TMI Tax Updates - e-Newsletter
May 7, 2022

Case Laws in this Newsletter:

GST Income Tax Benami Property Customs Insolvency & Bankruptcy FEMA Service Tax Central Excise Indian Laws

Articles

1. DECREE HOLDER – A FINANCIAL CREDITOR?

   By: DR.MARIAPPAN GOVINDARAJAN

2. SEBI PENALTIES – article on penalty us 15HA: Penalty for fraudulent and unfair trade practices u.s.15 HA – perception that Rs. five lakh is minimum and compulsory penalty is patently wrong. Orders imposing such penalties deserves to be challenged at appropriate forum depending on facts of case.

   By: DEVKUMAR KOTHARI

3. RECENT DEVELOPMENTS IN GST

   By: Dr. Sanjiv Agarwal

News

1. Revenue Deficit Grant of Rs. 7,183.42 crore released to 14 States

2. Exchange Rate Notification No. 40/2022 - Customs (N.T.)

3. Shri Piyush Goyal asks Indian project exporters to explore markets in the developed world

Notifications

Companies Law

1. G.S.R. 338(E) - dated 5-5-2022 - Co. Law

Companies (Prospectus and Allotment of Securities) Amendment Rules, 2022.

Income Tax

2. 49/2022 - dated 5-5-2022 - IT

Income-tax (Twelfth Amendment) Rules, 2022.

SEBI

3. SEBI/LAD-NRO/GN/2022/83 - dated 4-5-2022 - SEBI

Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2022.

Circulars / Instructions / Orders

DGFT

1. 07/2015-2020 - dated 6-5-2022

Allocation of additional quantity of 2051 MT for export of raw sugar to USA under Tariff Rate Quota (TRQ) for the US Fiscal Year 2022.

Highlights / Catch Notes

GST

• Petitioner Seeks Revival of GST Registration Amid Allegations Against Respondents; Case Unresolved Since 2003 at NCLT.

  Case-Laws - HC : Seeking revival of GST registration so that the petitioner can file GST-R1 and GST-R3B returns regularly - Removal of name of company from register of companies - In this case, there is a deliberate attempt on the part of the private respondents to close down the business and thereby impact the profits of the business carried out by the petitioner from unit B. The National Company Law Tribunal is also seized of the matter, which started in the year 2003, it has not seen the final conclusion till date. - petitioner directed to take steps to revive the GST registration, which stands cancelled. - HC
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• AAR Rules Applicant Ineligible for 12% GST Rate on Works Contract Under Notification No. 11/2017 for UPRNN Project.

  Case-Laws - AAR : Concessional rate of GST - Composite supply of works contract - the applicant is not of eligible to avail the concessional rate of GST at 12% as prescribed in of S. No. 3 (vi) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 for the impugned construction services provided by them to UPRNN. - AAR
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Income Tax

• Income-tax Rules Update: Streamlined Process for Advance Ruling Applications u/r 44E Introduced.

  Act-Rules : Form of application for obtaining an advance ruling - Manner of submission and Signing the application modified - Rule 44E of the Income-tax Rules, 1962
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• Assessment Reopening u/s 147 Challenged Due to Unaddressed Objections on Foreign Remittance; Reconsideration Ordered.

  Case-Laws - HC : Reopening of assessment u/s 147 - doubtful transactions of foreign remittances - The writ applicant in its own way has tried to explain while putting forward its objections, however, we do not find any meaningful discussion in the order disposing of the objections. In fact, none of the objections raised by the writ applicant could be said to have been taken into consideration by the Assessing Officer in a meaningful manner. - Matter restored before the AO - HC
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• Interest from Motor Accident Tribunal u/s 171 of the Motor Vehicles Act is non-taxable; no TDS required by insurers.

  Case-Laws - HC : TDS liability on Insurance companies - TDS u/s 194A -Taxability of interest awarded by the Motor Accident Claim Tribunal - Period is from the date of the Claim Petition till the passing of the award or the judgment. - The interest awarded by the Motor Accident Claim Tribunal u/s 171 of the Motor Vehicles Act 1988 is not taxable under the Income Tax Act, 1961. - The question of deduction of tax at source would arise only if the payment is in the nature of income of the payee. - HC
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• Assessment Under Income Tax Act Section 153A Faces Scrutiny for Inadequate Approval by Addl. CIT u/s 153D.

  Case-Laws - AT : Assessment u/s 153A - Valid approval given u/s 153D - additions u/s 68 r.w.s 115BBE - there is complete non-application of mind by the Ld. Addl. CIT before granting the approval. Had there been application of mind, he would not have approved the draft assessment order - AT
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• TDS Credit Allowed to Sole Legal Heir for Income from Late Father's Fixed Deposit Under Individual's PAN.

  Case-Laws - AT : TDS credit on income deducted in the PAN of his late father - TDS on fixed deposit income made in assessee's father’s name - income is offered by the assessee in his individual capacity as sole legal heir - Credit of TDS allowed - AT
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• TPO Rules Fixed Assets from Associated Enterprises Should Reflect Customs Value, Not Nil, for Fair Assessment.

  Case-Laws - AT : TP Adjustment - Purchase of fixed assets - TPO added the entire amount of fixed assets purchased by the assessee from its AE’s during the year - the fixed assets purchased by the assessee cannot be taken as NIL and the value assigned by the custom authorities are to be taken as the fair value of the fixed assets purchased by the assessee - AT
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• Property Transaction Tax Implications: Section 56(2)(vii)(b)(ii) Applies Based on Agreement Date, Not Registration Date, for AY 2013-14.

  Case-Laws - AT : Addition u/s. 56(2)(vii)(b)(ii) - difference between the stamp duty value and the consideration paid - Since, in the present case agreement was executed on 31/03/2013 i.e. during the Assessment Year 2013-14, the provisions of section 56(2)(vii)(b) of the Act as applicable to the assessment year 2013-14 would apply. Registration of agreement on the subsequent date would not alter the situation. - AT
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• Revenue's Duty to Verify Loan Repayment Claims u/s 68: Did They Fulfill Their Obligation?

  Case-Laws - AT : Addition u/s 68 - accommodation entry receipts - Had there been any doubt by the Revenue on the repayment of the loan as claimed by the assessee, it was the duty of the revenue to carry out the necessary verification. It is for the reason that the assessee has discharged its onus by furnishing the necessary details in support of the repayment of the loan. - AT
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Customs

• Current Exchange Rates for Import/Export in India: Key for Calculating Duties and Taxes on Goods.

  Notifications : Rate of exchange of one unit of foreign currency equivalent to Indian rupees - For Import and Export of goods - Notification
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• Customs Broker Admits to Role in Smuggling Firecrackers and Bicycle Parts; Evidence Leads to Penalties and Confiscation.

  Case-Laws - AT : Smuggling - prohibited goods - firecrackers as well as bicycle parts - confiscation - penalty - The appellants admission that he was the Customs Broker for Orient Overseas Shipping Line and Rahul Traders and the admission about visiting Delhi in the month of August, the relevant time for the clearance of the impugned consignment rather are sufficient admission to accept the entire above testimony as evidence against him; that he has tried to level allegation on Shri Rahul Sehgal. - AT
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FEMA

• Exim Bank of India Grants $190M Credit Line to SBM for Mauritius Infrastructure Projects.

  Circulars : Exim Bank's Government of India supported additional Line of Credit (LoC) of USD 190 million to the SBM (Mauritius) Infrastructure Development Company Ltd - Circular
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Corporate Law

• Private Placement Offers to Bordering Nations Need Prior Approval u/r 14 of Companies Rules 2014.

  Act-Rules : Private Placement - Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014 - offer or invitation of any securities under this rule shall be made to a body corporate incorporated in, or a national of, a country which shares a land border with India, shall be made only after prior approval
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• New 2022 Amendment: Companies Must Include Additional Declaration in Form No. SH-4 for Share Capital & Debentures Transactions.

  Notifications : Companies (Share Capital and Debentures) Amendment Rules, 2022 - New Declaration requirement added to Form No. SH-4 - Notification
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Direct Taxes

• High Court Rules Benami Transaction Provisions in Amendment Act 2016 Not Retrospective for Pre-November 2016 Deals.

  Case-Laws - HC : Benami transaction - Beneficial owner of property - beneficial owner for its immediate or future benefit, direct or indirect - Provisional attachment order - Section 2(9)(A) and Section 2(9)(C) can only have effect prospectively. Central Government has notified the date of coming into force of the Amendment Act of 2016 as 01.11.2016. Therefore, these two provisions cannot be applied to a transaction which took place prior to 01.11.2016. - HC
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Indian Laws

• Supreme Court: Exhaust Arbitration Act Appeals Before Filing Writ Petition Under Articles 226/227.

  Case-Laws - SC : Arbitration Award - Maintainability of petition before the HC - availability of alternative remedy of appeal - Against the award made by the learned Arbitrator made under the Act and against an order passed by the learned trial Court making the award a decree and without availing the alternative statutory remedy available by way of appeal under the provisions of the Act, the High Court ought not to have entertained the writ petition under Articles 226 and 227 of the Constitution of India. - SC
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Service Tax

• Challenge to Service Tax on Liquidated Damages for Contract Non-Compliance u/s 66E(e) of the Finance Act.

  Case-Laws - AT : Levy of service tax - liquidated damages/penalty collected for non-compliance of the terms of the contracts - It is not possible to sustain the view taken by the Commissioner that since the delivery was not made within the time schedule, the Appellant agreed to tolerate the same for a consideration in the form of delay in delivery charges, which would be subjected to service tax under section 66E(e) of the Finance Act. - AT
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• Service Tax on Compensation for Coal Block Cancellations: Unfair Comparison to Land Acquisition and Retirement Payments.

  Case-Laws - AT : Levy of service tax - Consideration for tolerating the act of cancellation of the coal blocks - Both the cancellation of the allocation of the blocks and the receipt of compensation are by operation of law. They are like the receipt of a compensation when one’s land is acquired by the Government in public interest or the payment to a Government employee of an amount equal to the salary for unused leave at the time of his/her retirement. It is unthinkable to say that the land-owner has tolerated the acquisition of his land as per an agreement and charge Service Tax on the compensation - AT
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• Service Tax Not Applicable on Liquidated Damages for Breach of MGT Agreement, No Service Activity Involved.

  Case-Laws - AT : Levy of service tax - liquidated damages/compensation charges received by the Appellant towards the breach and non-compliance of Minimum Guaranteed Tonnage (MGT) as per Agreement - The recovery of liquidated damages/penalty from the other party in the instant case cannot be said to be towards any service per se, as the Appellant did not carry on any activity to receive the ‘compensation charges’. Hence, scope of levy of Service Tax cannot be extended to apply to situations where the actual activity was non-existent. - AT
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Central Excise

• Exemption Granted for Fatty Acids in Palm Oil Production Under Notification No. 89/1995-CE; Order Misaddressed Tin Containers Issue.

  Case-Laws - AT : Waste or not - benefit of N/N. 89/95-CE - fatty acids arising in course of manufacture of refined palm oil and Vanaspati ghee - The Appellants are entitled to exemption contained in Notification No.89/1995-CE on the products which arise incidentally to the manufacture of vegetable oils - the impugned order misplaced itself and the findings vis-àvis tin containers/HDPE jars manufactured and captively consumed in the factory - AT
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• Medicaments Testing Integral to Manufacturing; Raw and Packaging Materials Eligible for CENVAT Credit as Production Inputs.

  Case-Laws - AT : CENVAT Credit - testing of medicament - The process of testing of the medicaments is an integral part which is used in relation to manufacturer of the final product. Accordingly, the raw/ packaging material which is used in manufacturing and which goes for testing are indeed the inputs which are used in or in relation of manufacturing of final products - Credit allowed - AT
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Case Laws:

• GST

• 2022 (5) TMI 292
  Seeking grant of Bail - offences punishable under Sections 132/134 of the Central Goods and Services Tax, 2017 - amount of Rs.4 Crores has been deposited with the concerned authorities and the appellant has been enjoying the facility of ad-interim bail - HELD THAT:- The appellant shall continue to be on bail on the same conditions on which he was allowed the facility of ad-interim bail. The security and documents of surety furnished at that stage shall continue to be operative as conditions of bail - appeal allowed.

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• 2022 (5) TMI 291
  Maintainability of petition - availability of efficacious alternate remedy of appeal - Section 107 of GST Act, 2017 - HELD THAT:- Undisputedly, upon scrutiny, notice under Section 61, notice in FORM GST ASMT-10 was issued to the petitioner on 11.08.2021 followed by show-cause notice under Section 73 of CGST/ SGST Act and the respondent authority by impugned order had determined the tax liabilities, interest and penalty upon the petitioner under Section 73(9) of CGST/ SGST Act and made demand of the amount mentioned therein. Section 107 of the GST Act, 2017 provides for appeal to appellate authority against the order of adjudicating authority. The order impugned is passed by adjudicating authority, hence, the order is to be assailed before the appellate authority under Section 107 of GST Act, 2017. Petitioner is having statutory alternate remedy of challenging the impugned order. The petitioner instead of availing the statutory remedy available to it of filing appeal under Section 107 of GST Act, 2017 has filed this writ petition. In the case at hand, respondent issued notice under Section 61 of GST Act, calling explanation upon the discrepancies found by the authority to which the petitioner did not reply, thereafter, show-cause notice under Section 73 of CGST/SGST along with the summary of show-cause notice dated 11.10.2021 was also issued - In the facts of the case, this Court is of the opinion that no exceptional circumstances as mentioned above are available for entertaining this writ petition. The writ petition being devoid of any substance which is liable to be and is hereby dismissed.

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• 2022 (5) TMI 290
  Seeking restoration of GST registration of petitioner - compensation for loss of business and reputation - liability for damages and compensation - HELD THAT:- Counsel for the respondents says that a reasonable period could be accorded for this purpose. The writ petition is disposed off.

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• 2022 (5) TMI 289
  Seeking revival of GST registration so that the petitioner can file GST-R1 and GST-R3B returns regularly - Removal of name of company from register of companies - power of Registrar to strike off the name - name of the company was struck off primarily on the ground that the returns were not filed - Section 248 of the Companies Act, 2013 - HELD THAT:- In this case, there is a deliberate attempt on the part of the private respondents to close down the business and thereby impact the profits of the business carried out by the petitioner from unit B. The National Company Law Tribunal is also seized of the matter, which started in the year 2003, it has not seen the final conclusion till date. The writ petition that has been filed by the petitioner stands allowed by directing the petitioner to take steps to revive the GST registration, which stands cancelled.

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• 2022 (5) TMI 288
  Maintainability of petition - availability of alternative remedy of appeal - sufficient opportunity for hearing not provided - ex-parte order - violation of principles of natural justice - HELD THAT:- This Court, notwithstanding the statutory remedy, is not precluded from interfering where, ex facie, it is opined that the order is bad in law. This is for two reasons- (a) violation of principles of natural justice, i.e. Fair opportunity of hearing. No sufficient time was afforded to the petitioner to represent his case; (b) order passed ex parte in nature, does not assign any sufficient reasons even decipherable from the record, as to how the officer could determine the amount due and payable by the assessee. The order, ex parte in nature, passed in violation of the principles of natural justice, entails civil consequences. Petition disposed off.

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• 2022 (5) TMI 287
  Concessional rate of GST - Composite supply of works contract - construction services provided by the applicant to UPRNN - Applicability of S.No. 3 (vi) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended - classification and rate of GST - HELD THAT:- In the instant case there is Composite supply of works contract provided to UPRNN, a Government Entity by way of construction of a clinical establishment i.e. a hospital. The Sr. No. 3 (vi) mentioned above will not be applicable to the activity to be undertaken by the applicant at a future date. The Authorised representative of the applicant also agreed that the provisions of Sr. No. 3 (vi) will not be applicable to applicant s activities in view of the amendment brought about in Notification No. 11/2017-CTR dated 28.06.2017 vide Notification No. 15/2021 - CTR dated 18.11.2021 (with effect from 01.01.2022) - the applicant is not of eligible to avail the concessional rate of GST at 12% as prescribed in of S. No. 3 (vi) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 for the impugned construction services provided by them to UPRNN. If the impugned service is not covered under Sr. No. 3 (vi) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, then what is the appropriate classification and rate of GST to be charged by the applicant? - HELD THAT:- Since the impugned service is expected to commence only at a future date, in view of the amended Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, the impugned activity is not covered under Sr. No. 3 (vi) mentioned above and therefore the said activity will be covered under the residuary clause (xii) of Sr. No. 3 of Notification No. 11/2017- mentioned above and the rate of GST to be paid by the applicant will be 18% of the taxable value.

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• 2022 (5) TMI 286
  Concessional rate of GST - Composite supply of works contract - construction services provided by the applicant to UPRNN - Applicability of S.No. 3 (vi) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended - classification and rate of GST - HELD THAT:- In the instant case there is Composite supply of works contract provided to UPRNN, a Government Entity by way of construction of a clinical establishment i.e. a hospital. The Sr. No. 3 (vi) mentioned above will not be applicable to the activity to be undertaken by the applicant at a future date. The Authorised representative of the applicant also agreed that the provisions of Sr. No. 3 (vi) will not be applicable to applicant s activities in view of the amendment brought about in Notification No. 11/2017-CTR dated 28.06.2017 vide Notification No. 15/2021 - CTR dated 18.11.2021 (with effect from 01.01.2022) - the applicant is not of eligible to avail the concessional rate of GST at 12% as prescribed in of S. No. 3 (vi) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 for the impugned construction services provided by them to UPRNN. If the impugned service is not covered under Sr. No. 3 (vi) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, then what is the appropriate classification and rate of GST to be charged by the applicant? - HELD THAT:- Since the impugned service is expected to commence only at a future date, in view of the amended Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, the impugned activity is not covered under Sr. No. 3 (vi) mentioned above and therefore the said activity will be covered under the residuary clause (xii) of Sr. No. 3 of Notification No. 11/2017- mentioned above and the rate of GST to be paid by the applicant will be 18% of the taxable value.

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• Income Tax

• 2022 (5) TMI 285
  Stay of demand - seeking refund which was recovered in excess of 20% of the total disputed tax demand - stay on recovery of outstanding tax demand subject to fulfilment of appropriate conditions - HELD THAT:- Refund has been adjusted against the outstanding tax demand by the Authority without following the due procedure prescribed under the said Section inasmuch as no notice or opportunity of pre-decisional hearing had been provided to the petitioner prior to such adjustment of refund, this Court is of the opinion that the petitioner is entitled to refund of adjustments made in excess of 20% of the disputed tax demands and Rs.30,000/-set off of refunds against tax payable. Consequently, this Court directs the respondents to verify the facts stated in the writ petition and if it finds them to be true and correct then refund the amount adjusted in excess of 20% of the disputed tax demands for the Assessment Year 2012-13 as well as Rs.30,000/-as mentioned in the intimation under Section 245 of the Act to the petitioner within four weeks. The Appellate Authority is also directed to decide the petitioner s appeal challenging the order dated 27th November, 2019 within a year.

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• 2022 (5) TMI 284
  Reopening of assessment u/s 147 - notice in the name of company amalagamated - denial of adequate opportunity to file response to the said show cause notice-cum-draft assessment orders - HELD THAT:- Having heard learned counsel for the parties, this Court is of the view that even if the submission of learned counsel for the Respondents is accepted, then also the impugned assessment orders are liable to be set aside as the Petitioner was not given adequate opportunity to file response to the said show cause notice-cum-draft assessment orders. Consequently, as there has been a violation of principle of natural justice, the impugned assessment orders as well as demand and penalty notices dated 31st March, 2022 are set aside and the matter is remanded back to the Assessing Officer for fresh adjudication. The petitioner shall file its response to the show cause notices dated 30th March, 2022 within two weeks.

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• 2022 (5) TMI 283
  Reopening of assessment u/s 147 - doubtful transactions of foreign remittances - Absence of opportunity given to explain the transaction - HELD THAT:- The first and the foremost thing we take notice of is that whatever has been explained by Mr. Bhatt on the basis of the three documents does not figure in the reasons assigned by the Assessing Officer. Therefore, in such circumstances, the writ applicant could be said to have had no opportunity to offer its explanation as regards the transactions which Mr. Bhatt is talking about. The reasons assigned by AO are altogether on a different footing. The writ applicant in its own way has tried to explain while putting forward its objections, however, we do not find any meaningful discussion in the order disposing of the objections. In fact, none of the objections raised by the writ applicant could be said to have been taken into consideration by the Assessing Officer in a meaningful manner. We want the Assessing Officer to undertake a fresh exercise for the purpose of looking into and understanding the objections raised by the writ applicant. We are of the view that the writ applicant should be given an opportunity to even meet with what has been pointed today to us by Mr. Bhatt i.e. the transactions between M/s. Siddhi Cooperative Bank Limited, Mili Corporation and also Yashoda Enterprises and in turn with Shimmer Exim Private Limited and in turn the transactions with Shimmer Exim Private Limited undertook with the ICICI Bank Limited. If what has been pointed out by the Revenue is also to be considered as a part of the reasons, then the writ applicant must be afforded an opportunity to offer its explanation. We are not asking the Assessing Officer to furnish fresh set of reasons. Mr. Soparkar has been able to understand what has been conveyed to us by Mr. Bhatt. We leave it for the writ applicant to raise its objections even with regard to the three documents, which have been placed on record. We quash and set aside the order passed by the Assessing Officer disposing of the objections. We remit the matter to the Assessing Officer for fresh consideration of all the objections, which have been raised by the writ applicant and / or on record and we also want the Assessing Officer to consider the objections that may be offered by the writ applicant with respect to the materials which has been brought to our notice today by the Revenue.

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• 2022 (5) TMI 282
  TDS liability on Insurance companies - TDS u/s 194A - Taxability of interest awarded by the Motor Accident Claim Tribunal - interest granted on compensation or enhanced compensation - Taxability of certain income u/s 145B - liability for TDS shall be attracted in respect of any income credited by way of interest on the compensation amount awarded by the MACT - Whether interest allowed by the MACT in the accident case on the amount of award can be termed as the Income from interest or the same is a part of compensation for the delay caused in the legal proceedings? - Whether interest allowed on the compensation amount can be equated with interest earned on the principal amount? - Whether the interest awarded by the MACT is not a part of compensation? HELD THAT:- Compensation received under the Motor Vehicles Act is either on account of loss of earning capacity on account of death or injury or on account of pain and suffering and such receipt is not by way of earning or profit. The award of compensation is on the principle of restitution to place the claimant in the same position in which he would have been as the loss of life or injury would not have been suffered. Our final conclusion may be summarized as under: [a] The interest awarded by the Motor Accident Claim Tribunal u/s 171 of the Motor Vehicles Act 1988 is not taxable under the Income Tax Act, 1961. [b] The interest awarded in the motor accident claim cases from the date of the Claim Petition till the passing of the award, or in the case of Appeal, till the judgment of the High Court in such appeal, would not be exigible to tax, not being an income. This position would not change on account of clause (b) of Section 145A of the Act as it stood at the relevant time amended by Finance Act, 2009, which provision now finds place in sub-section (1) of Section 145B of the Act. Neither clause (b) of Section 145A, as it stood at the relevant time, nor clause (viii) of sub-section (2) of Section 56 of the Act make the interest chargeable to tax, whether such interest is income of the recipient or not. Section 194A of the Act is only a provision for deduction of tax at source. Any provision for deduction of tax at source in the said section would not govern the taxability of the receipt. The question of deduction of tax at source would arise only if the payment is in the nature of income of the payee. [c] The Insurance Companies or the owners of the motor vehicles depositing the requisite amount in due compliance with the awards of the Motor Accident Claims Tribunals shall deposit the full amount with the Tribunal and shall not deduct tax u/s 194A of the Income Tax Act on the interest awarded by the Motor Accident Claims Tribunal. We may clarify that the aforesaid observations and conclusions would apply to interest granted on compensation or enhanced compensation awarded by the Motor Accident Claims Tribunal or the High Court from the date of the Claim Petition till the passing of the award or the judgment. Further, the interest that may be paid for the delay in depositing the awarded amount, would not form part of the compensation and, therefore, would fall in the bracket of interest income and would be exigible to tax under the normal provisions.

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• 2022 (5) TMI 281
  Benefit of exemption claimed by the assessee u/s 10(37) on the compulsory acquisition of agricultural land under the Land Acquisition Act - CIT-A jurisdiction u/s 251 (2) in treating the subject agricultural land as capital asset u/s 45(5) - CIT-A held that land in question is a Capital Asset , whose acquisition by state Government is a transfer of capital asset wherein the principal compensation received by the appellant is chargeable to under the head Capital Gains u/s 45 and interest on enhanced compensation is to be treated as Income from Other Sources u/s 56 - whether interest awarded u/s 28 of the Land Acquisition Act is part of compensation is taxable or not? - HELD THAT:- There are divergent views on this taxability of interest on the enhanced compensation awarded u/s 28 of the Land Acquisition Act wherein the Hon ble Punjab Haryana High Court has consistently taking a view that it is an income to be treated under the head income from other sources . The Hon ble Gujarat High Court has decided this issue in favour of the assessee following the decision of Hon ble Supreme Court in the case of Ghanshyam[ 2009 (7) TMI 12 - SUPREME COURT] Since the AO of the present case falls under the jurisdiction of Hon ble Delhi High Court, therefore following the dictum that, if one High Court is in favour of the assessee, then in absence of any jurisdictional High Court, that should be followed in favour of the assessee. Thus, ratio of Hon ble Punjab Haryana High Court may not have any binding precedent. Thus, the interest on the enhanced compensation u/s 28 of the Land Acquisition Act is not taxable. Whether the land was an agricultural land or not?- It cannot be inferred even remotely that the land which was acquired by the Government was not an agricultural land. The observation and the finding of the ld. first appellate authority despite noting down these evidences does not have any basis to negate these evidences nor any independent enquiry has been made to counter these evidences. In fact the entire impugned order revolves around on various case laws and the facts discussed herein which has been distinguished by ld. counsel before us. However, we do not find it relevant to discuss here, as none of the case laws are relevant for the present case in the light of these evidences. Once the Land Acquisition Officer as well as court have awarded the compensation treating to be an agricultural land and not only that, all the Revenue departments have certified that it was an agricultural land and substantial proof has been given that agricultural activities were being carried out, then to say that it was a commercial land and not an agricultural land, is unjustifiable. Therefore, we hold that firstly, it was an agricultural land on which the compensation has been awarded by the court; and secondly, the interest received on enhanced compensation u/s 28 of the Land Acquisition Act is part of compensation and hence is not taxable, accordingly assessee is entitled for exemption u/s 10(37) of the Act. - Decided in favour of assessee.

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• 2022 (5) TMI 280
  Disallowance u/s 14A read with rule 8D - disallowance against the exempted income - HELD THAT:- As there was no suo-moto disallowance made by the assessee, there was no option available with the revenue except to make the disallowance in the manner as provided under rule 8D of income tax rule. However, we find that the own fund of the assessee exceeds the investments. Thus, a presumption can be drawn that the assessee has made investment out of its own fund without involving any borrowed fund. The amount of own fund of the assessee stands at Rs. 2,94,057.78 Lacs as on 1st April 2013 and 31 March 2014 at Rs. 3,29,483.04 Lacs and likewise the amount of investment as on 1st April to 13 and 31 March 2014 stand at Rs. 52,602.09 Lacs and 65,610.45/- lacs respectively. There is no ambiguity, that the own fund of the assessee exceeds the investments - See TORRENT POWER LTD [ 2014 (6) TMI 185 - GUJARAT HIGH COURT] - thus there cannot be any disallowance of interest expenses against the impugned exempted income. - Decided in favour of assessee. Disallowance of administrative expenses as per rule 8D - The decision for making the investments in the shares is a very complex decision which are generally taken by the top management. Likewise, a lot of research is done before taking the decision for making the investments which is generally carried out by the staff. Similarly, in a meeting the expenses on refreshment, travelling, patrol and stationary are generally incurred. The services of the accountants are also used to record the necessary transactions in the books of accounts. The books of accounts are generally audited and therefore the services of the auditors also utilized indirectly for making the investments in equity shares. Thus, we hold that the argument of the learned AR is not acceptable that there was no expense incurred with respect to the impugned investments. Accordingly, we hold that the disallowance made by the AO on account of administrative expenses in pursuance of the provisions of rule 8D is correct and as per the provisions of law. Investments which have yielded the dividend income in the year under consideration should only be considered for the purpose of making the disallowance under section 14A read with rule 8D of income tax rule. Thus we hold that the disallowance with respect to administrative expenses has to be made as per the provisions of law and in the manner as discussed above against the exempted income. Hence the ground of appeal of the Revenue is partly allowed. Depreciation on account of capitalization of certain administrative expenses capitalized in the earlier year - HELD THAT:- Question whether the assessee is eligible for depreciation on the amount of administrative expenses which were capitalized in the earlier years is to be answered in positive. It is for the reason that the AO himself has allowed the depreciation at the rate of 15% which were capitalized in the year under consideration by attributing to the capital work in progress. Accordingly, the amount which were capitalized in the earlier year and brought forward after claiming the depreciation in the respective year is eligible for depreciation. Thus we do not find any infirmity in the order of the learned CIT-A. - Decided against revenue. ESOP compensation expenses - Disallowance u/s 37(1) - HELD THAT:- As decided in own case [ 2021 (8) TMI 1143 - ITAT AHMEDABAD] Special Bench in the case of Biocon Ltd.[ 2013 (8) TMI 629 - ITAT BANGALORE] where it has been held that ESOP compensation expenditure is not a notional expenditure but an allowable expenditure under Section 37(1) of the Act. It has further been held that Special Bench that object of issuing of shares at a lower issue price than the market price to the employees under ESOP must be taken into consideration and thereby it cannot be treated as short receipt of securities premium but a cost on account of compensation of employees. Thus, principally the claim on account of deduction of ESOP compensation is allowable but in our considered opinion it would be in the fitness of things to remit the issue to the file of the Ld. AO to verify the actual expenses incurred by the appellant and to allow the same

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• 2022 (5) TMI 279
  Assessment u/s 153A - Valid approval given u/s 153D - additions u/s 68 r.w.s 115BBE - Whether approval given u/s 153D is not in accordance with law, the assessment order framed u/s 153A r.w.s.143(3) of the Act should be quashed? - HELD THAT:- Function to be performed by the Addl. CIT or CIT in granting previous approval u/s 153-D of the Act, requires to adopt judicial approach and to apply his mind independently and to conduct the enquiry himself on the entire facts, material, evidence and proposal put up to him for approval in the light of the material placed and relied upon by the Assessing Officer because where any act or function requires application of mind and judicial discretion or approach by any authority it partakes and assumes the character and status of judicial or at least quasi-judicial act, particularly because their Act or function is likely to affect the rights of affected persons. As the question of validity of the approval goes to the root of the case and can vitiate the assessment proceedings itself and therefore the said power vested in the Commissioner to grant or not to grant approval is coupled with a duty and cannot be exercised casually and in a routine manner. In the present case, we have no hesitation in stating that there is complete non-application of mind by the Ld. Addl. CIT before granting the approval. Had there been application of mind, he would not have approved the draft assessment order, where the returned income has been taken at Rs.Rs.11,00,460/- as against the returned income of Rs.87,20,580/-. Similarly, when the total assessed income as per the AO comes to Rs.16,69,42,560/-, the Addl. CIT could not have approved the assessed income at Rs.1,65,07,560/- had he applied his mind. The addition of Rs. 15,04,35,000/- made by the AO in the instant case is completely out of the scene in the final assessed income shows volumes. Even the factual situation is much worse than the facts decided in the case of Sanjay Duggal [ 2021 (1) TMI 909 - ITAT DELHI] . In that case, at least the assessment folders were sent whereas in the instant case, as appears from the letter of the Assessing Officer seeking approval, he has sent only the draft assessment order without any assessment records what to say about the search material. As mentioned earlier, there are infirmities in the figures of original return of income as well as total assessed income and the Addl. CIT while giving his approval has not applied his mind to the figures mentioned by the AO. Therefore, approval given in the instant case by the Addl. CIT, in our opinion, is not valid in the eyes of law. We, therefore, hold that the approval given u/s 153D has been granted in a mechanical manner and without application of mind and thus it is invalid and bad in law and consequently vitiated the assessment order for want of valid approval u/s 153D - Decided in favour of assessee.

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• 2022 (5) TMI 278
  TDS credit on income deducted in the PAN of his late father - TDS on fixed deposit income made in assessee s father s name - income is offered by the assessee in his individual capacity as sole legal heir - assessee is the only legal heir of his deceased father and his mother is also pre-deceased her husband - HELD THAT:- As relying on case of Naresh Bhavani Shah (HUF) [ 2017 (7) TMI 819 - GUJARAT HIGH COURT ] it is crystal clear that there are provisions of under the IT Act; namely, section 199 of the IT Act, 1961 and Rule 37BA of the IT Rules, 1962 and proper mechanism is also provided under the Act and Rules. Thus,the assessee is entitled to get credit on TDS which was deducted in the PAN of his late father. However, the entire income is offered by the assessee in his individual capacity as sole legal heir. Apart from that, the assessee also paid self assessment tax on the above income. Thus, the grounds of appeal raised by the assessee allowed.

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• 2022 (5) TMI 277
  Reopening of assessment u/s 147 - information received by department that the assessee has made investment in the property during the year under consideration - creditworthiness of the lenders and the genuineness of these loan transactions - HELD THAT:- The assessee has stated that department can obtain bank statement of these lenders directly from the bank, as due to passage of time the assessee is not able to obtain these bank statements. One of the purposes of Public Authorities is to assist Public in their genuine and bonafide difficulties, as Public Authorities are meant to serve public. The assessee has also produced notorized affidavit dated 18.04.2022, of son of Mr. Jehangir Alam(since deceased), wherein it is averred by son of Mr. Jehangir Alam (since deceased) that his father has given cheque of Rs. 5 lacs to his friend s brother-in-law, namely Shri Sanjay Kumar, in the year 2009. This is an additional evidence filed by the assessee before the tribunal which requires verification by authorities below. Thus we are inclined to restore the matter back to the file of ld. CIT(A) for fresh adjudication on merits of the issues concerning loans aggregating to Rs. 10 lacs raised from Mr. Jeetender Kumar (Rs. 5,00,000) and from Mr. Jehangir Alam(Rs. 5,00,000/-) respectively,in accordance with law. Needless to say that ld. CIT(A) will give proper and adequate opportunity of hearing to the assessee in set aside remand proceeding in accordance with the principle of natural justice and in accordance with law. CIT(A) is directed to pass reasoned and speaking order.

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• 2022 (5) TMI 276
  Addition u/s. 68 - unsecured loans - HELD THAT:- There is nothing on record suggesting that the assessee had sought explanation from these parties regarding cash deposits. Therefore, in the absence of the inquiry from the concerned parties about the source of deposits of such amount, we are of the considered view that the authorities below erred in making addition merely on the ground of suspicion. As in the case of Smt. Seema Singhal, she has been withdrawing salary income and rental income to make the payment. In the case of M/s. S.K. Singhal (HUF), it was stated that lender had deposited only Rs. 10,000/- in cash and rest of sum of Rs. 2,90,000/- was credited through account payee cheque on 12.06.2014 and Rs. 30,000/- deposited in cash in the bank on 12.06.2014. Further, in the case of Smt. Shalika Singhal, it was stated that a sum of Rs. 30,000/- was received as a professional income in cash which was deposited out of the professional income. It is seen that the authorities below have not commented and made any inquiry on this explanation of the assessee. We find that there is a categorical submission by the assessee that in the case of lenders HUF, the amount was deposited through account payee cheque which was recorded as cash deposits by the assessing authority. Therefore, under these facts, additions made and sustained by the authorities below was in a mechanical manner without bringing on record the correct facts. Hence, additions made by the AO are hereby deleted. Ground raised by the assessee is allowed.

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• 2022 (5) TMI 275
  Reopening of assessment u/s 147 - HELD THAT:- Assessment was reopened on the basis of the information available with the Assessing Officer regarding concealment of income by the assessee. He, therefore, submitted that reopening is justified under the facts and circumstances of the present case. The assessee has not provided any supporting evidence in respect of the ground taken by the assessee. Therefore, in the absence of any supporting evidence,we do not see any reason to interfere in the finding of CIT(A). Ground is dismissed. Non-providing opportunity to the assessee before transferring the jurisdiction by the Assessing Officer from Ward 1(1) Noida to Circle 71(1), New Delhi - HELD THAT:- The assessee has not filed any evidence in support of the allegation that he was not given opportunity before transfer of jurisdiction u/s.127 of the Act. In the absence of such evidence I do not see any merit in the ground raised by the assessee. Accordingly, ground no. 3 is dismissed. Issuance of notice u/s. 143(2) before filing of return of income in response to the notice u/s. 148 - HELD THAT:- Assessing Officer in the assessment order has categorically stated that Shri R.K. Tayal, CA and AR of the assessee attended the assessment proceedings and filed copy of ITR and thereafter statutory notice u/s. 143(2) of the Act was issued on 13.9.2017. Hence, this ground is devoid of any merit and stands rejected accordingly.

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• 2022 (5) TMI 274
  Disallowance u/s. 40(a)(ia) - Interest Paid to Non-banking Finance Company (NBFCs) without deduction of TDS - HELD THAT:- Assessee had availed loans from the aforesaid three NBFCs. Further, the learned CIT(A) also refused to grant any relief to the assessee on this issue even when the assessee had furnished the certificate in Form no.26A, in respect of Tata Capital Financial Services Ltd., and Reliance Capital Ltd. The second proviso to section 40(a)(ia) of the Act inserted by Finance Act, 2012, w.e.f. 01.04.2013, provides that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII B on any such sum but is not deemed to be an assessee in default under the first proviso to section 201(1) of the Act, then, for the purpose of this sub clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the payee. Assessee though has taken the plea on the basis of second proviso to section 40(i)(ia) of the Act and has also furnished certificates in Form no.26A in respect of two NBFCs, however, no relief was granted by the learned CIT(A) and disallowance made by the Assessing Officer was upheld. Now in the present appeal, the assessee by way of additional evidences has produced copies of Form no.26A in respect of all the three NBFCs in support of its aforesaid plea based on second proviso to section 40(a)(ia) of the Act. Additional evidences as filed by the assessee are admitted and the Assessing Officer is directed to verify the details as submitted before us. We further direct that if it is found that the NBFCs have taken into account the sum received as interest from the assessee while computing its taxable income in the return of income filed, then, to that extent, relief be granted to the assessee as per second proviso to section 40(a)(ia) of the Act. With above directions, this issue is restored to the file of the Assessing Officer for de novo adjudication, and the impugned order passed by the learned CIT(A) is set aside. Appeal by the assessee is allowed for statistical purpose.

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• 2022 (5) TMI 273
  Reopening of assessment u/s 147 - voluntary disallowance under section 14A while computing the total taxable income - HELD THAT:- The assessment was reopened for making disallowance in as much as the disallowance under section 14A of the Act has already come across under section 143(1) of the Act as well as under section 143(3) of the Act without any new tangible material on record. Hon ble Supreme Court in the case of CIT v. Kelvinator of India Ltd [ 2010 (1) TMI 11 - SUPREME COURT] as well as the decision of the Hon ble Bombay High Court in the case of Marico Ltd.. [ 2019 (8) TMI 1337 - BOMBAY HIGH COURT] we held that the reopening is invalid and the assessment order passed under section 143(3) r.w.s. 147 of the Act is quashed. Once we have quashed the assessment order under section 143(3) r.w.s. 147 of the Act, the appeal preferred by the Revenue against the order passed by the ld. CIT(A) remains academic, no adjudication is required and liable to be dismissed and accordingly dismissed the appeal of the Revenue.

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• 2022 (5) TMI 272
  TP Adjustment - ITEs Segment on transaction with Colt Luxembourg - whether the margins accepted by MAP to be applied or not? - whether margin accepted in MAP resolutions i.e. 15.50% should be applied to bench mark the ITEs services rendered by the assessee to Colt Luxembourg as against the margin of 32.24% computed by the Ld. TPO? - HELD THAT:- As relying on the case of Amazon Development Centre (India) (P.) Ltd. [ 2018 (5) TMI 343 - ITAT BANGALORE ] and CGI Information System Management Consultants (P) Ltd. [ 2017 (5) TMI 777 - ITAT BANGALORE ] in the MAP Resolution, the margin accepted was 15.50% , we direct the AO/TPO to apply to benchmark ALP at 15.50% with respect to the ITEs segment on transaction with Colt Luxembourg. Accordingly, we allow the Assessee s Grounds of Appeal No. 1 to 13. Interest on receivables - computing notional interest on the delayed receipt of payment in case of certain receivables with AE s at PLR plus 300 basis points - DRP in its order directed the Ld. TPO to apply interest in keeping with safe harbor regulations i.e. SBI base rate on 30.06.2009 plus 300 basis points which amounted to 14.75% and the addition got revised - HELD THAT:- As in the MAP Resolution entered into between UK and Indian Authorities in respect of the addition pertaining to UK got settled at 3 months average Euribor plus 200 basis points applied on receivables beyond 90 days, we direct the AO/TPO to apply 3 months average Euribor plus 200 basis points on the receivables received beyond 90 days in respect of outstanding from Colt Luxembourg. Accordingly, allow the Grounds No. 14 to 16 for statistical purpose. Purchase of fixed assets - TPO added the entire amount of fixed assets purchased by the assessee from its AE s during the year - DRP in its order directed the TPO to accept the value of fixed assets in case of those invoices from AE where it is mentioned that, they have been valued at the present depreciated value of equipment - HELD THAT:- In the case of Assistant Commissioner of Income Tax Vs. Coastal Energy Pvt. Ltd, Chennai [ 2011 (7) TMI 154 - ITAT, CHENNAI ] it is held that, the custom authorities are assigning the value to imported goods on the basis of scientifically formulated methods and they are responsible for determining a fair value of the imported goods. By considering the facts and circumstances of the case, we are of the opinion that, the fixed assets purchased by the assessee cannot be taken as NIL and the value assigned by the custom authorities are to be taken as the fair value of the fixed assets purchased by the assessee - Accordingly, we allow the Assessee s Grounds of Appeal No. 17 18. Levying interest u/s 234B and 234C on the additional income agreed as per the Advance Pricing Agreement entered between the appellant and the Central Board of Direct Taxes and offered to tax by the appellant in the modified return of income u/s 92CD(1) - HELD THAT:- As relying on case of Prime Securities Ltd. Vs. Assistant Commissioner of Income Tax (Investigation) [ 2010 (12) TMI 475 - BOMBAY HIGH COURT ] we hold that, the levy of interest u/s 234B and 234C of the Income Tax Act on additional income agreed as per advance pricing agreement entered between appellant and the CBDT is illegal. Ergo, we allow the additional grounds of appeal.

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• 2022 (5) TMI 271
  Disallowance of employee s contribution of PF and ESI deposited belatedly but before due date of filing of return of income u/s 139(1) - HELD THAT:- Where Assessee had paid employees contribution of PF and ESIC, though beyond due date(s) under respective Acts but prior to due date of filing the Return of income under sec. 139(1) of IT Act, the payments cannot be disallowed u/s. 43B. Respectfully following the order of this Bench in the case of Sanjay Porwal [ 2022 (4) TMI 898 - ITAT JAIPUR ] the disallowance made on account of employees contribution towards PF ESI deposited before due date of filing of return of income u/s 139(1) of the Act is deleted. - Decided in favour of assessee.

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• 2022 (5) TMI 270
  Delayed payments of employees contribution to ESI and PF invoking the provisions of section 36(1)(va) - addition on the basis of the amendment effected by the Finance Act, 2021, to section 43B of the Act by insertion of Explanation-5 and to section 36(1)(va) of the Act by insertion of Explanation-2 - HELD THAT:- In view of the aforestated decisions of the Ajay Piplani [ 2021 (10) TMI 1280 - ITAT] And M/S JUPITER AQUA LINES PVT. LTD. [ 2021 (11) TMI 761 - ITAT CHANDIGARH] therefore the contention of the Ld. DR before us that the amendment to section 36(1)(va) of the Act is retrospective is dismissed. Also since no facts distinguishing the present cases from those decided by the ITAT have been pointed out by the Ld. DR before us and admittedly the amounts of employees contribution to ESI and PF stood paid before the due date of filing of return of income, the issue of disallowance on account of delayed payments of employees contribution to ESI and PF is squarely covered by the aforesaid decisions, following which the disallowance made of ESI/PF employees contribution u/s. 36(1)(va) is deleted. - Decided in favour of assessee.

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• 2022 (5) TMI 269
  Assessment u/s 153A - Disallowance u/s 14A - HELD THAT:- We observe that the Assessing Officer made the disallowance u/s 14A, which was already made in the original assessment, these additions were general additions which is not based on the material found during the search. It is fact on record that there is no incriminating material found during the search and Assessing Officer is allowed to make additions only on the material found during the search in the case of unabated assessments. This issue is already addressed by Ld CIT(A) and we do not find any reason to interfere with the findings of Ld CIT(A). Accordingly, the ground raised by the revenue is dismissed. Treating the expense on software renewal license as revenue expenditure instead of capital expenditure - HELD THAT:- We observe that this addition was also made by the Assessing Officer without there being any material found during the search, he made the similar additions made in the original assessment. Therefore, this ground raised by the revenue also dismissed. Addition u/s 69A - CIT(A) has granted relief on the ground that no payment was made to assessee - HELD THAT:- Addition made by the AO is based on the survey conducted in the case of M/s Windsor Realty Pvt. Ltd and not based on any material found during the search conducted in the premises of the assessee. The addition made in the case of Windsor Realty Pvt Ltd was deleted subsequently on further appeal by the assessee and revenue respectfully by the Ld CIT(A) and ITAT with the finding that there was no such payments were ever made in order to invoke the provisions of section 69A. Therefore, the basis of addition made itself was deleted by the appellate authorities in the case of Windsor Realty Pvt Ltd, the same addition cannot be made in the case of the assessee without their being any corroborative evidence and also addition is not made based on the incriminating material found during search. Therefore, this addition made in the assessment passed u/s 153A also deserves to be deleted. Accordingly, grounds raised by the revenue are dismissed. Set off of brought forward long term capital loss on sale of listed equity shares against long term capital gain of current year - HELD THAT:- We observe that this issue also not coming out of the search proceedings but Assessing Officer made the similar additions made in the original assessment. This issue under consideration is under challenge by the department in the original proceedings before ITAT, which the respective bench will take the appropriate decision. The issue under consideration is whether the Assessing Officer made the addition in the unabated year based on the incriminating material which was found during search, can he merely repeat the additions made in the original assessment. This issue is also addressed by the CIT(A) in his order and we are inclined to accept the findings of Ld CIT(A) in this regard that Assessing Officer has no jurisdiction. Therefore, we dismiss the grounds raised by the revenue.

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• 2022 (5) TMI 268
  Addition u/s 69A - Assessee was unable to explain the source of cash deposit - HELD THAT:- Assessee could not disclose the source of Rs.9.00 lacs substantially with corroborative evidence. He has not countered any observation of the AO and even had not filed such evidences which were placed before the ld. CIT(A) to check the veracity of finding. The ld. AR of the assessee on asking, expressed his inability to file those documents before us. He has also submitted that Rs.3.00 lacs pertained to his wife being Stridhan. Keeping in view the totality of the facts and circumstances of the case, the Bench feels that out of Rs.12.00 lacs disallowed by the lower authorities, the amount of Rs.3.00 lacs as Stridhan can be considered as a good gesture that the wife of the assessee might have saved such an amount as Stridhan and may have given to the assessee. Thus, Rs.3.00 lacs is allowed and remaining Rs.9.00 lacs is confirmed. Disallowing 10% of the raw material expenses - NP estimation - HELD THAT:- AO has not pointed out any specific defects in the books of accounts, bills and vouchers maintained by the assessee. It is also noted that the books of account of the assessee are maintained day today and no defect has been noticed by the AO during assessment proceedings. The assessee has declared N.P. Rate of 11.80% as compared to N.P. Rate of 13.14% of immediately preceding year. This slight decrease in the profit is ignorable due to stiff competition in the market for the businessman. It is also noteworthy to mention that provisions of Section 44AD of the Income Tax Act prescribes that in case of non-maintenance of books of account, an assessee may declare his income at a minimum rate of 8%of the turnover and the same is accepted. It means that the Department is satisfied if an assessee declares profit at least at a rate of 8% but in the present case the assessee has declared N.P. Rate of 11.80% which is better than the rate so stipulated u/s 44AD of the Act. Hence, in view of all the facts and circumstances of the case, we do not concur with the findings of the lower authorities. - Decided in favour of assessee.

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• 2022 (5) TMI 267
  Late deposit of PF and ESI employee s contribution - addition u/s 2(24)(x) read with Section 36(1)(va) - HELD THAT:- Admitted facts of the present case are that the payments of PF ESI contribution relating employee s contribution are before the due date of filing of return of income U/s 139(1) of the Act. We have noted that the issue under consideration is covered by the decision of the Coordinate Bench in case of M/s Mohanlal Khatri [ 2021 (11) TMI 1035 - ITAT JAIPUR] . It is clear that there are series of decisions of various Hon ble High Courts on this issue and even Hon ble Jurisdictional High Court in the case of M/s. Industrial Security Intelligence India P Ltd. [ 2015 (7) TMI 1063 - MADRAS HIGH COURT] held that the payment of employees contribution in regard to PF ESI if made before the due date of filing of return of income u/s.139(1) of the Act, the same is allowable as deduction as per the provisions of Section 2(24)(x) r.w.s. 36(1)(va) r.w.s. 43B. Scope of amendment - We are of the view that the amendment brought in the statue i.e., by Finance Act, 2021, the provisions of Section 36(1)(va) r.w.s. 43B of the Act amended by inserting explanation 2 is prospective and not retrospective. Hence, the amended provisions of Section 43B r.w.s. 36(1)(va) of the Act are not applicable for the assessment year under consideration i.e. 2018-19 but will apply from assessment year 2021-22 and subsequent assessment years. Hence, this issue raised in assessee s appeal is allowed.

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• 2022 (5) TMI 266
  Disallowance of depreciation on WDV of BSE Membership Card - HELD THAT:- As decided in own case [ 2012 (2) TMI 718 - ITAT MUMBAI ] sections which are for the computation of capital gains, have no relevance on the allowability of depreciation. The argument of the assessee that it had taken the original cost of the share 1, while computing capital gain in a latter year, does not effect our decision. Thus, we uphold the order the Assessing Officer as confirmed by the Commissioner (Appeals) wherein depreciation on membership card has been denied. Computation of capital gain - applicability of provisions of section 55(2)(ab) of the Act as per which cost of acquisition of membership rights of the exchange is deemed to be the cost of shares received on demutualization - While computing the capital gains arisen on sale of shares of Bombay stock exchange rate, the cost of acquisition on membership rates of the exchange as cost of shares sold. Since Assessing Officer charged long term capital gain on sale of BSE shares @20% - HELD THAT:- This issue under consideration is covered in favour of the assessee in the case of M/s.Techno Shares Stocks Ltd. [ 2019 (8) TMI 1770 - ITAT MUMBAI ] hold that the cost of acquisition of shares of BSE Ltd. shall be the original cost of acquisition of membership card in terms of Section 55(2)(ab) of the Act even though assessee has claimed depreciation on the cost of membership card in the earlier years. As regards the period of holding of shares of BSE Ltd., find that as per clause (ha) inserted in Explanation 1 to Section 2(42A) of the Act by the Finance Act, 2003, period for which the person was a member of the recognised stock exchange in India immediately prior to such demutualisation or corporatisation shall also be included in period of holding of shares. In terms of the clear and unambiguous language of the section, hold that the period of holding of shares of BSE Ltd. shall be reckoned from the date of original membership of BSE and not from date of allotment of shares in BSE Ltd. We thus, agree with the view taken by the learned Judicial Member that the cost of shares will be original cost of the membership card in terms of Section 55(2)(ab) of the Act. - Decided in favour of assessee.

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• 2022 (5) TMI 265
  Addition u/s. 56(2)(vii)(b)(ii) - difference between the stamp duty value and the consideration paid - primary objection raised by the assessee against addition made u/s. 56(2)(vii)(b)(ii) is that since the assessee had paid stamp duty and had executed the agreement on or before 31/03/2013, amended provisions of section 56(2)(vii)(b)(ii) of the Act would not get attracted - HELD THAT:- As per the amended provisions of sub clause (b) to section 56(2)(vii), where an individual or HUF receives in any previous year any immovable property for a consideration which is less than stamp duty value of such property, the Assessing Officer can made addition of the difference between the stamp duty value and the consideration paid. Prior to amendment by the Finance Act, 2013 there was no provision u/s.56(2)(vii)(b) of the Act to make addition in respect of consideration less than the stamp duty value. The scope of section 56(2)(vii) has been enlarged after amendment w.e.f. 01/04/2014. Since, in the present case agreement was executed on 31/03/2013 i.e. during the Assessment Year 2013-14, the provisions of section 56(2)(vii)(b) of the Act as applicable to the assessment year 2013-14 would apply. Registration of agreement on the subsequent date would not alter the situation. The registration of agreement is a compliance of a legal requirement under the Registration Act, 1908. Thus, in the facts of case we are of considered view that the authorities below have erred in invoking the provisions of section 56(2)(vii)(b)(ii) as amended by the Finance Act, 2013. Ergo, ground No.2 of the appeal is allowed.

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• 2022 (5) TMI 264
  Addition u/s 68 - accommodation entry receipts - Genuineness of unsecured loan - HELD THAT:- First of all, we note that there were double entries appearing in the bank statement for repayment of the loan which were cancelled and reflected as deposits in the bank. This fact can be verified from the necessary details of RTGS application to the bank and the bank statements. All these facts, have not been disputed by the learned DR appearing on behalf of the Revenue. Had there been any doubt about the amount of loan, the revenue could have verified the same from the bank. But we note that no such verification has been carried out by the authorities below. Accordingly we hold that, the assessee has received a sum of Rs.6 lakhs from the party and not Rs.12 lakhs as alleged by the revenue. It is also not out of the place to mention that the loan received by the assessee in the year under consideration was refunded in the same financial year. It implies that the assessee was not the beneficiary of the loan received by it as alleged by the AO. Thus, we can assume that the impugned transaction was the business transactions between the assessee and the loan parties. Had there been any doubt by the Revenue on the repayment of the loan as claimed by the assessee, it was the duty of the revenue to carry out the necessary verification. It is for the reason that the assessee has discharged its onus by furnishing the necessary details in support of the repayment of the loan. Accordingly the onus shifted upon the revenue to disprove the contention of the assessee based on the documentary evidence. But we note that no documentary evidence has been brought on record by the Revenue to disprove the contention of the assessee. The question arises for the adjudication whether only the credit entries should only be considered for the purpose of cash credit entries as provided under section 68 of the Act after ignoring the debit entries. To our mind the debit entries cannot be set aside for determining the income of the assessee. We are of the opinion that, though the transactions of the loan received by the assessee are not free from any doubt but in either of the case, once repayment of the loan has been established based on the documentary evidence, the credit entries cannot be looked into isolation after ignoring the debit entries. Thus in view of the above and after considering the facts in totality, we are not inclined to uphold the finding of the learned CIT-A. Accordingly we set aside the finding of the learned CIT-A and direct the AO to delete the addition - Decided in favour of assessee.

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• 2022 (5) TMI 247
  Reopening of assessment u/s 147 - payment received by the appellant from two companies as compensation for cancellation of agreements for non-compete / non-solicitation and termination of related rights - HELD THAT:- The said amount has been taxed during the assessment year 2005-2006, which has also been accepted by the respondent / assessing authority by assessment order dated 14.12.2007. Without considering the same, the respondent reopened the assessment, stating that the appellant failed to truly and fully disclose the material particulars at the time of passing the order of assessment. The learned Judge also, directed the respondent to pass re-assessment order, in accordance with law. Having regard to the above stated position, this court, in order to provide an opportunity to the appellant and also in the interest of justice, is inclined to set aside the order of the learned Judge in the writ petition as well as the order of the respondent rejecting the objection filed by the appellant for reopening the assessment and are acco6rdingly set aside, in the following terms: (i) The appellant is directed to submit all the material evidence along with additional objection meeting out the proposal raised by the respondent/Assessing Authority for reopening the assessment under Section 148 of the Act, before the respondent, within a period of two weeks from the date of receipt of a copy of this judgment. (ii) On receipt of such material evidence and additional objection, the respondent is directed to consider the same and pass appropriate orders on merits and in accordance with law, within a period of two weeks thereafter.

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• 2022 (5) TMI 246
  Sale of software products give rise to royalty income - DTAA between India and USA - Assessment on protective business - HELD THAT:- As the Bench is of considered opinion that the revenue has been following a persistent approach in regard to assessee and its sister assessee subsidiaries of MS Corp holding sale of MS Retail Software Products to Indian Distributors as royalty under the Act as well as under DTAA between India and US. The assessment in the hands of present assessee was made on protective basis while the substantive assessment was in the hands of MOLC. The assessment in the hands of Gracemac which stands amalgamated with MOLC stands set aside in regard to assessment years 2005-06, 2006-07 and 2007-08 by the Hon ble Delhi High Court. The same were based on the principles of law that sale of software products does not give rise to royalty income as laid down by the Hon ble Delhi High Court in Infrasoft Ltd. case [ 2013 (11) TMI 1382 - DELHI HIGH COURT] which have now further been affirmed by the Hon ble Supreme Court of India in the case of Engineering Analysis Centre of Excellence P. Ltd. [ 2021 (3) TMI 138 - SUPREME COURT] . Functional aspects of Cloud base service while holding the subscription to cloud base service as royalty - HELD THAT:- The cloud base services do not involve any transfer of rights to the customers in any process. The grant of right to install and use the software included with the subscription does not include providing any copy of the said software to the customer. The assessee s cloud base services are though based on patents/copyright but the subscriber does not get any right of reproduction. The services are provided online via data centre located outside India. The Cloud services merely facilitate the flow of user data from the front end users through Internet to the provider s system and back. The ld. AO has fallen in error in interpreting it as licensing of the right to use the above Cloud Computing Infrastructure and Software (para 10.5 of the Ld. AO order). Thus the subscription fee is not royalty but merely a consideration for online access of the cloud computing services for process and storage of data or run the applications. While dealing with similar question in regard to the case of M/s. Salesforce.com Singapore Pte.[ 2022 (4) TMI 327 - ITAT DELHI] where the said assessee was provider of comprehensive customer relationship management servicing to its customer by using Cloud Computing Services/Web Casting Services as decided in M/S SALESFORCE. COM SINGAPORE PTE[ 2022 (4) TMI 327 - ITAT DELHI] all the equipments and machines relating to the service provided by the assessee are under its control and are outside India and the subscribers do not have any physical access to the equipment providing system service which means that the subscribers are only using the services provided by the assessee. The Mumbai Tribunal in the case of DDIT v Savvis Communication Corporation [ 2016 (5) TMI 635 - ITAT MUMBAI] has held that payment received for providing web hosting services though involving use of certain scientific equipment cannot be treated as consideration for use of, or right to use of, scientific equipment which is a sine qua non for taxability under section 9(1)(vi), read with Explanation 2 (iva) thereto as also article 12 of Indo-US DTAA. Thus Tax Authorities below had fallen in error in considering the subscription received towards Cloud Services to be royalty income. Assessee appeal allowed.

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• 2022 (5) TMI 245
  Late filing fees under section 234E - intimation u/s 200A - HELD THAT:- Sec. 200A prescribes processing of statements of tax deducted at source and Sec. 234E provides for fees for default in furnishing various statements. Further Sec. 200(3) provides for requirement to file TDS statement within prescribed time. In the case of assessee there is delay in respect of 3rd quarter of F.Y. 2015-16, the assessee filed quarterly statement on 25.07.2016 and the same was processed on 29.07.2016 and therefore, there was a delay respectively for 3rd quarter of F.Y. 2015-16. The assessee has raised objection against the validity of the order passed by the A.O and the intimation were issued after making adjustment on account of late fee u/s 234E of the Act. We are of the opinion that in Block Development Officer [ 2020 (6) TMI 565 - ITAT JAIPUR] and in Sree Narayana Guru Smaraka Sangam Upper Primary School [ 2017 (1) TMI 1105 - KERALA HIGH COURT] also have held that fee can be levied u/s 234E in terms of section 200A, where the date of filing of TDS statement and date of intimation are much after 1-6-2015 CIT(A) is justified in confirming the late fee levied by the AO u/s. 200 A r.w.s. 234 E since the defaults made by the assesee are after 1-6-2015. Accordingly we uphold the order of the Ld. CIT(A) and the fee levied u/s. 234 E, is directed to be confirmed. - Decided against assessee.

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• 2022 (5) TMI 244
  Condonation of delay - proof of sufficient cause of delay - CIT(A) dismissing the appeal of the assessee by not condoning the delay of the assessee thereby not deciding the appeal on merit - denial of deduction u/s 10AA - HELD THAT:- The claim of the assessee should not be rejected on the technicalities. The assessee has not filed the appeal before the Ld. CIT(A) within the due time which is explained with reasons but CIT(A) going into the technicalities of the things dismissed the appeal as barred by limitation. In our opinion appeal is a legal right vested in a person who is aggrieved by an order of the lower authority and should not be deprived of the same on technical issues. In cases of MST Katiji Ors. [ 1987 (2) TMI 61 - SUPREME COURT] wherein the Apex Court has held that the legislature has conferred power to condone the delay by enacting section 5 of the Limitation Act, 1963 in order to enable the courts to do substantial justice to parties by disposing of matter on merits and the expression sufficient cause as provided in Section 5 is adequately elastic to enable the court to apply the law in a meaningful manner so that the ends of justice is served. The court observed that everyday s delay must be explained does not imply a pedantic approach. The doctrine must be applied in a rational, common sense and pragmatic manner. The court held that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred. In the present case, the assessee is not benefitted in any manner by filing the appeal before the Ld. CIT(A) after the due time. We, accordingly set aside the order of the Ld. CIT(A) .The ground 1 to 5 are allowed. Disallowing the exemption u/s 10AA - As relying on M/S YOKOGAWA INDIA LTD. [ 2016 (12) TMI 881 - SUPREME COURT] , TEI TECHNOLOGIES PVT. LTD. [ 2012 (9) TMI 47 - DELHI HIGH COURT] and BLACK VEATCH CONSULTING PVT. LTD. [ 2012 (4) TMI 450 - BOMBAY HIGH COURT] assessee cannot be denied the legitimate exemption as provided under the Statute citing the technicalities. Accordingly we direct the AO to allow the exemption u/s 10AA of the Act from the business profits of Rs. 6,48,75,288/-. However, since the amount of exemption has not been verified by the AO, we are restoring the issue to the file of AO for the purpose of limited verification of the amount of exemption u/s 10AA of the Act. Needless to say that the deduction has to be allowed after verification.

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• 2022 (5) TMI 243
  Nature of land sold - agricultural land or capital asset u/s 2(14) - gains arising on transfer of capital asset would be chargeable to capital gains - definition of agricultural land - As distance between nearest municipality and the land was less than 8 Km, the land was to be treated as non-agricultural land - HELD THAT:- Assessee s land is situated at Village No.92, Eachangaranai which is located near Sri Esani Angala Parameshwari Amman Temple and Avigna. The name of Village no. 92 has since been changed to No.94, Eachangaranai which is evidenced by certificate of VAO as placed on record. Another locality having similar name i.e., Eachankarania is located near Bethesda IPA Church. AR has submitted that the land is situated near Avigna which is approx. 9.90 Kms from Chengalpattu Village in comparison to second Eachankarania which is very close to Chengalpattu. In support, the copy of Google map has been placed on record which shows that shortest route between these two points is 9.90 Kms. The exact location of the land is also certified in various certificates issued by Village Administrative Officer (VAO), the copies of which have been placed on record. Quite clearly, the assessee s land is situated beyond 5 Kms since notification, as referred to by the assessee during appellate proceedings, has been accepted by Ld. CIT(A) and according to notification, the relevant area is 5 Kms. and not 8 Kms. Therefore, the assessee s land could not be considered as non-agricultural land and the same would be out of ambit of capital asset as defined in Sec.2(14). The fact that land continues to be agricultural land in revenue record could also not be controverted before us. This being the case, the assessment of capital gains, would have no legs to stands. By deleting the impugned additions, we allow the appeal.

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• 2022 (5) TMI 242
  Reopening of assessment u/s 147 - Unexplained bank deposits - HELD THAT:- From the reasons as recorded, it is noted about the escaped income for the assessment year under consideration, that the assessee had entered into financial transactions, amounting to Rs. 1,41,94,000/- but as per the copy of the bank statement obtained by the Assessing Officer by way of enquiries u/s 133(6), there were only deposits of Rs. 74,41,900/-, for which, he has made the addition. In our view the very formation of belief by the Assessing Officer is not valid. We have gone through the judgements, relied upon by the Ld. Counsel in the cases of Sh. Gaurav Joshi , Smt. Monika Rani , Sh. Jaspal Singh and M/s Kapoor Rice Gen. Mills [ 2019 (1) TMI 1893 - ITAT AMRITSAR] - In all these cases, it has been held that where wrong facts have been recorded for formation of reason to believe, the assessment proceedings deserve to be quashed. Also relying on GURDISH KAUR KHULLAR case [ 2022 (3) TMI 122 - ITAT CHANDIGARH] there were wrong reasons recorded for the purposes of formation of belief for issuance of notice u/s 148 in the present case. It was merely on the basis of incorrect bank transaction in the form of bank deposits, the Assessing Officer has form reason to belief and thus He has wrongly assumed the jurisdiction and, therefore following the judgments as cited supra , the assessment as framed by issuance of notice u/s 148 for incorrect belief is deserves to be quashed. - Decided in favour of assessee.

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• Benami Property

• 2022 (5) TMI 263
  Benami transactions - beneficial/Real owner of property - plaintiff has to establish that he has purchased the property in the name of wife or that he is holding the said property as a trustee for the benefit of his elder brother and the wives of the two brothers - HELD THAT:- We have not been shown any evidence which would prove that the said property was purchased out of the fund of the appellants or the conduct of the parties are such which would create an impression that the property was purchased for the benefit of Chanchal Kumar Dutta and wives of the two brothers. On the contrary, D.W.-1 has categorically admitted that Chanchal Kumar Dutta is the co-sharer in respect of the property over which Sanat Kumar Dutta is claiming absolute ownership. D.W.-1 is the wife of Sanat Kumar Dutta. Moreover, as noticed earlier D.W.-1 has admitted to have received fund from Chanchal Kumar Dutta to raise certain constructions in the house which would demolish the case of exclusivity of Sanat Kumar Dutta in relation to the property in question. We have carefully examined the evidence. We do not find from evidence that the appellants have able to satisfy the aforesaid two conditions in claiming as the true owner of the suit property. On such lack of evidence and establishing his right over the property as owner thereof or that such consideration money was paid by him alone, we do not find any reason to interfere with the order passed.

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• 2022 (5) TMI 262
  Benami transaction - Beneficial owner of property - Provisional attachment order - scope of Amendment Act of 2016 - transaction in question was arranged and executed in a planned manner by M/s.Nexus Feeds Limited, the petitioner, which has been treated as the beneficial owner so that its funds out of unknown sources get parked in the name of the benamidar in the form of shares - HELD THAT:- It is apparent that Section 2 (9) (A) and Section 2 (9) (C) are substantive provisions creating the offence of benami transaction. These two provisions are significantly and substantially wider than the definition of benami transaction under Section 2 (a) of the unamended 1988 Act. Therefore, Section 2 (9) (A) and Section 2 (9) (C) can only have effect prospectively. Central Government has notified the date of coming into force of the Amendment Act of 2016 as 01.11.2016. Therefore, these two provisions cannot be applied to a transaction which took place prior to 01.11.2016. Admittedly, in the present case, the transaction in question is dated 14.12.2011. That being the position, we have no hesitation to hold that the show cause notice dated 30.12.2019, provisional attachment order dated 31.12.2019 and the impugned order dated 30.03.2021 are null and void being without jurisdiction. Consequently, the impugned order is set aside and quashed.

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• Customs

• 2022 (5) TMI 261
  Levy of redemption fine and penalty - MIsdeclaration of quantity of export goods - rejection of declared value - Big Onions - perishable commodity - case of appellant is that excess quantity taken in order to compensate the weight loss on account of drying of the onion - monetary benefit out of the excess quantity declared is made or not - HELD THAT:- The appellant has misdeclared almost 11 MTs of goods. The explanation given is that onion being a perishable commodity, they have loaded excess quantity to compensate the weight loss on account of drying of the cargo. Though such an explanation cannot be accepted when the excess quantity is so huge, it has to be seen that the redemption fine for the excess value of Rs.4,76,400/- is too high. The authorities below have imposed a redemption fine of Rs.3,35,750/-. Since the cargo is of perishable in nature, the profit margin would be very less. The redemption can be reduced to Rs. One lakh. Penalty - HELD THAT:- Section 114(iii) states that the penalty imposed is not to exceed the value of the goods as declared by the exporter or the value as determined under the Act whichever is greater. For these reasons, it is found that the penalty imposed under sec. 114(iii) does not require any interference. On perusal of the orders passed by the authorities below, nothing is brought out to prove and establish that the appellant has knowingly and intentionally made any false documents. It is explained by them that the excess quantity was loaded in order to compensate the loss on account of drying of the onion which are perishable goods. Taking these facts into consideration, the penalty imposed under sec. 114AA is set aside. The impugned order is modified to the extent of reducing the redemption fine from Rs.3,33,750/- to Rs.1,00,000/- (Rupees one lakh only) and setting aside fully the penalty imposed under sec. 114AA of the Customs Act, 1962 - Appeal allowed in part.

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• 2022 (5) TMI 260
  Smuggling - prohibited goods - firecrackers as well as bicycle parts - statement of co-noticees - corroborated/legal evidences or not - seizure of goods - confiscation - penalty - HELD THAT:- M/s. Kirat Sales has no relation with Orient Overseas Shipping Lines. In addition to the above statements, there have been the print outs of retrieved data from electronic devices, recovered seized from the premises of appellant, i.e. print outs reveals conversation about imported consignments from China about the firecrackers from one phone number to another and from the aforementioned e-mail ID which has been changed by Shri Jaskirat to be the ID for Kirat Sales. From all the above mentioned statements as have been relied upon by the Adjudicating Authority, it becomes clear that the present appellant had full knowledge of the impugned consignment. He has been clearing the consignment for M/s. Rahul Traders and for M/s. Kirat Sales. No illegality has been committed when witnesses have not been cross examined by the appellant. Otherwise also there has been no requests of the appellant for the cross examination of such witnesses based whereupon the Adjudicating Authority issued the order. Since appellant is found to have admitted his involvement, the admissions are best evidence which need no proof in terms of section 52 of Indian Evidence Act. The appellants admission that he was the Customs Broker for Orient Overseas Shipping Line and Rahul Traders and the admission about visiting Delhi in the month of August, the relevant time for the clearance of the impugned consignment rather are sufficient admission to accept the entire above testimony as evidence against him; that he has tried to level allegation on Shri Rahul Sehgal. Thus, appellant being CHA of M/s. Kirat Sales as well as of M/s. Rahul Traders had access to all their documents, consignments etc. No proceedings got initiated against M/s. Jaskirat. Proceedings against Rahul and Saurabh has been dropped. Purashottam and Ajay have clearly deposed about appellant only to have approached them at Delhi for getting cleared a mis-declared consignment. There are no infirmity in the findings arrived at by Commissioner (Appeals) - appeal dismissed.

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• 2022 (5) TMI 259
  Refund of SAD - Time Limitation - eligibility for refund after one year from the date of payment or otherwise - applicability of N/N. 102/2007-Cus dated 14.09.2007 - HELD THAT:- As regards limitation for the purpose of claiming refund of SAD under Notification No. 102/2007-Cus, as per the judgments cited by learned AR, it is settled that period of limitation should be reckoned from the date of payment of duty. However, on the issue raised by learned Counsel that the refund claim is well within the time-limit as assessment was provisional at the time of clearances of goods and the same was finalized on 18.05.2018 whereas the refund claim was filed before that i.e. on 23.04.2018. It is an admitted fact that this issue has not been raised before the lower authorities however, this issue being a question of law, can be raised before this Tribunal. Since the facts of this issue has not been verified by the lower authorities, the matter is remitted back to the Adjudicating Authority to decide the matter afresh after taking into consideration the aspect of provisional assessment of imported goods - Appeal allowed by way of remand.

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• 2022 (5) TMI 258
  Refund of balance SAD, paid at the time of import - such goods were re-sold and on such sale, the rate of VAT/Sales Tax was nil - HELD THAT:- There is no merits in the grounds of appeal. SAD is applicable at the time of import by way of an equitable levy in lieu of sales tax, so as to protect the domestic industry. Further, the Customs Tariff Act itself provides for refund of SAD on re-sale of the goods. The mechanism of refund has been provided vide notification no.102/2007-Cus, which provides that one of the conditions for refund is that the goods must be re-sold and appropriate VAT/Sales Tax should have been paid. This Tribunal in precedent ruling of the M/S GAZAL OVERSEAS, M/S MAYANK ENTERPRISES, M/S ANAND ASSOCIATES VERSUS COMMISSIONER OF CUSTOMS, NEW DELHI [ 2015 (12) TMI 427 - CESTAT NEW DELHI] has held that the refund of SAD is available even if the rate of VAT/Sales Tax is lower than the rate of SAD or nil. Appeal dismissed - decided against Revenue.

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• Insolvency & Bankruptcy

• 2022 (5) TMI 257
  Seeking permission for withdrawal of petition - Section 12A of IBC - HELD THAT:- The Admission of the Application under Section 9 of the I B Code, 2016 was passed only on 22nd December, 2021 and the Application under Rule 11 by the Operational Creditor to withdraw the Application was filed on 03rd January, 2022 and 04th January, 2022, Adjudicating Authority has passed an order on the Application that status quo regarding the CIRP be maintained. The Application was admitted on 22nd December, 2021 and on 04th January, 2022, the Adjudicating Authority after noticing the Application and submissions of the Learned Counsel for the Operational Creditor has directed the Status Quo, the IRP virtually effectively functioned only for 14 days. In view of the Status Quo order was not to function any further, it is held that the Order of the Adjudicating Authority directing the payment of fee and CIRP cost of Rs. 1,10,000/- in addition to Rs. 75,000/- was quite reasonable and does not warrant any interference. IRP has filed the Appeal only raising issue of fee whereas he had worked only for 14 days and the direction was issued for payment of fee of Rs. 1,10,000/- plus Rs. 75,000/- which is quite reasonable and appropriate - Appeal dismissed.

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• FEMA

• 2022 (5) TMI 256
  Offence under FEMA - prejudice on account of infraction of the procedure - main ground of challenge was that the impugned notice was issued without complying with the Rule 4(1) and Rule 4(2) of the Rules of 2000 - HELD THAT:- The adjudicating authority is required to give the notice under sub-rule (1) to the concerned person requiring him to show cause as to why inquiry should not be held against him indicating the nature of contravention alleged to have been committed by him. After considering the cause, if any shown, and on forming an opinion that an inquiry should be held, the adjudicating authority is required to issue notice under sub-rule (3) fixing the date of appearance. In the present case, undisputedly no notice in terms of sub-rule (1) and (2) of Rule 4 has been given and straight away notice under sub-rule (3) of Rule 4 has been issued which was subject matter of the challenge in the writ petition. As decided in KANWAR NATWAR SINGH KANWAR JAGAT SINGH VERSUS DIRECTORATE OF ENFORCEMENT [ 2010 (10) TMI 156 - SUPREME COURT] Notice in terms of sub-rule (1) and (2) is necessary and thereafter formation of opinion under sub-rule (3) is required before conducting inquiry in terms of other provisions of the Rule. The Hon ble Supreme Court in the matter of State of Uttar Pradesh vs. Singhara Singh and Others [ 1963 (8) TMI 43 - SUPREME COURT] has noted that where a power is given to do a certain thing in a certain way, the thing must be done in that way or not at all and that other methods of performance are necessarily forbidden. Enforcement Directorate was required to form an opinion after giving notice to the petitioner before issuing the impugned show cause notice dated 06.07.2020 which he has failed to do in the present case. Hence, we dispose of the appeal without interfering in the show cause notice dated 06.07.2020 but by directing the Special Director, Eastern Region, Enforcement Directorate to form his opinion after recording reasons in terms of sub-rule (3) of Rule 4. If the opinion so formed is adverse to the appellant, such opinion along with the reasons so recorded shall be furnished so as to reach the appellant at least 15 days prior to the date of personal hearing as the same would meet the requirement of Rule 4(3).

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• 2022 (5) TMI 241
  Offence under FEMA - Petitioner argued that the adjudicating authority did not follow the procedure prescribed in Rule 4(1) and 4(2) of the Adjudication Rules of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 - petitioner has been seriously prejudiced by refusal and failure to supply documents relied upon by the complainant Assistant Director - HELD THAT:- In the instant case, failure to bring back export proceeds to the extent of seven thousand crores arose out of loan transactions between the petitioner and his entities and about 23 banks. It is now well settled that every infraction of the principles of natural justice or procedure stipulated for adjudication would not vitiate a proceeding. The petitioner has to demonstrate actual and real prejudice The two tier procedure under Rule 4 which warrants a preliminary enquiry to form an opinion before the process of actual adjudication, may have laudable objects given the very serious civil consequences. The need of demonstration of prejudice due to infraction of such procedure would still be necessary to vitiate the proceedings, and would not otherwise be given a go-by merely because of codification of principles of natural justice into separate Rules in the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000. Since the petitioner himself submits that the notice issued by the Adjudicating Authority was under Rule 4(3), this Court requires the adjudicating authority to submit a brief gist of its satisfaction of prima facie case against the petitioner along with copies of necessary documents within a period of 15 days from date. Upon receipt of such gist, the petitioner shall show cause both to the notice dated 6th July 2020 as well as the gist. The procedure prescribed under Rule 4(3) would thereafter be undertaken by the adjudication authority. The proceedings before the adjudicating authority shall be completed expeditiously and preferably within a period of two months from the date of supplying the gist as indicated hereinabove.

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• Service Tax

• 2022 (5) TMI 255
  Levy of service tax - liquidated damages/penalty collected for non-compliance of the terms of the contracts - Appellant had agreed to tolerate breach of timelines stipulated in the contract - delay in delivery terms as per Price Reduction Schedule (PRS) - HELD THAT:- There is substance in the submission advanced by the learned counsel for the Appellant that no service tax is payable on the amount collected towards delay in delivery as this issue has been decided by the Tribunal in favour of the Appellant in M/S SOUTH EASTERN COALFIELDS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, RAIPUR [ 2020 (12) TMI 912 - CESTAT NEW DELHI] . Various commercial contacts had been executed by South Eastern Coalfields and certain clause provided for levy of penalty for non-observance / breach of the terms of the contract. A show cause notice was issued with an allegation that the amount charged by the Appellant during the period from July 2012 to March 2016 appeared to be taxable as a declared services under Section 66E(e) of the Finance Act. The Principal Commissioner, however, did not accept the contention advanced on behalf of the Appellant and confirmed the demand of service tax holding that the amount received by the said appellant towards penalty, earnest money deposit forfeiture and liquidated damages would tantamount to a consideration for tolerating an act on the part of the buyers of coal/contractors, for which service tax would be levied under section 66 E(e) of the Finance Act. It is not possible to sustain the view taken by the Commissioner that since the delivery was not made within the time schedule, the Appellant agreed to tolerate the same for a consideration in the form of delay in delivery charges, which would be subjected to service tax under section 66E(e) of the Finance Act. Interest - penalty - HELD THAT:- As service tax could not be levied, the imposition of interest and penalty also cannot be sustained. Appeal allowed - decided in favor of appellant.

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• 2022 (5) TMI 254
  Levy of service tax - Consideration for tolerating the act of cancellation of the coal blocks by the Ministry of Commerce, Government of India - HELD THAT:- The question of tolerating something and receiving a compensation for such tolerance pre-supposes that: a) the person had a choice to tolerate or not; b) the person chose to tolerate; c) such tolerance was for a consideration as per an agreement (written or otherwise) to tolerate; d) the tolerance was a taxable service. None of the above elements are present in the case under consideration. The Appellant had no choice of tolerating cancellation or not. The Appellant has not chosen to tolerate the cancellation. The cancellation was in pursuance of the order of the Hon ble Supreme Court and not as a result of a contract to tolerate cancellation. There was no consideration for tolerating the cancellation, only a compensation provided for statutorily for the investment made in the mines by the Appellant. Even in cases where any amount is received under a contract as a compensation or liquidated or unliquidated damages, it cannot be termed Consideration . This case is not even a case of payment under a contract. Both the cancellation of the allocation of the blocks and the receipt of compensation are by operation of law. They are like the receipt of a compensation when one s land is acquired by the Government in public interest or the payment to a Government employee of an amount equal to the salary for unused leave at the time of his/her retirement. It is unthinkable to say that the land-owner has tolerated the acquisition of his land as per an agreement and charge Service Tax on the compensation - No Service Tax can be levied on the amounts received by the Appellant as compensation. Since the matter is decided in favour of the Appellant on merits, it is not found necessary to examine the question of limitation. Appeal allowed - decided in favor of appellant.

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• 2022 (5) TMI 253
  Levy of service tax - liquidated damages/compensation charges received by the Appellant towards the breach and non-compliance of Minimum Guaranteed Tonnage (MGT) as per Agreement - consideration for declared service or not - HELD THAT:- The penalty clause is provided in the impugned Agreement dated 12.07.2011 to safeguard the commercial interest of the Appellant (1) to compensate the Appellant for financial damage/injury in case of failure to achieve the MGT and also (2) to discourage the service recipient from repeatedly breaching the terms and conditions of the Agreement dated 12.07.2011 and the penal clause is invoked only in cases where the service recipient does not adhere to the contractual condition of MGT as per Agreement dated 12.07.2011. As per Finance Act, 1994, the basic element to charge Service Tax is the element of service i.e. there should be an activity in the form of service or declared service. However, in the instant case, the said amount has not been collected towards any activity liable for Service Tax but as compensation/penalty for breach of terms and conditions of the contract [Agreement dated 12.07.2011] i.e. non-compliance of MGT. Thus, such compensation charges are not covered within the definition of taxable service under the Finance Act, 1994 and hence not liable for Service Tax. In the instant case, the parties entered into the said Agreement dated 12.07.2011 for import of a specified quantity of coal and for availing various port services for the same and not for flouting the terms of the agreement so that the penal clauses were the reason for the execution of the Agreement dated 12.07.2011 for an agreed consideration. It is only in situations where the condition of MGT is not satisfied by the service recipient, the Appellant s claim for penalty/compensation/liquidated damages - the term service is defined to mean any activity carried out by a person for another for consideration. The recovery of liquidated damages/penalty from the other party in the instant case cannot be said to be towards any service per se, as the Appellant did not carry on any activity to receive the compensation charges . Hence, scope of levy of Service Tax cannot be extended to apply to situations where the actual activity was non-existent. The issue of leviability of Service tax on penalty, liquidated damages, compensation, forfeiture amounts, cancellation charges etc. stands settled by various pronouncements wherein it has consistently been held that the said amounts recovered as charges for breach or non-compliance of contractual terms and conditions cannot be construed as consideration for refraining or tolerating an act and were thus not leviable on Service Tax in terms of Section 66E(e) of the Finance Act, 1994 - reliance can be placed in the case of M/S K.N. FOOD INDUSTRIES PVT. LTD. VERSUS THE COMMISSIONER OF CGST CENTRAL EXCISE, KANPUR [ 2020 (1) TMI 6 - CESTAT ALLAHABAD] and M/S LEMON TREE HOTEL VERSUS COMMISSIONER, GOODS SERVICE TAX, CENTRAL EXCISE CUSTOM [ 2019 (7) TMI 767 - CESTAT NEW DELHI] . Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2022 (5) TMI 252
  Waste or not - benefit of N/N. 89/95-CE - fatty acids arising in course of manufacture of refined palm oil and Vanaspati ghee - HELD THAT:- The Appellants are engaged in the manufacture of vanaspati/refined palm oil. They are importing crude palm oil at nil rate of duty in terms of Sl.No.30-II(A) of Notification No.21/2002-CUS dated 01.03.2002 as amended by Notification No.42/2008-CUS dated 01.04.2008. It is found that fatty acid is not manufactured as excisable goods from crude palm oil, rather it is waste arising in the course of manufacture. The Ld.Commissioner has erred in finding that they are not eligible for the benefit of Notification No.89/1995-CE because they are manufacturing tin containers/HDPE jars as submitted by the Ld. Counsel for the Appellants. The Ld. Commissioner has not appreciated the fact that the tin containers/HDPE jars manufactured are also eligible for exemption under Notification No.10/1996 as submitted by the Appellant. The Larger Bench of the Tribunal in the case of M/S RICELA HEALTH FOODS LTD., M/S J.V.L. AGRO INDUSTRIAL LTD., M/S KISSAN FATS LIMITED VERSUS CCE, CHANDIGARH, ALLAHABAD [ 2018 (2) TMI 1395 - CESTAT NEW DELHI] has held that Noting that the reference is to decide whether these are to be treated as waste for the purpose of exemption N/N. 89/95-CE we note though the excisability of the product itself is seriously in dispute as per the opinion expressed by us, as above, these cannot be considered as anything other than waste and as such will be covered by the exemption N/N. 89/95-CE. The Appellants are entitled to exemption contained in Notification No.89/1995-CE on the products which arise incidentally to the manufacture of vegetable oils - the impugned order misplaced itself and the findings vis- vis tin containers/HDPE jars manufactured and captively consumed in the factory The impugned orders cannot be sustained and are therefore set aside - Appeal allowed - decided in favor of appellant.

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• 2022 (5) TMI 251
  CENVAT Credit - capital goods - MS Angles, Channels, Beams and Plates - eligibility of credit on the basis of the use of said goods and the nature of the said goods - period 2008-09 and 2009-2010 - HELD THAT:- The appellant have not produced Chartered Engineer certificate however, they submitted the documents related to accounting of the goods and as per the Chartered Accountant certificate, the goods on which the credit is availed, have been accounted for and used for repair of plant and machinery - It is also observed that in the show cause notice, the use of the goods has been mentioned in the statement enclosed with the show cause notice. In this statement also it is observed that all the steel material was used in the plant and machinery. Though the appellant has not provided Chartered Engineer certificate which was not practicable as the use was taken place almost 7-8 years ago. Therefore, this can be accepted on the fact of use of goods from these documents. TMT Bar - HELD THAT:- It was used in the plant and machinery or platform made for the plant. Therefore, it is admissible for Cenvat credit. The similar issue has been considered in the appellant s own case in M/S BODAL CHEMICALS LTD. VERSUS C.C.E. AHMEDABAD-I [ 2017 (9) TMI 147 - CESTAT AHMEDABAD] where it was held that these Items were used in the factory for repair and maintenance of the capital goods. The appellant is entitled for the Cenvat credit in respect of goods in question - appeal allowed - decided in favor of appellant.

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• 2022 (5) TMI 250
  CENVAT Credit - input services - place of removal - Storage and Warehousing Service for storage of goods at the premises of C F agent in relation to onward sale of goods, cleared by the appellant from the factory - HELD THAT:- The dispute is in relation to Service of Storage and Warehousing at the premises of C F Agent as the agent of the appellant from whose premises the sale of goods take place on behalf of the appellant only. In terms of Section 4 of Central Excise Act, the place from where the goods is sold is also the place of removal - In the present case since the sale of goods is from the C F Agent s premises, the said premises is the place of removal. Therefore the service provided upto the place of removal is admissible input service in terms of Rule 2(l) of Cenvat Credit Rules, 2004. Even in terms of inclusion clause under Rule 2(l) of Cenvat Credit Rules, 2004, the service of Storage and Warehousing is clearly included and for this reason also the appellant is entitled for Cenvat credit. The appellant is entitled for Cenvat credit on Storage and Warehousing Service at C F Agent s premises - appeal allowed - decided in favor of appellant.

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• 2022 (5) TMI 249
  CENVAT Credit - testing of medicament - inputs and packing material used in the manufacture of medicament and the same is tested for trial and quality purpose and were destroyed thereafter - process of quality testing is an integral part of manufacturing of final product or not - HELD THAT:- There is no dispute in the fact that packaging/ raw materials on which the appellant has claimed Cenvat credit has been used in the process of manufacturing of medicaments for trial and testing purpose under the Drugs and Cosmetics Act, which was subsequently destroyed. On the basis of such tests only the marketability of the product is ascertained. Accordingly, the process of testing of the medicaments is an integral part which is used in relation to manufacturer of the final product. Accordingly, the raw/ packaging material which is used in manufacturing and which goes for testing are indeed the inputs which are used in or in relation of manufacturing of final products. The appellant is entitled for the credit on the input and packaging material used for testing products - appeal allowed - decided in favor of appellant.

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• Indian Laws

• 2022 (5) TMI 248
  Arbitration Award - Maintainability of petition before the HC - availability of alternative remedy of appeal - non-compliance of Clause 56 of the Articles of Agreement - procedure as required under Clause 56 not followed - HELD THAT:- Against the award made by the learned Arbitrator made under the Act and against an order passed by the learned trial Court making the award a decree and without availing the alternative statutory remedy available by way of appeal under the provisions of the Act, the High Court ought not to have entertained the writ petition under Articles 226 and 227 of the Constitution of India. When the statute provides a further remedy by way of appeal against the award and even against the order passed by the learned trial Court making the award a decree of the court, the High Court ought not to have entertained the writ petition and ought not to have set aside the award, in a writ petition under Articles 226 and 227 of the Constitution of India. In that view of the matter the impugned judgment and order passed by the High Court is unsustainable and the same deserves to be quashed and set aside. Impugned Judgment and Order passed by the High Court is set aside - Appeal allowed.

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