experts. To dispose off the argument of Learned Authorized Representative that the first appellate authority had erred in not deferring to scientific knowledge, there is much to be said for authentic and authoritative source being employed in judicial decision-making but, nonetheless, the judicial organ erected by the Constitution would be in jeopardy if that proposition is accepted in absolute terms - We cannot subscribe to such a position as all judgements may, if not stemming from such expertise, be said to be lacking in credibility. That is clearly overreach on the part of Learned Authorized Representative. Reliance placed on the decision of the Tribunal in re Fortune Impex may not be assistance as there is no record of section 138B of Customs Act, 1962 having been brought to the notice of the Tribunal which followed the decision of the Hon ble High Court of Calcutta in TAPAN KUMAR BISWAS VERSUS UNION OF INDIA (UOI) AND ORS [ 1995 (7) TMI 429 - CALCUTTA HIGH COURT] and in DEBU SAHA VERSUS COLLECTOR OF CUSTOMS [ 1990 (2) TMI 184 - CEGAT, CALCUTTA] . In re Tapan Kumar Biswas, the issue was limited to the scope of section 124 of Customs Act, 1962 and in re Debu Saha, the issue pertained to crossexamination of co-noticee - In re Jagdish Shanker Trivedi, the Tribunal was not only considering statements recorded under section 108 of Customs Act, 1962 and the non-availment of several opportunities afforded for cross-examination but also relied upon the decision of the Hon ble Supreme Court in KANUNGO CO. VERSUS COLLECTOR OF CUSTOMS, CALCUTTA AND OTHERS [ 1972 (2) TMI 35 - SUPREME COURT] which dealt with proceedings under Sea Customs Act, 1872 in a seizure of October 1959 that did not provide for cross-examination; indeed, even Customs Act, 1962 incorporated relevancy of statements subject to examination in section 138B only from September 1973. It is common ground that no test method existed, as standard, for ascertainment of textured yarn in fabric and that a methodology had been devised by Joint Director, Central Revenue Control Laboratory (CRCL) along with two members of the Textile Committee. In these circumstances, cross-examination would appear to have been intended for placing on record the technical competence of the progenitors of the new testing parameters as expertise in one or, even several branches of science, does not necessarily imply expertise in ascertainment of composition of fabric. More to the point, therefore, is the implicit, as it turns out, resolution of disputed classification within chapter 54 of First Schedule to Customs Tariff Act, 1975, intended for man-made filaments; strip and the like of man-made textile materials , by reliance on the test report. Surprisingly, the adjudicating authority had, not two but, three possible tariff items to choose from and that is in breach of the General Rules for the Interpretation of Import Tariff which permits alternative to claimed classification subject to compliance with stipulations therein - There is no dispute at the heading level as both sides did not seek to foray beyond WOVEN FABRICS OF SYNTHETIC FILAMENT YARN, INCLUDING WOVEN FABRICS OBTAINED FROM MATERIALS OF HEADING 5404 corresponding to heading 5407 in First Schedule to Customs Tariff Act, 1975. It is at the next subordinate level that the divergence occurs between sub-heading 5407 61 and sub-heading 5407 72 of First Schedule to Customs Tariff Act, 1975 and which, in accordance with the decisions of the Hon ble Supreme Court, places onus on customs authorities to defend the appropriateness of the latter before evaluating comparative precedence between the two. It is apparent from the classification adopted by the customs authorities that preference been accorded to the generality of fabric woven from synthetic filaments over the more specific composition of textured polyester filaments even though the reference to the testing authorities was ascertainment of the presence of texturised yarn in the impugned fabric. The declaration of goods as polyester fabric has not been controverted. Woven fabrics containing less than 85% by weight of textured polyester yarn and woven fabrics containing more than, as well as less than, 85% by weight of non-textured polyester yarn are covered with sub-heading 5407 61 of First Schedule to Customs Tariff Act, 1975; by no stretch can a later sub-heading be adopted for woven fabrics from polyester , except on composition less than 85%, without compromising the General Rules for the Interpretation of Import Tariff in Customs Tariff Act, 1975. In the absence of finding, or even proposal, that samples of impugned goods contained less than 85% by weight of polyester yarn, the sub-heading adopted for re-classification does not meet the test of decisions of the Hon ble Supreme Court in HPL CHEMICALS LTD. VERSUS CCE, CHANDIGARH [ 2006 (4) TMI 1 - SUPREME COURT] where it was held that If the Department intends to classify the goods under a particular heading or sub- heading different from that claim by the assessee, the Department has to produce proper evidence and discharge the burden of proof. In the present case the said burden has not been discharged at all by the Revenue. The classification declared in the bills of entry, along with claim for effective rate according to the relevant notification, of both importers, stands unchallenged. Appeal of Revenue dismissed.

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• 2023 (5) TMI 449
  Classification of goods proposed to be imported - Cryptogenic Devicc/Token (ProxKey and ProxKey PRO) - to be classified under CTH 8471 80 00 or under 8473 30 99 - applicability of Sr. No. 2 of Notification No. 24/2005-Customs, dated 01.03.2005, as amended - HELD THAT:- Parts and Accessories (Other than covers, carrying cases and the like) suitable for use solely or principally with machines of heading 8470 to 8472, 8473 30-Parts and Accessories of machines of heading 8471 are capable of directly connecting to and designed for use with an Automatic Data Processing System (Hereafter known as ADPS) of Heading 8471. The accessories covered by this heading are interchangeable parts or devices designed to adapt a machine for a particular operation, or to perform a particular service relative to the main function of the machine, or to increase its range of operations. It is observed that the applicant has not ruled out possibility of classification of goods under consideration under 8473 30 and specifically 8473 30 99 as the product is also in the nature of an accessory which has to be used only with ADP machine for a very distinct function of generating digital certificates and signing, encryption authentication of data. The said function is relative or supplementary to the main function of ADP System - The functions of the apparatus are controlled by firmware (a chip containing a programme) installed in the product at the manufacturing process. The product contains small flash storage of 2 MB for auto run plug and play feature loaded with its middleware from factory. The product docs not have any function which can even remotely be related to that of a flash drive as used in general parlance. Applicant has stated that when a user buys the product under consideration, he buys it for its function of Digital Signature, Signing, Encryption and Authentication and not to use as a flash drive or pen drive. The applicant s contention that the classification of goods should be based on its primary function, is agreed upon. On the ground of provisions of GRI the specific heading will prevail over the general heading. Moreover, the product has specific character which are in consonance with principles laid to Chapter note 5C of 84, WCO Explanatory notes to 8471 80 and specific product entry of WCO classification opinion under 8471 80. There is nothing contrary to this opinion in the chapter 84 to the first schedule to the Customs Tariff Act, 1975. HSN/WCO classification opinion has a significant guidance value in deciding the matters of classification under the Customs law. In the case of Collector of Customs, Bombay Vs Business Forms Ltd, [ 2002 (1) TMI 68 - SUPREME COURT ] , the Hon ble Supreme court held that Explanatory Notes to HSN need to be given due consideration for classifying goods. There are few more apex court judgments echoing similar views. Hence, based on foregoing discussion, it is found that the product will be classifiable under CTH 8471 80 00 as other units of automatic data processing machines. The entry 8471 is mentioned at serial no. 8 that extends the benefit of exemption from whole of the duty of Customs leviable on all goods covered under heading 8471 of first schedule of Customs Traffic Act, 1975. Applicant has incorrectly quoted and claimed eligibility to avail benefit under benefit under Sr. 2 of Notification No 24/2005- Customs - the Cryptogenic Device/Token (ProxKey and ProxKey PRO) fall under Tariff entry 8471 80 00: Other units of automatic data processing machines of chapter 84 of the first schedule of the Customs Tariff Act, 1975. Said goods are eligible for duty exemption under serial number 8 of the notification. No. 24/2005- Customs amended from time to time.

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• Securities / SEBI

• 2023 (5) TMI 448
  Validity of Second Freeze Order - imposition of Bank Guarantee for repatriation of amount, which was realized in favour of the appellant company - imposition of the bank guarantee and the freeze orders passed by the respondent, were solely imposed on the grounds of criminal proceedings being alive against one Dharmesh Doshi, who is alleged to be connected to the appellant company. HELD THAT:- While perusing through the documents on record, it has come to notice that the said Dharmesh Doshi, on the basis of whom the condition of bank guarantee was imposed, has now been discharged of the alleged offences by the Trial Court. It is also important to note that the said Dharmesh Doshi , who has been discharged of the alleged crime, was never an employee/share holder/director or a key managerial person in the appellant company - Since the said Dharmesh Doshi was in no way connected to the appellant company herein, the trial faced by him, was in his individual capacity, and not vicariously on behalf of the appellant company. In such a circumstance, wherein the appellant company and the accused Dharmesh Doshi are two separate entities, and the appellant company is in no way connected to the concerned Investigation, the operation of the freeze order against the appellant company, is not legally tenable - Since the appellant company is not connected to the alleged crime, and has not found mention in the FIR or the chargesheet, the freeze order against the appellant company s properties is redundant qua the investigation, since the appellant company itself is not necessary for the conclusion of the investigation. It has also come to notice that the operation of the freeze order has been active for a period of 17 years and has caused huge losses to the appellant company. The purpose of the freeze order, and the bank guarantee in extension of the freeze order, can only be in operation to aid in the investigation against the alleged crime. Since the investigation against the appellant company is redundant, hence, the freeze of the appellant company s assets and the bank guarantee imposed in furtherance of the freeze order also becomes redundant. The condition imposed upon the appellant to furnish a bank guarantee by the Courts below, is not liable to be sustained and is therefore set aside - Appeal allowed.

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• 2023 (5) TMI 447
  Filling of a casual vacancy - requirement of approval through a special resolution from the shareholders of the Company, before such appointment - appointment of a person who has attained the age of 75 years - Rejection of waiver application - application was filed for waiver of the fine on account of non-compliance of Regulation 17(1A) of the Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations, 2015 - HELD THAT:- A reading of Section 152(2) and Section 161(4) makes it clear that a Director can only be appointed by the shareholders of the Company in the general meeting. However, in case where the office of a Director is vacated before his term of office expires which results in a casual vacancy then such casual vacancy can be filled by the Board of Directors which shall subsequently be approved by the members in the immediate next general meeting - from a reading of Section 161(4) of the Companies Act read with the proviso to Rule 4(1) of the Rules it is clear that a casual vacancy which occurs in the office of the Director is required to be filled up by the Board of Directors within three months from the date of such vacancy and such appointment is required to be approved by the members in the next general meeting. Regulation 25 of the LODR Regulations, 2015 relates to obligations with respect to Independent Director - The said provision provides that where an Independent Director resigns or is removed from the Board of Directors. Such Independent Director is required to be replaced by a new Independent Director within three months from the date of such vacancy - Regulation 17(1A) provides that no person shall be appointed or continue the directorship as a Non- Executive Director who has attained the age of 75 years unless a special resolution is passed to that effect by the members in the general meeting - A perusal of the Regulation 17(1C) indicates that the listed entity shall ensure that the appointment of a person on the Board of Directors is approved by the shareholders at the next general meeting or within a period of three months from the date of appointment whichever is earlier. Thus, upon the death of Dr. Chauhan on 22nd November, 2020, a casual vacancy in the office of Independent Director came into existence which could be filled up by the Board of Directors under Section 161(4) of the Companies Act read with Regulation 17(1C) of the LODR Regulations and proviso to Rule 4 of the Rules. Such appointment was required to be subsequently approved by the shareholders of the Committee in the next general meeting - the finding of the respondent that no persons can be appointed or continued to be appointed as a Non-Executive Director unless prior approval of the shareholders is made is erroneous. The impugned order cannot be sustained. No penalty could have been imposed for violation of Regulation 17(1A) of the LODR Regulations. Nothing has been brought on record to indicate violation of any provision of the Companies Act or Regulation 17(1C) of the LODR Regulations. Appeal allowed.

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• Insolvency & Bankruptcy

• 2023 (5) TMI 446
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- The NCLAT having referred to the nature of the claim made has taken note that the amount as claimed by the appellant herein was to the extent of Rs.1,81,45,943/-. The appellant herein however contended that the claim as made is not sustainable but according to the statement of accounts maintained by the appellant herein only a sum of Rs.22,56,833/- was due to be paid. In that context, the NCLAT having taken note that in any event since the appellant herein had stated that they are due in a sum of Rs. 22,56,833/- which amounts to admission and such amount in any event being more than Rs. 1,00,000/- had pressed into service the decision of this Court in the case of MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED [ 2017 (9) TMI 1270 - SUPREME COURT ] and in that context was of the opinion that the application filed before the NCLT under Section 9 of IBC was sustainable and has accordingly remanded the matter. Be that as it may, in the present circumstance when the claim as put forth by the respondent is to the tune of Rs.1,81,45,943/- after referring to the earlier deductions and the appellant herein is presently contending that only a sum of Rs.22,56,833/- was due and was offered to be paid but declined to be received by the respondent, the said amount itself was made the basis by the NCLAT to arrive at its conclusion that in any event, the due admitted is more than Rs. 1,00,000/- - in the present circumstance it is opined that the impugned order is liable to be set aside and the matter is to be remitted to the NCLAT to undertake the said exercise to find out as to whether any amount more than Rs.22,56,833/- is due as claimed by the respondent herein and thereafter arrive at its conclusion in accordance with law. Appeal disposed off.

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• 2023 (5) TMI 445
  Preferential Transaction or Fraudulent Transaction - charge on the property of the corporate debtor with respect to the two Agreements in form of Bajaj Finance Ltd. - defrauding the creditors of the corporate debtor or not - ultimate beneficiaries of the two loans are related parties of the corporate debtor or not. Whether the creation of the security interest by way of mortgage of the Mortgaged Property located at Noida is a preferential transaction under section 43 or a transaction intended to defraud the creditors of the corporate debtor which is covered under section 66 of the IBC? - HELD THAT:- Section 43 of the IBC stipulates that if there is a transfer of property or an interest thereof of the corporate debtor for the benefit of a creditor or a surety or a guarantor for on an account of an antecedent financial debt or operational debt or other liabilities owed by the corporate debtor, such a transaction would be considered a preferential transaction. Moreover, if the transaction is with a related party then the lookback period will be two years and if it is a party other than a related party the lookback period would be one year preceding the insolvency commencement date as per sub-section 4 of section 43. The Hon ble Supreme Court has held in the matter of Anuj Jain, PROFESSIONAL FOR JAYPEE INFRATECH LIMITED VERSUS AXIS BANK LIMITED ETC. ETC. [ 2020 (2) TMI 1259 - SUPREME COURT ] that mortgage deeds entered by the corporate debtor JIL should be considered alongwith the fact as to who are the real beneficiaries of the transaction - The Hon ble Supreme Court has thus held that if there is a transfer of property or interest thereof of the corporate debtor for the benefit of related parties and not necessarily be the corporate debtor, then the look back period would be two years and such a transaction will be considered as a transaction which infringes sub-section (2) of section 43. The Adjudicating Authority erred in holding that the security interest created in the Mortgaged Property was correct and we accordingly set aside this part of the Impugned Order and hold that the mortgage created on the Mortgaged Property and which is registered by Form CHG-1 shall be cancelled and the said property shall become a part of the assets of the corporate debtor in an unencumbered form, available in the liquidation estate of the corporate debtor for the benefit of its creditors. Ultimate beneficiaries of the two loans are related parties of the corporate debtor or not - Transfer of Rs.1,02,09,360/- by the corporate debtor in favour of SAKS Developers LLP - HELD THAT:- An MoU was signed between the corporate debtor and SAKS Developers on 30.08.2018. Notably, Mr. Ramesh Kumar Suneja as director of the corporate debtor and Mr. Pankul Suneja as managing partner/partner of SAKS Developers signed this MoU who are father and son respectively. Moreover, this MoU was executed on a non-judicial stamp paper purchased in Uttar Pradesh (where stamp papers in hard copy as against e-stamp paper could be purchased) even though the corporate debtor and SAKS Developers have their registered offices in New Delhi. It is also noted that in New Delhi only e-stamp papers can be purchased. Moreover the MOU is neither notarized or registered. Therefore the veracity about the signing of the MoU on the date claimed cannot be firmly established. A close perusal of the recital and profits sharing clauses of the MoU reproduced above shows that while on one hand the Developer had ostensibly shared with the Collaborator the relevant details of project including architectural plans, estimated cost of land and constructions etc. and after due consideration the Collaborator had agreed to invest in the proposed project, the clauses in the Profit Sharing section as extracted above show that the plans and final project cost etc. are not yet clear and therefore the actual profit sharing ratio and the total cost of the proposed project are not indicated in the MoU. The absence of these details in the MoU shows that the MOU was perhaps executed in a hurry. The intention of the Developer and Collaborator for development of the proposed project also then appears either half-baked or suspicious - Thus, it is clear that when the corporate debtor was experiencing insolvency, it still chose to transfer an amount of Rs.1,02,09,360/- to a related party SAKS Developers LLP and which is also a family concern of Mr. Ramesh Kumar Suneja to siphon off the said amount from the corporate debtor to SAKS Developer LLP even though it could have used the said amount to pay off its debtors and resolve its insolvency. The amount of Rs.1,02,09,360/- which was transferred by the corporate debtor to the related party SAKS Developers LLP during the lookback period of two years was in clear violation of section 43 of the IBC. Therefore, the order made by the Adjudicating Authority directing SAKS Developers LLP to repay/refund the amount of Rs.1,02,09,360/- to the corporate debtor is correct and does not require any interference. Appeal allowed.

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• PMLA

• 2023 (5) TMI 444
  Money Laundering - proceeds of crime - predicate offence - property purchased from proceeds of crime is attached - whether there is ground for putting the petitioner on trial for offence of money laundering? - HELD THAT:- Organized crime in general and economic offences in particular are not individual act, they are collaborative criminal enterprise of collective of persons, with defined role, who may join at its different stage of its execution. These are species of economic offence, where proceed of crime may run into crores with wide ramification undermining financial institutions and the economic health of the country. Actors involved are skilled and educated, the process of money laundering involves meticulous planning and deft execution in placement, layering and integration of the ill-gotten money in a complex layer of financial transactions to disguise it and project it as untainted. Different players may enter and exit in stages, to bring into fructification the larger design. In order to curb this, Prevention of Money Laundering Act aims at the persons who may not be involved in the predicate offence, but in laundering the proceeds of crime. The offence of money laundering is a stand alone offence and it is not necessary that the person accused of offence under PMLA should also be charged of the Scheduled offence. It is sufficient that proceed of crime so generated by the commission of scheduled offence, is laundered by the accused for being charged under PMLA. Money laundering is an independent offence has been held in Vijay Madan Lal Choudhary Vs Union of India [ 2022 (7) TMI 1316 - SUPREME COURT ] . After investigation chargesheet has been submitted against the contracting company M/s Classic Coal Construction Pvt. Ltd through its directors Sri Pawan Kumar Singh (father of the petitioner, since dead) and others for causing wrongful loss to the Govt. of Jharkhand and wrongful gain to the Company - Petitioner became a salaried director in the year 2010 and after the death of his father on 27.03.2013 he became the Managing Director and inherited the assets and liabilities of the Company. The presumption under Section 24 of PML Act can be rebutted only at the stage of trial and not at the stage of framing of charge. Nexus if any, between the properties acquired in the name of this petitioner and the proceeds of crime is a question of fact to be looked into at the stage of trial and not at the stage of discharge. There are no infirmity in the impugned order - Criminal Revision Petition accordingly stands dismissed.

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• 2023 (5) TMI 443
  Money Laundering - provisional attachment order - scheduled offences - no reasons given by the authorities while attaching the bank accounts - non-application of mind - Section 5(1) of PML Act, 2002 - HELD THAT:- On a perusal of para 10 of the impugned attachment order, no specific reasons for attaching Account Nos. 641301010050403 and 641304010000001, are stated. If the contention of the petitioners that, no third-party has deposited any amount in the said accounts is taken as true and, in such circumstances, whether such accounts can be attached or not, the reasons are not coming forward in the provisional attachment order. If that is the case, it can be easily presumed that the provisional attachment order, insofar as two accounts is concerned, is without application of mind and without any reasons to believe i.e., the reasons for such belief has not been recorded. Further, this Court, under Articles 226 of the India, cannot adjudicate or decide the aspect of depositing of amounts by the third parties in the subject accounts. The scope of entertaining this Writ Petition under Article 226 of the Constitution of India is no doubt limited and this Court cannot adjudicate on provisional attachment order if it is in consonance with Section 5 of the Act, 2002. There is no dispute with regard to the law laid down by various courts in that regard. But Section 5 of the PML Act, clearly says that the authority should record reasons while attaching the properties, both movable and immovable. However, in the present case, in the impugned attachment order, the respondent-authorities have not recorded any reasons for attaching the subject accounts referred supra. As such, this Court holds that the attachment of the said accounts is without proper reasons. The impugned order is set-aside only to the extent of attaching Account Nos. 641301010050403 and 641304010000001 of the Union Bank of India. However, the 2nd respondent-Deputy Director is at liberty to look into the said two accounts and if he finds that the said two accounts are to be attached, he may do so by passing a fresh reasoned order, in accordance with law - the Writ Petition is disposed of.

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• Service Tax

• 2023 (5) TMI 442
  Applicability of service tax - services rendered by a club to their members as also the service tax on membership fee - subscription fee - HELD THAT:- This Court adverting to the decision in STATE OF WEST BENGAL ORS. VERSUS CALCUTTA CLUB LIMITED AND CHIEF COMMISSIONER OF CENTRAL EXCISE AND SERVICE ORS. VERSUS M/S. RANCHI CLUB LTD. [ 2019 (10) TMI 160 - SUPREME COURT] observed that the said decision deals with clubs which are incorporated but insofar as the present respondent is concerned, the same is an unregistered institution and is not incorporated under any provisions of law. With this observation, notice was issued in this case. Considering the nature of the case, leave is granted.

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• 2023 (5) TMI 441
  Maintainability of appeal - monetary amount involved in the appeal - HELD THAT:- The tax effect in this appeal is below the limit indicated in the Circular No. 17 of 2019 of the Government of India, Ministry of Finance, Department of Revenue, Central Board Direct Taxes Judicial Section dated 8th August, 2019. Appeal dismissed.

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• 2023 (5) TMI 440
  Jurisdiction - appropriate forum to entertain the appeal - High Court or Supreme Court - appeals is regarding determination of taxability of the goods for the purpose of assessment of service tax - Sections 35G and 35L of Central Excise Act - Levy of Service tax - Transportation of Goods through Pipelines/Condult Services - seller or service provider - service provider/service recipient relationship exists or not. HELD THAT:- The very substantial question of law, which has been proposed by the appellant, raises an issue about the liability or otherwise of the assessee to pay service tax on transportation of goods by pipeline service. Thus, the core issue involved pertains to determination of the rate of duty of excise (service tax) or the value of goods for the purpose of assessment. Perusal of the language of subsection (2) of Section 35L of the 1944 Act brings more clarity and virtually puts the controversy beyond the pale of doubt that the issues posed for adjudication are falling in the category of exceptions and, as a consequence, the High Court would not have the jurisdiction to entertain appeal against the order of CESTAT. The provision makes it clear that determination of any question having a relation to the rate of duty shall include the determination of taxability or excisability of the goods for the purpose of assessment . The Full Bench of Bombay High Court considered identical issue in the case of Commissioner Central Excise, Mumbai-V -Vs- Reliance Media Works Limited [ 2019 (12) TMI 392 - BOMBAY HIGH COURT] has held that Appeals from orders of the Tribunal relating to taxability/excisability passed prior to 6th August, 2014 i.e. the date of insertion of sub-section (2) to section 35-L of the Act being a rate of duty issue, would be appealable only to the Hon ble Supreme Court and not the High Court. Similar interpretation, as was made the by Bombay High Court in the above judgment, has been made by various other High Courts in the judgments relied upon by the learned counsel for the appellant. We are in complete agreement with the view taken by the Bombay High Court after apposite evaluation of the statutory provisions - hence, these appeals to the High Court against the order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata are clearly barred by virtue of Section 35G(1) read with Section 35L of the 1944 Act. Since the issue involved in these appeals is regarding applicability of service tax interest and penalty on transportation of goods through pipelines/conduit services undertaken by the respondent assessee, the same, if were to be challenged, can only be resorted to by filing an appeal before the Hon ble Supreme Court. The appeals are dismissed as being not maintainable.

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• 2023 (5) TMI 439
  Refund of accumulated CENVAT Credit - Export of services - cleaning activities - convention center - event management - renting of immovable property including car parking - CENVAT Credit remain on the books of accounts for the said services - SCN invoking Rule 14 of CENVAT Credit Rules, 2004 proposing denial of availment of the said credit, also not issued - HELD THAT:- The deficiency memo has not invoked any provisions of CENVAT Credit Rules much less said Rule 14. Therefore, the said deficiency memo cannot be called a show cause notice. The refund of Rs. 25,81,828/- was denied to the appellant without issue of any show cause notice. Such an order is not sustainable in law - the part of the impugned order through which refund of accumulated CENVAT Credit of Rs. 25,81,828/- was rejected, is set aside - Revenue is directed to refund accumulated CENVAT Credit of Rs. 25,81,828/- to the appellant. Appeal allowed.

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• Central Excise

• 2023 (5) TMI 438
  Wrongful abatement of MODVAT credit - demand barred by time limitation or not - whether the quantum was justified in allowing appeal without ascertaining the factual position for actual utilisation of input appropriate to be charged to the electric induction furnace? HELD THAT:- After noting the legal requirement the Tribunal examined the factual position and pointed out that there is no allegation of misstatement or suppression made by the department at any stage of the proceedings. More particularly when all the documents were produced by the assessee examined by the revenue and thereafter the final assessment was made. Therefore, the Tribunal held that extended period of limitation could not have been invoked by the revenue and that the entire demand is barred by limitation. The Tribunal was of the view that while referring the matter to this Court referred the question as to whether Tribunal was justified in allowing the appeal without ascertaining factual position of actual utilisation. The question of limitation is a legal issue, which is required to be decided taking note of the relevant facts. If on facts, the Tribunal had come to the conclusion that the demand was barred by limitation nothing prevented the Tribunal from granting relief to the assessee on the said ground and there would be no occasion to examine the merits of the matter as such the exercise will be a sheer academic exercise. Thus, the Tribunal rightly took note of the undisputed fact that held that extended period of limitation could not be invoked. There are no ground to interfere with the order passed by the Tribunal - appeal dismissed.

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• 2023 (5) TMI 437
  Violation of principles of natural justice and fair play - review of own order - refixation of annual capacity of production not appreciated - non-issuance of SCN - opportunity of hearing not provided - HELD THAT:- On perusal of the grounds of appeal filed before the Tribunal by the assessee it is found that specific contention raised by the assessee was that the earlier order passed by the Commissioner attained finality accepted by the department not appealed against the review, the order could not have been done unilaterally by an officer, who is junior in rank than the Commissioner. This contention raised by the assessee was not considered by the Tribunal. Interestingly, identical issue has been raised in respect of the other assessees, who are also carrying on similar production activities and one such case travelled up to the Tribunal in the case of Commissioner of Central Excise-IV vs. Hooghly Ispat Ltd. The Tribunal dismissed the appeal filed by the department and affirmed the order passed by the Commissioner of Central Excise [Appeals] was granted relief in favour of the said assessee. The learned Tribunal pointed out that the availment of MODVAT credit by the said assessee was lawful. It would be beneficial to refer to the decision of the Hon ble Supreme Court in the case of Birla Corporation Ltd. vs. CCE, [ 2005 (7) TMI 104 - SUPREME COURT ]. The Hon ble Supreme Court held when a same question arises for consideration on identical fact, the revenue cannot be permitted to take a different stand and it was pointed out that earlier appeal involving the identical issue was not pressed and dismissed and the revenue having taken a conscious decision to accept the principles laid down in the said order cannot be permitted to take opposite stand in a different manner and if the same is permitted, the law will be in a state of confusion and will place parties as well as the assessee in a quandary. Once the department has accepted the orders passed in identical issue considering the scope of the revision of the annual production capacity of those units who are also carrying similar group of activities, the department has precluded from taking a different stand in other cases more particularly, in the case of the assessee. The appeal filed by the assessee is allowed.

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• 2023 (5) TMI 436
  Method of valuation - manufacture of SRGO (Straight Run Gas Oil)/DHDS (Diesel Hydrosulphurisation Feed) - clearance on stock transfer basis - to be valued under Rule 8 of CEVR, 2000 or Rule 11? - contention of the Department is that the above said goods were either captively consumed within the factory at Haldia or cleared to their own sister unit at Barauni, on stock transfer basis and hence Rule 8 of the Central Excise Valuation Rules, 2000 is to be adopted. HELD THAT:- SRGO manufactured by IOCL Haldia refinery has not been sold to any independent buyers. In fact the Appellant stated that it is not a marketable product and no duty is payable. However, they have agreed to pay duty only to avoid litigation as the entire exercise is revenue neutral. They stated that Rule 8 of the Valuation Rules is not applicable in their case as all the SRGO/DHDS manufactured were not captively consumed in their factory at Haldia. Part of the SRGO/DHDS manufactured at Haldia Refinery were consumed captively for manufacture of HSD and the remaining were cleared to their sister unit at Barauni. The Appellant stated that whatever duty paid by their Haldia Unit will be availed as credit for their Barauni unit and hence the entire exercise is revenue neutral and there is no loss of revenue to the exchequer - there are merit in the argument of revenue neutrality by the Appellants The duty paid by the refinery at Haldia is available as credit to the unit in Barauni. Valuation is to be done as per Rule 8 of the Valuation Rules when the entire goods are captively consumed and there is no other method of sales involved. In this case the Appellant has partly consumed the goods captively and partly cleared the same to their sister unit. The Circular No.643/34/2002-CX dated 01.07.2002 does not visualize this situation. For captive consumption Rule 8 would be applicable and for sale to their sister unit Rule 9 of the Valuation Rule 2000 would be applicable. Since none of the Valuation Rules from Rule 4 to 10A covers the above said situation, the Appellant stated that they have adopted Rule 11 Best Judgement Method. Rule 11 is adopted when the situation is not covered by any of the other methods of valuation prescribed from Rule 4 to 10A. The method of valuation adopted by the Appellant under Rule 11 of the Valuation Rules is the appropriate method in this case because the situation of part sale to related person and part captive consumption is not covered by any of the other Rules in the Valuation Rules 2000. Even if CAS-4 is arrived at and the goods are valued as per Rule 8 of the Valuation Rules, there is no loss of revenue because of the duty paid will be available as credit and the entire exercise would be revenue neutral. The issue of Revenue Neutrality is a very valid argument in this case as the sister Unit at Barauni would be eligible for the credit of the duty paid by the Haldia Unit. The above said decisions cited by the Appellant are squarely applicable in this case. The facts and circumstances of the decision in COMMR. OF C. EX. CUS., VADODARA-II VERSUS INDEOS ABS LIMITED [ 2010 (3) TMI 656 - GUJARAT HIGH COURT] are same as that of the present case on hand - it was held in the said case that The grievance was that the aspect of undervaluation has not been considered by the Tribunal at all. Grievance would have merited acceptance if the ultimate exercise would have benefited the Revenue by collection of duty in the coffers of the exchequer. In the facts of the present case, admittedly no such benefit accrues to the exchequer. The valuation adopted by the Appellant under Rule 11 of the Valuation Rules 2000 is proper - Appeal allowed.

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• 2023 (5) TMI 435
  Levy of Central Excise Duty - subsidy received by the appellant under the Rajasthan Investment Promotion Scheme, 2014 (RIPS) - Subsidy forms consideration for the purpose of levy of excise duty or not? - suppression of facts or not - extended period of limitation - HELD THAT:- The Government of Rajasthan had introduced the Rajasthan Investment Promotion Scheme, 2014 with a view to promote investment in the State and to generate employment opportunities through such investment. The scheme provided for various exemptions and at the same time provided for investment subsidy - The appellant is covered by the investment promotion scheme of the Rajasthan Government and in terms thereof they are required to discharge their VAT liability by making payment of the same. The VAT so credited to the Government, certain portion is disbursed as VAT to the appellant in the form of subsidies in form of VAT 37B challan which can then be utilised in the subsequent period towards discharge of VAT liability. The appellant has been following the said practice and therefore the present case is squarely covered by the decision of the SHREE CEMENT LTD. SHREE JAIPUR CEMENT LTD. VERSUS CCE, ALWAR [ 2018 (1) TMI 915 - CESTAT NEW DELHI ], wherein this Tribunal has considered the same subsidy under Rajasthan Investment Promotion Scheme and relying on the earlier decision of the Tribunal in COMMISSIONER OF CENTRAL EXCISE, MUMBAI-I VERSUS M/S WELSPUN CORPORATION LTD. [ 2017 (5) TMI 177 - CESTAT MUMBAI ] which dealt with the incentive in the form of subsidy under the Sales Tax Incentive Scheme, 2001, concluding that there is no justification for inclusion in the assessable value, the VAT amounts paid by the assessee using VAT 37B challans. Extended period of limitation - show cause notice dated 22.08.2019 for the period April, 2016 to March, 2017 - assessee did not disclose the correct information to the Department - HELD THAT:- Although, the issue on merits has been decided in favour of the appellant and therefore the issue of extended period of limitation does not require any decision thereon. The issue whether the subsidy amount was includible in the transaction value in terms of Section 4(3)(d) of the Central Excise Act was a matter of interpretation of law and therefore the allegation of suppression of fact are not applicable in the present case and consequently neither interest nor penalty is leviable. The allegation of mis-representation with reference to the inclusion of the subsidy amount under the instant scheme have been considered by the Tribunal in M/S. SELECT POLY PRODUCTS PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR [ 2019 (1) TMI 556 - CESTAT NEW DELHI ] and also in HONDA MOTORCYCLE AND SCOOTERS INDIA PVT. LTD. VERSUS C.G.S.T.C. C.E., ALWAR [ 2019 (4) TMI 748 - CESTAT NEW DELHI ] where it was held that discharge of liability by way of VAT 37B Challans has already been held as legally sustainable methodology of discharging tax liability for subsequent period. It is held that, in the given circumstances, Department was not entitled to invoke the extended period of limitation. The demand could be confined only to the normal period of one year. The impugned orders are unsustainable - Appeal allowed.

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• 2023 (5) TMI 434
  Date on which notification becoming effective - Legality of simultaneous availment of SSI exemption benefit under Notification No. 8/2003-CE dated 01.03.2003 and CENVAT Credit in respect of its branded goods Victor Paints manufactured by the Assessee as well as goods of Berger Paints processed by it as job worker and cleared under the brand names of Berger - HELD THAT:- The period under dispute in this appeal is before introduction of such an amended provision in February, 2009 but going by the entire text of the Notification, it can be said that the same is clarificatory in nature, that can be applied from the day of its inception, as has been held by this Tribunal in the case of VAIBHAV ACQUA FRESH LTD. VERSUS COMMISSIONER OF C. EX., MUMBAI-II [ 2009 (3) TMI 191 - CESTAT, MUMBAI] wherein such amendment was held to be of clarificatory in nature. Having regard to the judicial precedent set by the Hon ble Supreme Court in COMMISSIONER OF CENTRAL EXCISE, CHENNAI VERSUS M/S. NEBULAE HEALTH CARE LTD. [ 2015 (11) TMI 95 - SUPREME COURT] vis-a-vis insertion of proviso into the Notification w.e.f. 11.02.2009 that clarified the notification further, Appellant is entitled to the SSI exemption available under Notification No. 8/2003-CE for clearance of its branded product and also entitled to avail CENVAT Credit on clearance of branded products of others cleared through payment of duty - Appeal allowed.

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• 2023 (5) TMI 433
  Legality of availment of SSI exemption under Notification No. 08/2003-CE(NT) dated 28.02.2003 - non-inclusion of value of supplies to Merchant Exporters - applicability of clarificatory Circular No. 468/39/2002- CX dated 25.07.2002 - penalty on Appellant Company or its Managing Partner - HELD THAT:- here is reiteration of the finding of this Tribunal made on this issue in the case of VADAPALANI PRESS VERSUS COMMISSIONER OF C. EX., CHENNAI [ 2007 (3) TMI 151 - CESTAT, CHENNAI ] where it was held that we are of the view that the interpretation given by Learned SDR to the Board s Circular No. 648/39/2002 would not be consistent with the provisions of law governing issuance of Form-H certificate. It is not the case of the Revenue that the cartons supplied by the appellants to A.V. Thomas Co. and other similar customers were not exported. It is, however, pointed out that the cartons were not exported as such, but were only used as packing material for goods exported by the customers. It is also noticed that Hon ble High Court of Bombay, in COMMISSIONER OF CENTRAL EXCISE, MUMBAI-V VERSUS UNIVERSAL PACKAGING [ 2013 (10) TMI 140 - BOMBAY HIGH COURT ], had dismissed the Revenue s appeal that was filed against decision of this Tribunal given in UNIVERSAL PACKAGING VERSUS COMMISSIONER OF C. EX., MUMBAI-V [ 2010 (9) TMI 561 - CESTAT, MUMBAI ] that was being passed basing on the ratio of Vadapalani Press. Further, decision of Vadapalani Press has been consistently followed thereafter in several decisions of this Tribunal including the case of JAI JAWALA PROCESSORS VERSUS COMMISSIONER OF CENTRAL EXCISE, ROHTAK [ 2014 (12) TMI 1318 - CESTAT NEW DELHI ], COMMISSIONER OF CENTRAL EXCISE VERSUS AMAR PACKAGING INDUSTRIES [ 2012 (8) TMI 1068 - GUJARAT HIGH COURT ], VIBA FLUID CONTROL VERSUS COMMISSIONER OF CENTRAL EXCISE, BELAPUR [ 2017 (11) TMI 277 - CESTAT MUMBAI ] and HARE KRISHNA BOXES PVT. LTD. VERSUS COMMISSIONER OF C. EX., BELAPUR [ 2010 (12) TMI 715 - CESTAT, MUMBAI ] - thus, inclusion of such value of corrugated boxes supplies to Merchant Exporters to determine tax liability by computing the out-turn so as to exceed the SSI exemption limit and its confirmation by the Commissioner (Appeals) is not sustainable in both law and facts. No penalty is imposable also on the Appellant Company or its Managing Partner. Appeal allowed.

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• 2023 (5) TMI 432
  Levy of penalty under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC of the Central Excise Act - CENVAT Credit on additional duty paid on capital goods under EPCG scheme - availment of benefit of Notification No. 97/2004 dated 17.09.2004 and Notification No. 64/2008 dated 09.05.2008 thereby the capital goods imported - HELD THAT:- From the entire findings recorded in the impugned order, we do not find any reason by which it could have been concluded that the case of willful suppression/misstatement, collusion etc. has been made out against the appellant. The mistake committed by the appellant could have been an inadvertent mistake. In the case of Rajasthan Spinning and Weaving Mills [ 2009 (5) TMI 15 - SUPREME COURT ] Hon ble Supreme Court has clearly stated that without proving the existence of such ingredients, penalty under Section 11AC should not have been imposed. In the present case the appellant has, on being pointed out, paid the entire amount of the credit wrongly taken along with interest much prior to the issuance of show cause notice. On being informed, the issue should have been settled under Section 11A(2B) of the Central Excise Act - Reliance placed in the decision in the case of COMMISSIONER OF CENTRAL EXCISE-I VERSUS GAURAV MERCANTILES LTD. [ 2005 (8) TMI 120 - BOMBAY HIGH COURT] where it was held that Factual matrix reveals that the show cause notice was issued on 19-4-2002 whereas entire amount of duty and penalty was paid on 31-1-2001 and 1-9-2001. It is thus clear that the entire duty liability was paid prior to the issuance of show cause notice. The order of the Commissioner to the extent of imposition of penalty under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC of the Central Excise Act cannot be upheld. Appeal allowed in part.

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• 2023 (5) TMI 431
  Recovery of Central Excise Duty alongwith Interest and penalty - Manufactured Goods cleared to duty free shop at airport claiming benefit of exemption - cigarettes - clearances affected to M/s. Nuance Group without payment of duty - eligibility for benefit of N/N. 46/2001 CE(N.T.) dated 26.06.2001 - cigarettes were consigned directly to duty free shop, which was a Customs Bonded Warehouse licensed under Section 58 of the Customs Act, 1962, from where they were sold to the outbound/inbound passengers against payment in foreign currency. - HELD THAT:- As per the show cause notice it is quite evident that M/s Nuance Group were granted permission to receive the impugned goods without payment of duty from the appellant for being bonded in their bonded ware house licensed under Section 58 of the Customs Act, 1962, for sale through their duty free shops located at International Airport, Bangalore. Para 5, also records that impugned goods were received by M/s Nuance Group in their bonded warehouse. Nuance Group had executed Bond with prescribed Bank Guarantees from time to time for covering the clearances of the said non duty paid cigarettes received by them from the Appellant. It is not the case of the revenue that these goods were cleared by the appellant in contravention of any of the conditions as per the permission accorded to them by the Commissioner. At the time of granting the permission, Commissioner would have satisfied himself in respect of fulfillment of all the conditions prescribed and in our view he was right in doing so. The conditions for registration under Rule 9 of the Central Excise Rules, 2002 as per Circular No 581/18/2001-CX dated 29.06.2001 was qua the exporter who intended to clear the goods for export from his warehouse. M/s Nuance Group have been granted the license under Section 58 of the Customs Act, 1962 for operating such a bonded warehouse to receive, store and subsequently clear for export the goods so received. Once he fulfilled these conditions the condition of registration under rule 9 of Central Excise Rules, was merely procedural and could not have been reason for the denial of substantial benefit that was claimed by M/s Nuance Group. Once it is admitted that the goods cleared by the appellant were received in the warehouse, the circular no. 581/18/2001 says in case of any diversion to domestic tariff area, the duty is required to be paid by the warehouse operator. The impugned order, wherein the demand has been made from the manufacturer of the impugned goods cannot be upheld - appeal allowed.

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• 2023 (5) TMI 430
  Process amounting to manufacture or not - Recovery of inadmissible Cenvat credit - GP Sheets Cut Length - case of Revenue is that process carried out by them was mere cutting of length of GP coils and the same were not amounting to manufacture as per the provisions of Section 2(f) of the Central Excise Act, 1944 - HELD THAT:- The order of the Commissioner of Central Excise, Raigad which was the basis for making the demand against the appellant in the case of COLOUR ROOF (INDIA) LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, RAIGAD [ 2014 (7) TMI 523 - CESTAT MUMBAI] has been set aside by the Tribunal where it was held that there is definitely some value addition involved as the goods in question have been removed at a higher rate of duty resulting into additional duty to the exchequer of Rs. 50.40 lakhs. Since the appeal has been allowed in the case of M/s. Colour Roof (India) Ltd., the impugned order can be set aside for this reason itself. Hon ble Gujarat High Court in the case of COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD-III VERSUS NAHAR GRANITIES LTD. [ 2014 (5) TMI 57 - GUJARAT HIGH COURT] where reliance placed in the case of COLLECTOR OF CENTRAL EXCISE, PATNA VERSUS TATA IRON STEEL CO. LTD. [ 2004 (2) TMI 68 - SUPREME COURT] , where the question of dutiability of such product came up before the Supreme Court on the ground that such product was a mere byproduct of the manufacturing activity. It was held that no excise duty would be leviable on Zinc Dross. It was observed that merely because the assessee was selling the said by-product, would not mean that the same was a marketable commodity. In short, the Supreme Court held that there was no excise duty liability on the sale of Zinc Dross. There are no merit in the impugned order and the same is set aside - appeal allowed.

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• 2023 (5) TMI 429
  Recovery of CENVAT Credit alongwith Interest and penalty - input services - after sale service - service tax paid on the same - HELD THAT:- The issue is no longer res integra decided in appellant s own case by the Tribunal in CCE, NASHIK VERSUS MAHINDRA MAHINDRA LTD [ 2012 (8) TMI 530 - CESTAT, MUMBAI] where it was held that if after sale service expenses are included in the assessable value, the assessee is entitled for input service credit on the expenses incurred on after sales charges. Thus, if the value of the services is claimed is included in the assessable value, the credit on the same cannot be denied - As per CA certificate, the value of after sale services is part and parcel of the assessable value for the purpose of payment of central excise duty which is not disputed by the Revenue in the impugned order. Appeal allowed.

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• 2023 (5) TMI 428
  Legality of simultaneous availment of SSI exemption benefit under Notification No. 8/2003-CE dated 01.03.2003 and CENVAT Credit - branded goods P P Ayurvedic Medicaments manufactured by the Assessee and cleared by it and goods belonging to other companies processed by it as job worker and cleared under the brand names of those companies - HELD THAT:- It is made clear that law is not static and it changes with the changing need of time. The judgment of the Hon ble Supreme Court, in view of operation of Article 141 of the Constitution of India, is the law of land. In the said COMMISSIONER OF CENTRAL EXCISE, CHENNAI VERSUS M/S. NEBULAE HEALTH CARE LTD. [ 2015 (11) TMI 95 - SUPREME COURT] , while distinguishing other judgments including COMMISSIONER OF C. EX., AHMEDABAD VERSUS RAMESH FOOD PRODUCTS [ 2004 (11) TMI 103 - SUPREME COURT] , it was held that once excise duty is paid by the manufacturer on such branded goods manufactured, the brand name whereof belongs to another person, on job work basis, the SSI Unit would be entitled to Cenvat/Modvat credit on the inputs which were used for manufacture of such goods as on those inputs also excise duty was paid. To put it otherwise, these branded goods manufactured by the SSI Units meant for third parties are regulated by the normal provisions of excise law and will have no bearing or relevance insofar as availing the benefit of those exemption notifications in respect of its own products manufactured by the SSI Units is concerned. The period under dispute in this appeal is before introduction of amended provision in February, 2009 by which Para 2(iii) was added but going by the entire text of the Notification, it can be said that the same is clarificatory in nature, that can be applied from the day of its inception, as has been held by this Tribunal in the case of VAIBHAV ACQUA FRESH LTD. VERSUS COMMISSIONER OF C. EX., MUMBAI-II [ 2009 (3) TMI 191 - CESTAT, MUMBAI] - having regard to the judicial precedent set by the Hon ble Supreme Court in Nebulae Health Care Ltd. vis-a-vis insertion of proviso into the Notification w.e.f. 11.02.2009 that clarified the notification further, Appellant is entitled to the SSI exemption available under Notification No. 8/2003-CE for clearance of its branded product and also entitled to avail CENVAT Credit on clearance of branded products of others cleared through payment of duty. Appeal allowed.

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• CST, VAT & Sales Tax

• 2023 (5) TMI 427
  Validity of initiation of review proceedings against the Petitioner-company - absence of requisite sanction being obtained by Commissioner of Commercial Taxes, Jharkhand in terms of the provisions contained under Section 9A(4) of the Bihar Electricity Duty Act, 1948 (as adopted) read with Rules 14(10) and 14(11) of the Bihar Electricity Duty Rules, 1949 - whether the order passed by the Appellate Authority remanding the matter back to the Assessing Authority for de-novo adjudication is required to be interfered with by this Court on the ground that when the very initiation of the proceeding for review was void ab initio and nonest; no jurisdiction could have been conferred by the Appellate Authority to the Assessing Authority by passing order of remand? The case of the Petitioner is that the very initiation of the review proceedings against the Petitioner by its Assessing Officer is contrary to the provisions of Section 9A(4) of the Electricity Duty Act read with Rules 14(10) and 14(11) of the Electricity Duty Rules, as the proceedings have been initiated by the successor in office of the original Assessing Officer without obtaining previous sanction in writing of Commissioner of Commercial Taxes, and, except for the Assessment Year 2016-17, review proceedings have been initiated beyond the period of limitation of twelve months without obtaining sanction of the Commissioner of Commercial Taxes. HELD THAT:- According to Section 9A(4), the prescribed authority, to review an order, would be the officer who has passed the order or its successor in office. Section 9A(4) of the Electricity Duty Act is to be read with Rules 14(10) and 14(11) of the Electricity Duty Rules, which clearly prescribe that for reviewing any order other than the order passed by the Commissioner, sanction of the Commissioner in writing is required and such review cannot be made beyond the period of 12 months from the date of passing of the order sought to be reviewed, and, an order can be reviewed by the officer who is successor in office of the officer who has passed the order sought to be reviewed only with previous sanction of the Commissioner even if the order is sought to be reviewed within a period of twelve months. Aforesaid proposition of law has been authoritatively laid down by the Coordinate Bench of this court in the case of TATA STEEL LIMITED, JAMSHEDPUR, EAST SINGHBHUM VERSUS THE STATE OF JHARKHAND, JOINT COMMISSIONER OF COMMERCIAL TAXES (ADMINISTRATION) , DEPUTY COMMISSIONER OF COMMERCIAL TAXES, COMMERCIAL TAX OFFICER, [ 2019 (12) TMI 1644 - JHARKHAND HIGH COURT] and the said decision was challenged by the State of Jharkhand before the Hon ble Apex Court and their S.L.P. has also been dismissed. There is no substance in the contention of the Respondent-State that in the case of Tata Steel Ltd, this Court remanded the matter back to the Assessing Authority for passing fresh review order. On the contrary, a bare perusal of the said order would reveal that penalty orders were set aside and it was merely recorded that this court has not stopped any authority to exercise his powers permitted under the law. It is a trite law that an order, which is bad from its inception itself, cannot be cured by subsequent action. In the present case, before the Appellate Authority, the Judgment of this Court in the case of Tata Steel Ltd. was duly placed on record, but despite the said fact, the Appellate Authority, instead of setting aside the order of review as not sustainable in the eye of law, has remanded the matter back to the Assessing Authority for reconsideration. This cannot be endorsed, as reviewing authority cannot be clothed with jurisdiction which it, otherwise, did not have at the time of initiation of review proceedings. The review orders dated 31.08.2020 and 12.09.2020 as well as the Appellate Orders dated 23.12.2022 in respect of the Period 2012-13, 2013-14, 2014-15, 2015-16 and 2016-17 are set aside - Consequently, penalty amount deposited/recovered from the Petitioner-company, if any, is directed to be refunded/adjusted in future bills towards Electricity Duty. Application allowed.

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• Indian Laws

• 2023 (5) TMI 426
  Arbitration proceedings - in a case where the notice invoking arbitration is issued prior to the Amendment Act, 2015, the old Act shall be applicable (pre-amendment 2015) or the new Act? - HELD THAT:- Section 11(6A) has been inserted by Amendment Act, 2015, by which the powers of the Court dealing with an application under Section 11(6) of the Act are restricted and as per section 11(6A), the powers of the Court while deciding application under Section 11(6) of the Act are confined to the examination of the existence of an arbitration agreement, which powers were not restricted in the pre-amendment Act, 2015. However, Section 26 of the Amendment Act, 2015 provides that nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of Section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree - as per section 21 of the principal Act the arbitral proceedings can be said to have commenced on the date on which a request for the dispute to be referred to the arbitration is received by the respondent. At this stage, it is required to be noted that by Amendment Act, 2015, Sections 34 and 36 of the Arbitration Act also came to be amended and the interference of the Court in challenge to the award has been restricted and/or narrowed down. The question of applicability of the Arbitration Amendment Act, 2015 fell for consideration before this Court in catena of decisions - In the case of M/S MAYAVTI TRADING PVT. LTD. VERSUS PRADYUAT DEB BURMAN [ 2019 (9) TMI 1548 - SUPREME COURT ], it is observed and held that the position of law that prevails after insertion of section 11(6A) is that Supreme Court or, as the case may be, the High Court, while considering any application under Sections 11(4) to 11(6) is to confine itself to examination of existence of arbitration agreement, nothing more, nothing less, and leave all other preliminary issues to be decided by arbitrator. In the case of BCCI [ 2018 (3) TMI 812 - SUPREME COURT ], it is observed and held that the Amendment Act, 2015 is prospective in nature. However, it is required to be noted that in the case of BCCI, this Court was considering the proceedings under sections 34 and 36 of the Amendment Act, 2015 and to that while interpreting section 26, it is observed that the Amendment Act is prospective in nature, and will apply even to those arbitral proceedings that are commenced, as understood by section 21 of the principal Act, prior to the Amendment Act, and to Court proceedings which have commenced on or after the Amendment Act came into force. The notice invoking arbitration clause was issued on 26.12.2013, i.e., much prior to the Amendment Act, 2015 and the application under Section 11(6) of the Act has been preferred/filed on 27.04.2016, i.e., much after the amendment Act came into force, the law prevailing prior to the Amendment Act, 2015 shall be applicable and therefore the High Court has rightly entered into the question of accord and satisfaction and has rightly dismissed the application under section 11(6) of the Act applying the principal Act, namely, the Arbitration and Conciliation Act, 1996, prevailing prior to the Amendment Act, 2015. In a case where the notice invoking arbitration is issued prior to the Amendment Act, 2015 and the application under Section 11 for appointment of an arbitrator is made post Amendment Act, 2015, the provisions of pre-Amendment Act, 2015 shall be applicable and not the Amendment Act, 2015 - Appeal dismissed.

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• 2023 (5) TMI 425
  Dishonour of Cheque - deposit a minimum of 20% of fine/compensation - seeking waiving off the payment of 20% of amount of fine imposed upon the petitioners as per section 148 NI Act - setting aside the order whereby suspension of sentence was ordered to be vacated due to non-payment of said amount - HELD THAT:- The aim, object and purport of Section 148 was explained by the Hon ble Apex Court in SURINDER SINGH DESWAL @ COL. S.S. DESWAL AND OTHERS VERSUS VIRENDER GANDHI [ 2019 (5) TMI 1626 - SUPREME COURT ] wherein it was categorically held that the use of words may in Section 148 must be construed as shall in order to give force to the actual intent behind insertion of such provision under the NI Act, 1881 - A perusal of the aforesaid decision of Hon ble Apex Court also reveals that though the Appellate Court is required to ordinarily direct an accused/appellant to deposit a minimum of 20% of fine/compensation imposed upon him, either on its own while ordering suspension of sentence under Section 389 Cr.P.C. or upon an application moved by the complainant under Section 148 NI Act, the Appellate Court, however, may choose to not impose such a condition upon an accused/appellant for special reasons to be assigned or recorded. The only ground on which waiver under Section 148 of NI Act is sought is that the petitioners have a good case of acquittal in the appeal in view of the above-stated facts. This ground alone, in the opinion of this Court, is not sufficient to exempt the petitioners from depositing 20% of the fine amount imposed by the learned Trial Court, as per Section 148 of NI Act. The fact remains that the parties were heard and their evidence was recorded and appreciated by the same Court in both the Complaint cases arising out of same set of facts, and the judgments were also passed on the same day. The merits of the appeal filed by the petitioners and their contentions cannot be considered while exercising powers under Section 148 of NI Act - every accused convicted under Section 138, who files an appeal against conviction, believes to have a good case for acquittal. This, by no stretch of imagination, can be held to fall within the purview of special reasons to allow a convict under Section 138 to not deposit a portion of the fine imposed upon him during the pendency of appeal. Suspension of sentence of the petitioners was vacated upon their failure to deposit the 20% of fine amount and they were asked to surrender within 7 days - HELD THAT:- The legal position with respect to imposition of condition to deposit a percentage of fine/compensation amount while granting suspension of sentence in a case under Section 138 of NI Act, was explained by the Hon ble Apex Court in case of SURINDER SINGH DESWAL @ COL. S.S. DESWAL AND OTHERS VERSUS VIRENDER GANDHI [ 2019 (5) TMI 1626 - SUPREME COURT ] where it was held that It is for the Appellate Court who has granted suspension of sentence to take call on non-compliance and take appropriate decision. What order is to be passed by the Appellate Court in such circumstances is for the Appellate Court to consider and decide. However, non-compliance of the condition of suspension of sentence is sufficient to declare suspension of sentence as having been vacated. Merely because the condition to deposit 20% of the fine amount was not imposed upon the petitioners at the time of suspension of sentence by the learned Appellate Court, it cannot be held that the vacation of order of suspension of sentence upon non-fulfilment of such a condition imposed subsequently by the learned Appellate Court was bad in law. Considering the mandate of Section 148 NI Act as explained by Apex Court in Surinder Singh Deswal-I and the powers of Appellate Court in revoking the suspension of sentence apropos Section 148 NI Act as explained by the Apex Court in Surinder Singh Deswal-II, this Court finds no infirmity in the impugned order dated 06.01.2023 whereby the petitioners have been directed to surrender, upon non-fulfilment of condition under Section 148 NI Act - the petitioners are directed to deposit 20% of the amount of fine imposed by the learned Trial Court, within 10 days from today, in default of which the petitioners shall surrender before the Trial Court concerned within one week of last day on non-payment of aforesaid amount. Petition is disposed off.

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• 2023 (5) TMI 424
  Validity of Arbitral Award - main ground for challenging the award is that the learned Arbitral Tribunal while passing the award has not taken into consideration any evidence led by the parties, particularly, by the petitioner - Violation of principles of natural justice - goods which were got manufactured from the third parties, known as Bought Out Products (BOP) i.e., materials, parts and equipments, etc. procured for the project by the claimant from the approved sub-contractors, the petitioner refused to reimburse the Excise Duty and CST. HELD THAT:- As far as, Section 34 of the Act is concerned, the position is well-settled by now that the Court does not sit in appeal over the arbitral award and may not interfere on merits. The Court may only interfere on the limited ground provided under Section 34(2)(b)(ii) of the Act i.e. of the award is against the public policy of India. As per the legal position clarified through decisions of this Court that violation of Public Policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of justice of India, conflict with justice or morality and existence of patent illegality in the arbitral award. The concept of the fundamental policy of Indian law would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice and reasonableness. As per the Section 34 of the Act, the award of the learned Arbitral Tribunal can be challenged on the ground if the award is contrary to the public policy, patent illegality and passed without any evidence. In the instant case, the main ground for challenging the award is that the learned Arbitral Tribunal while passing the award has not taken into consideration any evidence led by the parties, particularly, by the petitioner. The genesis of the dispute is to determine whether the petitioner was contractually liable to pay aforesaid amount i.e. Rs. 3,89,92,930/- in respect of the taxes, levies and duties towards BOP to the respondent - The learned Arbitral Tribunal, while interpreting the Clause 14 of the Contract, reached on the conclusion that the petitioner is obligated to pay the taxes and duties and there is no difference between the payment of taxes and duties in respect of manufactured goods and BOP. Taking view of the reason assigned in the interpretation, there are no error or illegality in the said interpretation of the learned Arbitral Tribunal. The learned Arbitral Tribunal has also rejected the arguments of the applicant regarding the applicable taxes and duties and held that the moment taxes and duties become applicable in respect of supplies to the respondent, they are reimbursable under Clause 14.1. That clause does not state that such taxes and duties were to be payable by the claimant directly to the Government. The expression applicable is to be understood in the context of manufacturing of goods and not with reference to the person. The sub-contractor while paying excise duty had passed on the burden to the claimant and the claimant therefore, became entitled to the payment or reimbursement thereof from the respondent. The learned Arbitral Tribunal rightly interpreted the term at actuals as none of the contractual provisions qualify for the respondent s obligation as confining to manufactured products only. On the contrary, the language is wide and all encompassing and includes BOP as well. The expression actual in this context refers the taxes, duties and levies actually paid to the exchequer. Therefore, as per the contract, there is no distinction between the respondent and the sub-contractor. The Schedule 7 does not in any way affect the tax liability of the petitioner towards the respondent. The Schedule 7 merely stated an estimate amount which may be paid to the petitioner and was not based on the actuals. The learned Arbitral Tribunal has rightly rejected the argument of the applicant on the aspect that reimbursement of taxes on account of BOP supplies was not made by the petitioner on 4th March, 2015 and 15th May, 2015. The petitioner acknowledged reimbursement of taxes and duties for BOP and such liability was not disputed/refuted by the petitioner. In Delhi Airport Metro Express Private Limited vs. Delhi Metro Rail Corporation Limited , [ 2021 (9) TMI 1479 - SUPREME COURT] , the Hon ble Supreme Court held that The limited grounds available to Courts for annulment of arbitral awards are well known to legally trained minds. However, the difficulty arises in applying the well-established principles for interference to the facts of each case that come up before the Courts. There is a disturbing tendency of Courts setting aside arbitral awards, after dissecting and reassessing factual aspects of the cases to come to a conclusion that the award needs intervention and therefore, dubbing the award to be vitiated by either perversity or patent illegality, apart from the other grounds available for annulment of the award. Hence, the law which has been settled by the Hon ble Supreme Court is that the scope of interference with an arbitral award under Section 34 of the Act is fairly limited and narrow. The Court shall not sit in an appeal while adjudicating a challenge to an award which is passed by an Arbitrator, the master of evidence, after due consideration of facts, circumstances, evidence and material before him. There are no reason to interfere in the impugned award as there is no perversity or illegality or error in the said award - petition dismissed.

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