TMI Tax Updates - e-Newsletter
May 19, 2023

Case Laws in this Newsletter:

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

Highlights / Catch Notes

• GST:

  Principles of natural justice - validity of SCN - vague and cryptic SCN - Section 75 of GST Act is complete Code in itself which prescribes for various stages or determination of wrongful utilization of ITC which is required to subject to affording of reasonable opportunity of being heard to the assessee. Since the Statute itself prescribes for affording reasonable opportunity, it is incumbent upon the Revenue to afford the same and any deficiency in that regard vitiates the end result. - HC
  Visit to Get Source

  ---

• GST:

  Classification of supply - bundled service or not - right to use of car/two wheeler vehicle parking space along with the sale of under constructed apartments - it is evident that sale/right to use car parking service and construction services are separate services which are not dependent on sale and purchase of each other. Therefore, sale/right to use car parking is not naturally bundled with construction services and hence, it can not be treated as composite supply of construction services. - AAAR
  Visit to Get Source

  ---

• GST:

  GST on sale and purchase of old and used jewellery - The applicant purchasing second hand gold in the form of jewellery / parts of jewellery, from unregistered individuals and selling to registered / unregistered dealers, after melting the same, in the form of lumps / irregular shapes of gold, cannot pay GST on the margin difference between the sale price and purchase price as stipulated in Rule 32(5) of CGST Rules, 2017 - AAR
  Visit to Get Source

  ---

• Income Tax:

  Addition u/s 69A - valuable article - ambit of the word ‘owner’ in section 69A - carriage contractor for bitumen - short delivery of bitumen - Can a thief become the owner - Deemed ownership - an ‘article’ shall be considered ‘valuable’ if the concerned article is a high-priced article commanding a premium price. - AO acted illegally in holding that one appellant was the ‘owner’ and on the said basis made the addition - SC
  Visit to Get Source

  ---

• Income Tax:

  Refund of the income tax for the past years on exempted income of disability pension (service element and disability element) - the amount of income tax paid by the petitioner for the relevant years be refunded to him alongwith interest @ 9% p.a. - HC
  Visit to Get Source

  ---

• Income Tax:

  Whether the assessee had a PE in India - it is observed that the contractee is to provide office space with some other facilities to the employees of the assessee in India to carry out their activities. Such premises and facilities have been given free of charge. However, the question, which arises, is, whether access given to the assessee of the office premises of the contractee would constitute service PE or for that matter any other PE. - we hold that the assessee does not have any PE in India - AT
  Visit to Get Source

  ---

• Income Tax:

  Addition of undisclosed income arising out of sale of land - on-money - Once, nature and character of land sold is established as agricultural land not to be treated as capital asset u/s. 2(14)(iii) of the Act, any income arising out of sale of such land – whether by way of declared sale consideration or on account of on-money, would partake the character of exempt income, as the source of both the declared sale consideration and the on-money received is the same, viz., sale of agricultural land. - AT
  Visit to Get Source

  ---

• Income Tax:

  MAT - Income to be taxed u/s 115BAA or u/s 115JB - assessee has not uploaded Form 10-IC electronically before or at the time of filing of return of income within time period prescribed u/s 139(1) - the ground of appeal raised by the assessee is restored back to the file of assessing officer to consider the report in Form-10IC and allow relief to the assessee, if the assessee fulfil all other requisite condition as per law. - AT
  Visit to Get Source

  ---

• Income Tax:

  Addition u/s 56(2)(vii) r.w.s. 69 - difference between the purchase price i.e. circle rate/stamp duty value and the value determined by the DVO - This section can be invoked only if the circle rate of the property was more than the price at which the property was purchased and the property can be referred to DVO only if the assessee disputes the stamp duty value of the property. Thus, it is the plea of the assessee that invocation of section 56(2)(vii) is itself wrong. - AT
  Visit to Get Source

  ---

• Income Tax:

  Revision u/s 263 by CIT - As per PCIT AO fails to examine the issue on increase in share premium in light of provisions of section 56(2)(vii), although, the assessee has made huge cash deposits during demonetization period, the AO has not verified the issue in light of SOP issued by CBDT for verification - Revision proceedings sustained - AT
  Visit to Get Source

  ---

• Income Tax:

  Disallowance of business promotion expenditure to the extent of 50% - The employees and Directors of the assessee company would incur the expenditure in their credit cards and later on the same were reimbursed by the assessee company to the Directors and employees. In any case, there cannot be any element of personal expenditure in the hands of the company - AT
  Visit to Get Source

  ---

• Income Tax:

  Long term capital loss - assessee has surrendered the leasehold rights - lease premium was amortized over the period of lease but was not shown as an asset in the income tax depreciation schedule - AO / CIT(A) considered the same as the long term capital loss has escaped assessment - AO directed to ascertain the facts and allow the relief to the assessee as per the CBDT circular - AT
  Visit to Get Source

  ---

• Income Tax:

  Bogus LTCG on shares - Addition u/s 68 - Transactions in Shares - For making an addition holding that transaction are bogus, the LD AO should have made inquiries on the documents submitted by the Assessee. Most important is the inquiry based on date and Time stamp of the transactions at stock exchanges. Buy and sale timing based on date and time stamp of trade would have led to exit providers and where the securities have travelled after sale, who provided the funds to the buyers, how the broker of buyer of shares are involved in these transactions. - Additions deleted - AT
  Visit to Get Source

  ---

• Customs:

  Valuation of imported goods - The importers had accepted the enhanced value and there was, therefore, no necessity for the assessing officer to determine the value in the manner provided for in rules 4 to 9 of the Valuation Rules sequentially - AT
  Visit to Get Source

  ---

• Indian Laws:

  Dishonour of Cheque - Liability of Director of company - Company is under CIRP proceedings under IBC and Director is personal guarantor to the loan - the provisions of Section 96 of the IBC would not be applicable in the facts of the present case as the petitioner is arrayed as an accused in the complaint u/s 138 NI Act in his capacity of the Managing Director of Respondent No. 2.- HC
  Visit to Get Source

  ---

• IBC:

  Rejection of claim by Resolution Professional - Petitioners sought return of stock of their owned rice from the Corporate Debtor - to accept the claims of the Appellants at the stage of Resolution and now Liquidation proceedings, the claims have to be real, based on solid documentary evidence and in accordance with law. These cannot be allowed on the basis of indirect or circumstantial or secondary evidence/ documents. - AT
  Visit to Get Source

  ---

• Service Tax:

  Refusal to honour the liability of paying the service tax (on the part of LIC) - Renting of immovable property to LIC - It is to be borne in mind that the LIC being an instrumentality of the State should not take up technical pleas and attempt to evade its liability to pay a tax which it is bound to pay in the eye of law. - Since the LIC is held liable to pay the service tax, the service tax paid by the petitioner shall be paid by the LIC to the petitioner within a period of one month from the date of receipt of a copy of this order - HC
  Visit to Get Source

  ---

• Service Tax:

  Denial of exemption - Demand beyond the scope of the Show Cause Notice (SCN) - Procurement of GTA service for export - When the return itself requires the details, there is no requirement for the show cause notice to specify in the said details, as has been submitted by the learned counsel for the appellant. - the appellant has complied with the notification condition as enumerated in column 4 of the aforesaid table. In view of the same, the demand of duty and interest is set aside. - AT
  Visit to Get Source

  ---

• Service Tax:

  Validity of SCN - SCN failed to identify the alleged taxable service and the category of service - the demand has been proposed in the show cause notice only because of the difference between the figures shown in the balance sheet of the appellant and the ST-3 returns. The show cause notice, therefore, is vague - AT
  Visit to Get Source

  ---

• Central Excise:

  Extended period of limitation - Revenue Neutrality - Clandestine Removal - In case of clandestine clearance against the delivery memo there could be no claim of CENVAT credit. The claim of revenue neutrality cannot be accepted in such case - by clearing the goods on the delivery memo, which cannot be co-related with the duty paying documents is an act of clandestine clearance and demand of duty against such clearances needs to be made by invoking the extended period of limitation as provided by the proviso to Section 11 A (1) of the Central Excise Act, 1944. - AT
  Visit to Get Source

  ---

• Central Excise:

  Revenue Neutrality - Levy of differential liability - price variation clause - The entire exercise is revenue neutral as the duty paid by them will be available as credit for their sister unit - As the entire exercise would be revenue neutral, there is no loss of revenue to the exchequer. - AT
  Visit to Get Source

  ---

• Central Excise:

  CENVAT Credit - invoice has been issued by the service provider much later than 14 days - cenvat credit cannot be disallowed in the hands of the service recipient by invoking Rule 4A (1) of the ST Rules even if the service provider issues such invoice beyond the prescribed period of 14days from the date of completion of service/receipt of payment. The obligation to issue the invoice timely has been cast on the service provider and not the service recipient. - AT
  Visit to Get Source

  ---

• VAT:

  Levy of Tax on consideration passed through Credit Notes - A credit note is a valuable consideration which is essentially a document to inform a buyer that the buyer’s account is being credited because of errors, returns or allowances. - Merely because the dealer is acting as an intermediary or on behalf of the manufacturer pursuant to a warranty and receives a recompense in the form of a credit note, the same cannot escape liability of tax under the Sales Tax Acts under consideration. - SC
  Visit to Get Source

  ---

• VAT:

  Levy of penalty - demand against wrongly claimed ITC - The benefit of this ITC was never granted by the revenue. Hence, it was not a case, where wrong information was given. Only a claim was made, which was ultimately rejected. This would not amount to an intention to claim wrong relief and attract imposition of penalty. The appeal to the extent of imposition of penalty and interest is also liable to be allowed. - HC
  Visit to Get Source

  ---

TMI Short Notes

• Income Tax:

  Addition u/s 69A - ambit of the word "owner" and "valuable article" for the purpose of additions as Unexplained money, etc

---

Articles

• Special All-India Drive against fake GST registrations and bogus GST invoicing
• EPF registration for a Private Limited Company
• AMNESTY SCHEME FOR ONE TIME SETTLEMENT OF DEFAULT IN EXPORT OBLIGATION

Notifications

• Customs

• 35/2023 - dated 17-5-2023 - Cus (NT)
  Land Customs Stations and routes - entries relating to Bangladesh substituted - amendment of Principal Notification No. 63/1994-Customs (N.T.) dated 21st November 1994

  ---

• GST - States

• S.O. 134 - dated 17-5-2023 - Bihar SGST
  Amendment of notification no. S.O. 174, dated the 29th August, 2022, for extension of limitation under section 168A under the BGST Act, 2017

  ---

• S.O. 133 - dated 17-5-2023 - Bihar SGST
  Under section 128 to provide amnesty to GSTR-10 non-filers under the BGST Act, 2017

  ---

• S.O. 132 - dated 17-5-2023 - Bihar SGST
  Notification under section 128 for rationalisation of late fee for GSTR-9 and amnesty to GSTR-9 non-filers under the BGST Act, 2017

  ---

• S.O. 131 - dated 17-5-2023 - Bihar SGST
  Notification under section 148 to provide amnesty scheme for deemed withdrawal of assessment orders issued under section 62 under the BGST Act, 2017

  ---

• S.O. 130 - dated 17-5-2023 - Bihar SGST
  Notification under section 148 for extension of time limit for application for revocation of cancellation of registration under the BGST Act, 2017

  ---

• S.O. 129 - dated 17-5-2023 - Bihar SGST
  Amendment in Notification No. S.O. 4, dated the 02th January, 2018

  ---

News

• Repayment of ‘6.17% Govt. Stock 2023’

  ---

Case Laws:

• GST

• 2023 (5) TMI 750
  Seeking refund of amount which the petitioner claims was illegally recovered under coercion - classification of Distilled Dried Grain Soluble (DDGS) - whether, given the controversy, the respondents were justified in freezing the the bank accounts of the petitioner? - HELD THAT:- The petitioner s case is not that he was coerced on a single date. It is the petitioner s case that he has been coerced by a series of actions by the respondents which includes freezing of the bank accounts and repeatedly summoning its officials while the pandemic was rising. It would be relevant to consider the reasons that prompted the respondents to freeze the bank accounts of the petitioner considering the tax status of the petitioner. It is not disputed that for any action under Section 83 the Act, the Commissioner must form an opinion that it is necessary in the interest of Revenue to freeze the bank account(s) and interest of the Revenue cannot be protected otherwise. List on 17.05.2023.

  ---

• 2023 (5) TMI 749
  Principles of natural justice - validity of SCN - show cause notice being vague and cryptic - Non-communication of relevant information and material thereby disabling the petitioner to respond - Section 74 and 75 of GST Act as well as Rule 142 of GST Rules - HELD THAT:- Bare reading of the show cause notice reveals that it neither contained the material and information nor the statement containing details of ITC transaction under question. Section 75 of GST Act is complete Code in itself which prescribes for various stages or determination of wrongful utilization of ITC which is required to subject to affording of reasonable opportunity of being heard to the assessee. Since the Statute itself prescribes for affording reasonable opportunity, it is incumbent upon the Revenue to afford the same and any deficiency in that regard vitiates the end result. In the case of Division Bench of Jharkhand High Court in M/s Sidhi Vinayak Enterprises Vs. The State of Jharkhand ors [ 2022 (10) TMI 671 - JHARKHAND HIGH COURT ] the facts and circumstances of which are similar if not identical to the facts and circumstance prevailing herein - The Jharkhand High Court has dealt with the provisions of Section 74 and 75 of GST Act as well as Rule 142 of GST Rules, and held that the impugned show cause notice in both the cases does not fulfill the ingredients of a proper show-cause notice and thus amounts to violation of principles of natural justice. In view of above and the following decision of the Jharkhand High Court, this Court has no manner of doubt that the very initiation of the proceedings by way of show cause notice is vitiated for the same being vague - petition allowed.

  ---

• 2023 (5) TMI 748
  Classification of supply - composite supply of construction of residential apartment services or the same is a distinct supply under section 7 of the CGST/WBGST Act, 2017? - bundled service or not - rate of tax - right to use of car/two wheeler vehicle parking space along with the sale of under constructed apartments - if apartments are sold after receipt of completion certificate from the competent authority, then whether the amounts collected for right to use of car parking space will also be treated as a non GST supply or not - Whether the taxability would change if such charges for right to use of car parking space is collected after the sale of the apartment has been done i.e. the customer had not opted for the car parking space at the time of purchase of the under constructed unit, but had sought for the same after the unit was handed over to the customer after receipt of the completion certificate? Whether parking space open or covered along with construction services of the apartment will be a bundled service as argued by the Appellant? - HELD THAT:- It transpires from plain reading of the above provisions of RERA that though a sanctioned plan requires inclusion of parking layout, an uncovered parking space such as open parking area is not included in the definition of garage but falls within the meaning of common area . Now the common area belongs to all apartment owners jointly or the owners association when formed and no portion can be sold/transferred/leased out to any person by the promoter - So in the instant case the sanctioned plan may have open parking spaces but the Appellant has no right to transfer ownership or lease out or allow right to use of the said spaces to allottees. The owners association on joint agreement of its members may lease out the open parking space on rent at a future date but that question is beyond the ambit of the current discussion. The amount charged by the appellant for right to use of car/two wheeler vehicle parking space, though not permissible as per RERA, constitutes a separate supply under the GST Act and the appellant is therefore liable to pay tax @ 18% on such supply. Further, the question of one-third abatement of valuation of land for open parking space is not maintainable as the common area which includes such open parking space is considered in the valuation of apartment and one-third abatement on supply of construction services is being availed before levy of tax under the GST Act. So, it is evident that sale/right to use car parking service and construction services are separate services which are not dependent on sale and purchase of each other. Therefore, sale/right to use car parking is not naturally bundled with construction services and hence, it can not be treated as composite supply of construction services. Appeal disposed off.

  ---

• 2023 (5) TMI 747
  Liability to pay GST on the margin difference between the sale price and purchase price as stipulated in Rule 32(5) of CGST Rules, 2017 - applicant purchasing second hand gold in the form of jewellery / parts of jewellery, from unregistered individuals and sells to registered / unregistered dealers, after melting the same, in the form of lumps / irregular shapes of gold, without changing the nature, (i.e.,) Gold remains gold - HSN Code for Old Gold Jewellery purchased and after melting the purchased old gold jewellery is 7113 or not? HELD THAT:- In the instant case, the applicant is purchasing second hand gold in the form of jewellery from unregistered individuals and supplies to registered / unregistered persons in the form of lumps after melting the same. One of the conditions to apply rule 32(5) for their outward supplies is that supply made by the supplier must be a taxable supply. The applicant is into supply of gold, which is a taxable supply and hence the first condition is satisfied. Classification of gold jewellery and gold lumps - HELD THAT:- The tariff heading 7113 pertains to jewellery and parts thereof of precious metal which includes gold jewellery, and tariff heading 7108 pertains to gold in unwrought or semi-manufactured forms such as gold lumps or irregular shapes of gold. Gold jewellery are a distinct category of article having distinct characteristics and is not same as gold lumps. When the applicant melts the gold jewellery into gold lumps, the nature of goods changes in as much as the characteristics of the articles and the classification changes. Since the processing done by the applicant changes the nature of goods, they are not eligible to avail the benefits of Rule 32(5) of CGST Rules, 2017. The HSN Code for Old Gold Jewellery is 7113 and after melting into gold lumps or irregular shapes of gold the HSN Code is 7108.

  ---

• 2023 (5) TMI 713
  Jurisdiction - Confiscation of goods (when in transit) - it was submitted that exercise of powers under Section 129 and thereafter switching over to Section 130 and passing order thereunder without availing the petitioner the benefits of release of the goods under Section 129, could be said to be without jurisdiction - HELD THAT:- Rule, returnable on 19.4.2023. By way of interim relief, the goods of the petitioner shall be released provided the petitioner complies with the conditions imposed.

  ---

• Income Tax

• 2023 (5) TMI 746
  Addition u/s 69A - Owner of valuable article - ambit of the word owner in section 69A - carriage contractor for bitumen - Allegation against the appellant that he had lifted 14507.81 metric tonnes of bitumen but delivered only 10064.1 metric tonnes. This meant that the appellant had not delivered 4443.1 metric tonnes. - whether the appellant could be treated as the owner of the bitumen? - HC confirmed the additions HELD THAT:- A bailee who is a common carrier would necessarily be entrusted with the possession of the goods. The purpose of the bailment is the delivery of the goods by the common carrier to the consignee or as per the directions of the consignor. During the subsistence of the contract of carriage of goods, the bailee would not become the owner of the goods . In the case of an entrustment to the carrier otherwise than under a contract of sale of goods also, the possession of the carrier would not convert it into the owner of the goods. Can a thief become the owner? It would be straining the law beyond justification if the Court were to recognise a thief as the owner of the property within the meaning of Section 69A. Recognising a thief as the owner of the property would also mean that the owner of the property would cease to be recognised as the owner, which would indeed be the most startling result. Ambit of the word owner in section 69A When it came to the Podar Cement Pvt. Ltd.[ 1997 (5) TMI 2 - SUPREME COURT] , this Court took into consideration the ground reality in the context of Section 22 of the Act and approved of taxing the income of a person who is entitled to receive income from the property in his own right under Section 22. We have elaborately referred to the judgment of the Patna High Court in the Sahay Properties case [ 1982 (12) TMI 27 - PATNA HIGH COURT] . The full rights of an owner as set out therein may again be reiterated as: - (1) The power of enjoyment which includes the power to destroy. (2) The right to possession which includes the right to exclude others. (3) The power to alienate inter vivos or to charge as security. (4) The power to bequeath the property. This Court may at this juncture observe that a carrier has none of these rights or powers. Deemed ownership A person in actual physical control of the property and realising the entire income for his own use may indicate the presence of ownership. The absence of the conveyance needed to complete the transfer may not detract from a person being found to be the owner. The soul of the reasoning appears to be the entitlement to receive the income from the property in his right . This Court has already found that the appellant is bereft of any of the rights or powers associated with ownership of property. The only aspect was the alleged possession of the goods which is clearly wrongful when it continued with the appellant contrary to the terms of the contract and the law. The Court is conscious of the fact that income derived from an illegal business can be legitimately brought to tax [ 1980 (5) TMI 2 - SUPREME COURT] . However, that is a far cry from justifying invocation of Section 69A of the Act as it is indispensable to invoke the said provision that the assessing officer must find that the articles in question was under the ownership of the assessee in the financial year. This is apart from other requirements being met. What is however important is, the requirement in Section 69A that the assessing officer must find that the assessee is the owner of the bitumen. This Court is unable to agree that in the facts it could be found that the appellant could be found to the owner. Quite clearly, if the case of short delivery is accepted, the consignee if property had passed to it had every right over the bitumen and proceeding on the basis that the assessing officer s reasoning is correct, the department definitely had a case that it had not received the bitumen in question. The right over the bitumen as an owner at no point of time could have been claimed by the appellant. The possession of the appellant at best is a shade better than that of a thief as the possession had its origin under a contract of bailment. This is also not a case where any case is set up of the carrier exercising rights available in law entitling it possess goods as of right or pass on title to another under law as permitted. Hence, this Court would hold that the Assessing Officer acted illegally in holding that one appellant was the owner and on the said basis made the addition. The intention of the law-giver in introducing Section 69A was to get at income which has not been reflected in the books of account but found to belong to the assessee. Not only it must belong to the assessee, but it must be other valuable articles. Bitumen may be found in small quantities or large quantities. If the article is to be found valuable , then in small quantity it must not just have some value but it must be worth a good price {See Black s Law Dictionary (supra)} or worth a great deal of money {See Concise Oxford Dictionary (supra)} and not that it has value . Section 69A would then stand attracted. But if to treat it as valuable article , it requires ownership in large quantity, in the sense that by multiplying the value in large quantity, a good price or great deal of money is arrived at then it would not be valuable article. Thus, this Court would conclude that bitumen as such cannot be treated as a valuable article . For purpose of Section 69A of Income Tax Act, it is therefore declared that- an article shall be considered valuable if the concerned article is a high-priced article commanding a premium price. As a corollary, an ordinary article cannot be bracketed in the same category as the other high-priced articles like bullion, gold, jewellery mentioned in Section 69A by attributing high value to the run-of-the-mill article, only on the strength of its bulk quantity. To put it in another way, it is not the ownership of huge volume of some low cost ordinary article but the precious gold and the like, that would attract the implication of deemed income under Section 69A. Conclusion Thus bitumen is not a valuable article in the context of Section 69A and the assessee here was not the owner of the concerned bitumen for the purpose of section 69A. No Additions - Decided in favor of assessee.

  ---

• 2023 (5) TMI 743
  Addition u/s 69A - seized gold bullion and ornaments - ITAT deleted the addition - Whether the order of Tribunal is perverse in not considering the factual trial of the transaction where identity of the original purchaser as well as the identity of the seized gold remain undisclosed - HELD THAT:- Tribunal found that the original challans seized with the gold, bullion and gold jewellery supported the claim of the assessee - claim of the assessee has been supported and proved by independent verification done by the investigation wing with third party jewellers in Chennai. Only reason based on which the assessing officer made the addition was on the ground that the gold, bullion lacked distinctive identification numbers on the challans. The correctness of this finding was considered by the learned Tribunal and the learned Tribunal agreed with the finding recorded by the CIT(A) at page 4 of the order dated 30th October, 2019. The Tribunal has extracted the relevant paragraphs at the said order. From paragraph 8 of the impugned order we find that the factual findings recorded by the CIT(A) was not controverted by the department and the Tribunal having been satisfied with the factual conclusion arrived at by the CIT(A) agreed with the same and dismissed the revenue's appeal. Stand taken by the assessee that the gold and ornaments were given to him for the purpose of making jewellery and for polishing was established and proved. The matter being entirely factual and the CIT(A) and the Tribunal having concurrently held in favour of the assessee on facts - No substantial questions of law.

  ---

• 2023 (5) TMI 742
  Expenditure incurred on free distribution of medicines to patients and other social organizations during the flood situation - Tribunal came to the conclusion that AO had based his conclusion solely upon a statement recorded from an office bearer of the social organization and disallowed the expenses incurred by the assessee for supplying free medicines to social organizations - Tribunal noted that the assessee was not provided the opportunity to cross-examine despite specific request made HELD THAT:- As without affording such an opportunity the AO could not have drawn adverse inference against the assessee. AO based his findings on a statement recorded from one Dr. Chatterjee. Interestingly, the said Dr. Chatterjee was working as a resident Medical Officer in the assessee hospital from 1997 and according to him, due to certain personal issues between himself and the assessee hospital he left the hospital in March, 2013 and again rejoined in July, 2015. It appears that a statement was recorded from the said Doctor on 1st December, 2016 which could not have been of any relevance. Such supply of medicines by the assessee was stated to have been done during October, 2013. Furthermore, the said Dr. Chatterjee was also not made available for cross-examination by the assessee. As factual conclusion arrived at by the Tribunal, we find no questions, much less substantial questions of law, arises for consideration in this appeal.

  ---

• 2023 (5) TMI 741
  Refund of the income tax for the past years on exempted income of disability pension (service element and disability element) - petitioner is a disabled officer of the Indian Army who was commissioned and retired with service pension - HELD THAT:- As no explanation has been given as to why as per the Circular dated 02.07.2001 as referred to in the case of Colonel Madan Gopal Singh Nagi [ 2019 (3) TMI 502 - MADHYA PRADESH HIGH COURT ] once the disability pension was exempted from income tax then why this benefit has not been given to the petitioner. More so, the Board's Circular No. 13/2019 dated 24.06.2019 has been challenged by the disabled soldiers which has been stayed by the Hon'ble Supreme Court. Since the parties were directed to maintain status quo, which means that no recovery of income tax could be effected from the Army officer. Another aspect which required to be considered is that the Delhi High Court in Mahavir Singh Narwal vs. Union of India and another [ 2004 (5) TMI 622 - DELHI HIGH COURT ] has already examined Rule 173 of the Disability Pension which has not been amended till date. This writ petition is allowed and the amount of income tax paid by the petitioner for the relevant years be refunded to him alongwith interest @ 9% p.a. within a period of one month from the date of receipt of certified copy of this order alongwith costs of Rs.1 lac. Thereafter, compliance report of the order be sent to this Court by the concerned authority. If the payment is not made within the stipulated period then interest @ 18% p.a. from the date of entitlement till the amount actually paid to the petitioner shall be given as per the judgment passed in Madan Gopal Singh Nagi vs. Commissioner of Income Tax II [ 2019 (3) TMI 502 - MADHYA PRADESH HIGH COURT ]

  ---

• 2023 (5) TMI 740
  Income deemed to accrue or arise in India - Addition u/s 44DA or u/s 115A r.w.s. 9(1)(vii) - amount received by the assessee from Delhi Airport Metro Express Pvt. Ltd. is taxable u/s 44DA as per departmental or u/s 115A r.w.s. 9(1)(vii) as per assessee - assessee is a non-resident corporate entity, a tax resident of Hong Kong - contention of the assessee is that since professional services rendered by the assessee are not through any fixed place of profession, the receipts are not taxable under section 44DA - HELD THAT:- As contention of the assessee is farfetched, hence, not acceptable. The expression fixed place of profession is used in the context of a non-resident, which is not a foreign company. Though, the expression fixed place of profession has not been defined specifically under the provisions of the Act, however, the term Permanent Establishment used in section 44DA, in turn, refers to the definition of Permanent Establishment u/s 92F(iiia) of the Act. As per definition of PE under section 92F(iiia), it includes fixed place of business, through which, the business of the enterprise is wholly or partly carried on. Thus, the fixed place of profession is akin to fixed place of business. Therefore, assessee s contention in this regard are rejected. Whether the assessee had a PE in India ? - On a perusal of the agreement between the parties, it is observed that the contractee is to provide office space with some other facilities to the employees of the assessee in India to carry out their activities. Such premises and facilities have been given free of charge. However, the question, which arises, is, whether access given to the assessee of the office premises of the contractee would constitute service PE or for that matter any other PE. The facts on record do not reveal that the space and facilities provided to the assessee by DAMEPL can be construed to be a fixed place of business from where the assessee carries on its business wholly or partly. In the facts of the present appeal, the Revenue has failed to establish through corroborative evidence that the assessee is having control over the premise. Admittedly, it is the DAMEPL, which is having control over the premises and the assessee has been given access to the premise and provided certain space and facilities. No corroborative evidence has been brought on record to demonstrate that the assessee carries on business in India wholly or partly through a fixed place of business. That being the factual position emerging on record, applying the ratio laid down in the judicial precedents cited before us by the learned counsel for the assessee, we hold that the assessee does not have any PE in India. That being the fact, the provisions of section 44DA would not be applicable. Thus income offered by the assessee un/s 115A read with section 9(1)(vii) of the Act has to be accepted. More so, considering assessee s contention that in the preceding assessment years, similarly declared income has been accepted has not been controverted by the Revenue. Accordingly, we delete the addition made by the Assessing Officer under section 44DA of the Act.

  ---

• 2023 (5) TMI 739
  Deduction u/s. 54F - new claim before the appellant authority - Assessee neither claimed the deduction in original return nor by filing a revised return - as assessee for the first time made the claim of deduction before the ld.CIT(A) as per revenue assessee cannot claim the exemption - CIT(A) allowed the exemption by admitting additional evidence - HELD THAT:- Assessee can make a new claim u/s. 54F before the appellant authority which was not claimed in the original return or in the revised return. For allowing the claim of deduction u/s.54F certain conditions are prescribed. Although in the instant case the assessee has stated that he did not possess any residential house in his name, however the same was not verified by the ld.CIT(A) by calling for a remand report from the AO and he has simply accepted the submission of the assessee. We deem it proper to restore the issue to the file of the AO with a direction to give an opportunity to the assessee to substantiate with evidence to his satisfaction that the assessee did not possess any residential house in his name. AO shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee.Grounds raised by the revenue on this issue are accordingly allowed for statistical purposes. Determination of cost of construction - cost of construction at Rs. 1370 per sq.ft by the ld.CIT(A) as against Rs. 2286/- per sq.ft adopted by the AO - HELD THAT:- Since the AO in the instant case has computed the cost of construction on the basis of the figures obtained from the Telangana Registration Department website, therefore, in our opinion everything should be based on the rate as per the office of the Sub Registrar - restore this issue also to the file of the AO - Ground allowed for statistical purposes. Addition u/s. 68 - assessee could not produce the proper confirmation letters by giving communication address, date of borrowal amount, mode of transaction, permanent account number, bank account statement etc. - HELD THAT:- Since the confirmation letter filed before the AO shows that the same amount is the opening balance as on 01.04.2010, therefore, addition of the same for the impugned assessment year for non-submission of date of borrowal and purpose of utilization of the same cannot be a ground for making the addition during the year. CIT(A) also given a finding that the above amount was received from the partnership firm M/s. V.Praveen Kumar Reddy Co. Since the amount was outstanding at the beginning of 01.04.2010 and the confirmation letter to this effect was also filed before the AO, therefore, this amount relates to the AY 2010-11 and addition if any, could have been made in AY 2010-11 and not in the AY 2012-13 being an old outstanding creditor. The ground raised by the revenue on this issue is accordingly dismissed. Disallow 30% of the agricultural income by CIT(A) - HELD THAT:- We are of the considered opinion that disallowance of 50% of the agricultural income in absence of any details for sale of the produce and towards expenses for earning agricultural income will meet the ends of justice. We therefore direct the AO to restrict the disallowance to 50% of the agirucltural income as against 30% restricted by the ld.CIT(A). The ground raised by the revenue on this issue is partly allowed.

  ---

• 2023 (5) TMI 738
  Addition u/s 69A - unexplained money - cash deposit made by the assessee during the demonetization period - AO rejected the books of account u/s 145(3) and viewed that assessee has nothing to offer regarding cash deposit during the demonetization period - HELD THAT:- Both the authorities below accepted the fact that the amount received by assessee are nothing but sale proceeds in the course of business of the assessee. The addition has made only on the basis that after demonetization, the demonetization note could not have been accepted as valid tender. Since the sales proceeds for which cash was received are added u/s 69A of the Act which would amount to double taxation once as sale and another against as unexplained cash credit which is violate principles of taxation. As relying on Senco Alankar case [ 2022 (8) TMI 79 - ITAT KOLKATA] hold that there is no reason to interfere with the factual findings given by the ld. CIT(A) in deleting the addition - Decided in favour of assessee.

  ---

• 2023 (5) TMI 737
  Assessment u/s 153A - Unexplained share capital and share premium - unexplained cash credit u/s. 68 - HELD THAT:- As the additions made are not based on any incriminating material found during the search and seizure operation conducted in case of the Assessee and moreover, the additions are not based on any conclusive evidence brought on record to demonstrate that investors did not have any creditworthiness or the transactions are not genuine, we do not find any compelling reason to disturb the factual finding of ld. Commissioner (Appeals), while deleting the addition. Addition u/s 68 - AY 2015-16 - As the investments in share capital and share premium, which were added as income of the Assessee u/s. 68 of the Act in the impugned assessment year, were made in preceding assessment years. The investments made were converted into equity shares in the impugned assessment year. However, considering the fact that the credit entries relevant to the investment in share capital and share premium do not relate to the impugned assessment year, provisions of section 68 of the Act cannot be invoked in the year under consideration. All the appeals filed by the Revenue are dismissed.

  ---

• 2023 (5) TMI 736
  Addition of undisclosed income arising out of sale of land - amount received by the assessee towards sale of agricultural land - whether as declared sale consideration or on-money ? - assessee has not disclosed the sale proceeds of the land sold in the original return of income - HELD THAT:- As in the revised return of income filed in pursuance to the notice issued u/s. 153A assessee has offered the amount received from sale of land. This, in our view, cannot be a finding which is sustainable either on facts or in law. Firstly, AO has not controverted the nature and character of land sold. Once, nature and character of land sold is established as agricultural land not to be treated as capital asset u/s. 2(14)(iii) of the Act, any income arising out of sale of such land whether by way of declared sale consideration or on account of on-money, would partake the character of exempt income, as the source of both the declared sale consideration and the on-money received is the same, viz., sale of agricultural land. Income derived from sale of agricultural land, which is not a capital asset, cannot be made taxable. The decisions relied upon by ld. Counsel for the assessee fully supports this view. No infirmity in the decision of ld. Commissioner (Appeals) in deleting the additions made. Decided against revenue.

  ---

• 2023 (5) TMI 735
  Revision u/s 263 - Validity of assessment order passed u/s 143(3) - unexplained credit on account of capital contribution from 2 partners of the assessee firm, the outstanding balance of the sundry creditor and alleged suppressed production - HELD THAT:- AO during the course of assessment proceedings, raises specific query on the issue capital contribution by the partners and required the assessee to furnish supporting evidence which can be verified from the notice issued u/s142(1) and SCN. It is not the case that the AO has not made any enquiry with regard to capital introduction by the 11 partners, as such the AO carried out adequate inquiry with regard to all the 11 partners who introduced capital in the assessee firm and thereafter made addition u/s 68 on account of capital introduced by the 2 partner only. Thus, the allegation of Pr. CIT for initiated proceedings u/s 263 of the Act on the ground that the AO has not made enquiries or verification with regard to other partners is factually incorrect. Even on merit of the case, we note that the honourable courts in series of the cases have held that the capital contribution made by the partner of the firm cannot be subject to the addition in the hands of the partnership firm. In this regard, we find support and guidance from the judgment of Pankaj dyestuff Industries [ 2005 (7) TMI 601 - GUJARAT HIGH COURT] - In view of the above we hold that the allegation framed by the learned PCIT cannot be made subject matter of revision under the provisions of section 263. AO made addition of outstanding sundry creditor on ad-hoc and actual amount worked out for supressed production and amount added while computing assessed income are different - Regarding both the issues, we note that the assessee is in appeal before the learned CIT(A). This fact can be verified from the memo of appeal filed by the assessee before the learned. Once the issue is pending before the learned CIT(A), the same cannot be made subject matter of revision under the provisions of section 263 - we note that in case of CIT vs. Vam Resorts Hotels (P.) Ltd. [ 2019 (8) TMI 1418 - ALLAHABAD HIGH COURT] as held that when an appeal is pending before the appellate commissioner, then the power under section 263 of the Act cannot be exercised.

  ---

• 2023 (5) TMI 734
  MAT - Income to be taxed u/s 115BAA or u/s 115JB - assessee has not uploaded Form 10-IC electronically before or at the time of filing of return of income within time period prescribed u/s 139(1) - case of assessee is that Form 10-IC could not be uploaded on ITBA Portal due to technical error and it was the first year of availing such benefit - whether non-filing of Form 10-IC on ITBA Portal is fatal to the assessee or not in availing the benefit of section 115BAA? HELD THAT:- Hon ble Delhi High Court in CIT Vs Web Commerce (India) (P) Ltd. ([ 2008 (12) TMI 13 - HIGH DELHI COURT] held that once audit report is filed before framing of assessment, the provisions of Section 80-IA (7) would be complied as furnishing of such report at the time of filing of return is directory in nature and not mandatory. Considering the similar principle that the assessee furnished Form 10-IC before the order of ld. CIT(A). It is settled principles under law that appeal is a continuation of assessment proceedings and the ld. CIT(A) has co-terminus power as of AO, therefore, the ld. CIT(A) was required to consider the report in Form 10-IC. In view of the above factual and legal discussion, the ground of appeal raised by the assessee is restored back to the file of assessing officer to consider the report in Form-10IC and allow relief to the assessee, if the assessee fulfil all other requisite condition as per law. Appeal of assessee is allowed for statistical purpose.

  ---

• 2023 (5) TMI 733
  Exemption u/s 54F OR 54 - New claim - assessee submitted that the assessee was eligible for the benefit u/s 54 but due to a bonafide and inadvertent typographical mistake, the claim was made erroneously u/s 54F - HELD THAT:- As the claim made by the assessee u/s 54 was not a new claim. Accordingly, we hold that the conclusion arrived by learned CIT(A) and the AO that the assessee s claim u/s 54 of IT Act is a new claim is, factually wrong in the specific facts and circumstances of the present appeal before us. Assessee had already made this claim in the return of income, although, in an inadvertent and bonafide typographical mistake, the section under which the benefit was claimed, was erroneously mentioned as 54F instead of section 54 which is the correct section. Issue in dispute in the present appeal before us is squarely covered in favour of the assessee by cases of Shrikar Hotels (P.) Ltd.[ 2017 (2) TMI 679 - ALLAHABAD HIGH COURT] , Natraj Stationery Products (P.) Ltd. [ 2008 (11) TMI 48 - HIGH COURT DELHI] , Malayala Manorama Co. Ltd. [ 2018 (8) TMI 198 - KERALA HIGH COURT] , Armine Hamied [ 2022 (9) TMI 35 - ITAT MUMBAI] and Jai Kumar Gupta (HUF) [ 2019 (3) TMI 466 - ITAT MUMBAI] Thus we direct the Assessing Officer to compute benefit u/s 54 of IT Act on merits, having regard to applicable law and relevant facts and circumstances; and we order the Assessing Officer to allow assessee s claim u/s 54 of IT Act accordingly. Appeal of the assessee stands allowed for statistical purposes.

  ---

• 2023 (5) TMI 732
  Addition u/s 56(2)(vii) r.w.s. 69 - difference between the purchase price i.e. circle rate/stamp duty value and the value determined by the DVO - assessee has purchased four properties at circle rates with his brothers and has 1/4th share in all four properties - HELD THAT:- As section 56(2)(vii) can be invoked only if the consideration at which the property is purchased is less than the stamp duty value of such property. This section can be invoked only if the circle rate of the property was more than the price at which the property was purchased and the property can be referred to DVO only if the assessee disputes the stamp duty value of the property. Thus, it is the plea of the assessee that invocation of section 56(2)(vii) is itself wrong. We find ourselves in agreement with the proposition that the sanguine provision of concerned section duly mandate that value of property purchased has to be less than circle rate for the difference to be added. Hence, we allow the additional ground raised by the assessee. Hence, the assessment is held to be invalid. Decided in favour of assessee.

  ---

• 2023 (5) TMI 731
  Revision u/s 263 by CIT - As per PCIT AO fails to examine the issue on increase in share premium in light of provisions of section 56(2)(vii), although, the assessee has made huge cash deposits during demonetization period, the AO has not verified the issue in light of SOP issued by CBDT for verification and as the assessee has claimed deduction for provision for bad and doubtful debts, the Assessing Officer has not applied his mind to relevant provisions of Act, before allowing the claim - HELD THAT:- Although the assessee has received huge share premium, but the Assessing Officer has not verified the issue in light of provisions of section 56(2)(vii) of the Act, by calling for specific details with regard to price charged by the assessee and valuation of shares, but simply accepted the explanation of the assessee without any verification with regard to price determined for allotment of shares. As regards huge cash deposits during demonetization period, although the assessee has deposited a sum of Rs. 19.53 crores into various bank accounts, but the Assessing Officer has not made any attempts to verify huge cash deposits in light of SOP issued by CBDT for verification of cash deposits during demonetization period. Similarly, the claim of provision for bad and doubtful debts written of was also not verified with reference to provisions of section 36(1)(vii) r.w.s. 36(2) of the Act. From observations of AO, it is very clear that although the assessee did not furnished relevant details called for by the Assessing Officer with reference to increase in share premium, cash deposit during demonetization period and provision for bad and doubtful debts, but the Assessing Officer has completed the assessment on the basis of available information on record and accepted income declared by the assessee for the relevant assessment year. Even though the assessee has not furnished any details with regard to three issues taken up by the PCIT for revision proceedings, AO has completed the assessment and accepted the income declared for relevant assessment years. Thus AO has failed to verify the issues in light of relevant provisions of the Act and he ought to have verified in light of provisions of section 263 of the Act and Explanation (2) to section 263 which rendered the assessment order to be erroneous in so far as it is prejudicial to the interests of the revenue and thus, the PCIT has rightly invoked their jurisdiction u/s. 263 - PCIT, after considering relevant facts has rightly set aside the assessment order passed by the Assessing Officer u/s. 143(3) - Decided against assessee.

  ---

• 2023 (5) TMI 730
  Disallowance of expenditure incurred for payment of salaries, incentives etc. to the helpers and guards - Expenses ment for personal purposes - during the course of search operation, the statement Manager of Finance and Accounts of the assessee was recorded u/s 132(4) wherein he admitted that employees work at the residence of the Directors - HELD THAT:- We find that out of the total expense towards salaries, incentive paid to drivers, helpers and guard which are reflected in the Tally Data seized, of Rs.18,46,149/-, a sum of Rs.17,28,439/- had been identified by the assessee and disallowed in the return filed in response to notice u/s 153A of the Act as meant for personal purposes of the assessee. In fact, a surrender had been made in the hands of the company for not including the same as perquisites in the hands of the Directors. This goes to prove that the remaining sum of Rs.1,17,710/- is meant wholly and exclusively for the purposes of the business of the assessee company. Hence, it became allowable expenditure u/s 37 of the Act. Accordingly, ground No.1 raised by the assessee is allowed. Disallowance of business promotion expenditure to the extent of 50% - AO had analysed Tally Data seized during the course of search and observed that assessee company had booked various expenses under the head business promotion expenses - HELD THAT:- As there are numerous entries entered by the assessee on account of business promotion and these are to be incurred by the assessee for improving the visibility of its brand and sale of its products, to the various customers / clients and business associates for the business purposes and also for entertaining the customers/clients in various restaurants and clubs and these are routine expenses incurred by the assessee in the normal course of business. The employees and Directors of the assessee company would incur the expenditure in their credit cards and later on the same were reimbursed by the assessee company to the Directors and employees. In any case, there cannot be any element of personal expenditure in the hands of the company. Reliance on the case of Sayaji Iron And Engg. Co. [ 2001 (7) TMI 70 - GUJARAT HIGH COURT] . Hence, we direct the Ld. AO to delete the disallowance made on account of business promotion expenses. Accordingly, ground No.2 is also allowed.

  ---

• 2023 (5) TMI 729
  Reopening of assessment u/s 147 - reopening was originated within the specified time limit of 4 years - HELD THAT:- In the present case since no specific query was raised by the AO in original assessment proceedings on the issues, which could have said to be turn out and became the basis on which the reopening assessment was initiated. Also, the reopening was originated within the specified time limit of 4 years, principle of law defined in the case law Kelvinator of India Ltd [ 2010 (1) TMI 11 - SUPREME COURT] cannot rescue the contention of the assessee. Contention, that the reopening was based on change of opinion is also not acceptable, since no finding on the issues raised under reopening was formed by the AO in the original assessment proceedings. In view of such facts and principal of law laid down by the Hon ble Jurisdictional High Court as discussed herein above, we are of the considered opinion that CIT(A) has rightly upheld the reopening of the assessment, which needs no interference. Depreciation on electrical installations to 10% as against the claim of assessee of 15% - HELD THAT:- As assessee s contention that the electrical installation should be considered as Plant is fortified by the judgment of Hon ble Jurisdictional High Court in the case of Geetha hotel Pvt Ltd [ 2001 (9) TMI 58 - MADRAS HIGH COURT] and consequently ground are decided in favour of the assessee in terms of our observation herein above. Disallowance of depreciation on non-compete fee under intangible assets @ 25% - HELD THAT:- The Hon ble Bombay High Court in the case of Piramal Glass Limited [ 2019 (6) TMI 891 - BOMBAY HIGH COURT] while dealing with this issue of allowability of depreciation u/s 32 of the Income Tax Act on non-compete fee relied on the Gujarat High Courts Decision in the case of Ferromatic Milacron India (P.) Ltd. [ 2018 (10) TMI 1955 - GUJARAT HIGH COURT] has held depreciation is allowed on non compete fee and accordingly no question of law arises. The Hon ble jurisdictional High Court of Madras in the case of Carborandum Universal Ltd [ 2012 (10) TMI 178 - MADRAS HIGH COURT] has held that where assessee made payment as non-compete fee for purpose of business of assessee, expenditure was on revenue count. Depreciation on non-compete fee which was disallowed by the ld. AO and upheld by the ld. CIT(A) was an erroneous application of law and bad finding, therefore the same deserves to be reversed and we do so. Thus, the ground in the appeal of the assessee is allowed. Treating the expenditure incurred towards interior decoration, extension and renovation of buildings as capital expenditure - HELD THAT:- Since the issue in assessee s own case was already decided [ 2013 (10) TMI 925 - ITAT CHENNAI] and the matter was restored back to the file of AO with a direction to disallow the claim of the expenditure which was in the capital field and allow the expenditure which was in the revenue field. TDS u/s 195 - Disallowance u/s.40(a)(i) - payments made to non-residents without deduction of tax under the provisions of Act - HELD THAT:- The payment made is towards the Annual management/subscription fees which is part of the membership agreement towards use of the Resorts in their respective countries outside India and hence not taxable in India. AO was wrong in not appreciating the fact that these payments constitute BUSINESS PROFITS of the non-residents and therefore, liability of tax in India does not arise in the assessee s case. It was also the contention of the ld. AR that the ld. AO was also wrong in not appreciating the fact that the payments, even if construed as FTS, were made in respect of services utilized in a business outside India and for purpose of making or earning income from any source outside India and therefore is not taxable under section 9(1)(vii)(b). After deliberations, during the course of hearing, learned counsel of both the sides have fairly admitted that certain details which were necessary to adjudicate this issue were neither called for by the department nor the assessee has furnished the same. We, therefore, are of the considered view that all these issues raised by the assessee regarding disallowance u/s.40(a)(ia) of the Act, in the interest of justice, needs to be restored back to the files of AO for thorough examination of facts, analysis of the same and to reajudicate the applicability of section 40(a)(i) in accordance with the provisions of Income Tax Act r.w. DTAA between India and respective countries and the foreign entities. These grounds are allowed for statistical purposes. Disallowance of the expenses u/s.14A by applying Rule 8 of the I.T.Rules,1963 towards earning of the dividend income - HELD THAT:- In order to arrive at the quantum of disallowance or non-disallowance, it is required to examine the status of investment during the relevant financial year by the assessee also the utilization of the investment which has yielded exempted income during the year. As the observation of the ld. CIT(A) that necessary financial information like fund flow statements were not produced by the assessee before the AO as well as before the ld. CIT(A). Therefore, the disallowance made by the ld. AO was upheld by the ld. CIT(A). All the information required to arrive at the figure of disallowance u/s.14A or to examine the applicability of provisions of section 14A of the Act by the AO, so as to verify and to reach at a conclusion that if the financial information of the assessee are suggesting any disallowance in terms of provisions of Section 14A or not. We, therefore, restore this matter back to the file of AO to readjudicate the issue afresh. Assessee is directed to submit all the necessary information required for readjudication. AO is also directed to consider the judicial principles laid down by the Hon ble courts referred to hereinabove. Thus, ground Nos. 6 to 6.8 are partly allowed for statistical purposes. Long term capital loss - assessee has surrendered the leasehold rights - lease premium was amortized over the period of lease but was not shown as an asset in the income tax depreciation schedule - AO / CIT(A) considered the same as the long term capital loss has escaped assessment - HELD THAT:- A lease deed for 99 years is a long-term lease that controls the transfer of land and its uses. A surrender deed is a legal document that transfers ownership of property from one party to another - The capital gains tax is to be calculated as prescribed under the provisions of Income Tax Act 1961, as the difference between the sale price and the cost of acquisition. The cost of acquisition is the price at which the property was acquired by the lessee. In present case the sale price is the price at which the property was surrendered by the lessee. Since the lease deed for purchase of the land was for 99 years and according to the case law relied on by the ld. AR of the assessee in the case of Hitashi Estates Ltd. [ 2008 (11) TMI 175 - DELHI HIGH COURT] wherein it was held that the tenancy right is a capital asset and cannot acquire a different character because of wrong treatment accorded to it in books of account of the assessee. It was also held that the Tribunal was justified in directing the AO to assess the profit and loss under the capital gains as claimed by the assessee. The assessee s reliance on the CBDT Circular(supra) also support the contention of the assessee which was issued by the department in consonance of the judgment in the case of Foxconn India Developer Limited [ 2016 (4) TMI 314 - MADRAS HIGH COURT] wherein it has been held that one-time non-refundable upfront charges paid by the assessee for the acquisition of leasehold rights over an immovable property for 99 years could not be taken to constitute rental income in the hands of the lessor, obliging the lessee to deduct tax at source u/s.194-I of the Act and that in such a situation the lease assumes the character of deemed sale and, therefore, in our considered view the transaction of impugned surrender deed executed by the assessee, in consideration in the present appeal will fall under the category of transfer eligible for provisions of Long Term Capital Gains. However, copy of lease deed and surrender deed were not placed before us for perusal of the terms and conditions of the same, also on perusal of the order of the ld. CIT(A) it is transpired that the required information / evidences were not adequately submitted by the assessee. Therefore, in the interest of natural justice, we restore this matter also back to the files of AO to examine the relevant documents and to allow the assessee benefit of the provisions of capital gain applying the provisions available under the Income Tax Act prevailing at the time of relevant assessment year, keeping in consideration the principal of law laid down in the cases referred to supra and as instructed by CBDT vide its circular referred to herein above. Addition made on deferred income of advance received from members - HELD THAT:- Since, the departmental representative has not furnished any information to substantiate their contention raised in grounds of the present appeal that the department has not accepted the relied upon order of ITAT in the assessee's own case [ 2010 (5) TMI 524 - ITAT, CHENNAI] by way of filing of an appeal before the Hon ble Jurisdictional High Court of Madras having granted an estoppel or stay on the decision of ITAT or have granted a deviating decision against the decision of Special Bench of ITAT Chennai benches [ 2010 (5) TMI 524 - ITAT, CHENNAI] or any other judgment of Hon ble Jurisdictional High Court or Apex Court having a contrary stand against the verdict of Special Bench of ITAT, thus, we are abided by to follow the decision of Special Bench (supra) and therefore, r espectfully following the aforesaid observations of the Special Bench of the Tribunal in assessee s own case for A.Ys.1998-1999 to 2002-2003, we do not see any reason to interfere with the findings offered by the ld. CIT(A). Thus, this ground of revenue is dismissed. Depreciation @60% on UPS in favour of the assessee.

  ---

• 2023 (5) TMI 728
  Bogus LTCG on shares - Addition u/s 68 - unexplained 'nature and source' of the receipt - whether the assessee has discharged its initial onus cast upon him or not? - AO relied upon the report of the investigation wing from Calcutta to make the addition - HELD THAT:- Each transaction needs to be tested on its own facts and circumstances. If it passes through the three tests as laid down u/s 68 of the Act, script, company and all other criteria are immaterial. It is also the facts that SEBI has exonerated the assessee for violation. It may so happen that SEBI might not have got any evidence, which is violation of that law, but LD AO might have got information, which is relevant for making addition u/s 68 - Needless to say, that SEBI Act, SCRA Act and PFUTP Regulations have different aspects to be tested. Findings of those may help the assessee in discharging his onus, but those matters does not sail the case of the assessee, if LD AO has material. Therefore, the prime important piece of evidence is inquiry by LD AO and his findings with evidences. In this case, SEBI has given a clear-cut answer that assessee and other who are named as exit providers are not at all involved any kind of price rigging of shares of this company. This was available with lower authorities When all these details have been produced by the assessee before the learned assessing officer, the assessee has discharged his initial onus under section 68 of the act. After that it is the duty of the learned assessing officer to throw back the onus back on assessee by making a concrete enquiry with respect to the evidence submitted by the assessee and if any adverse information is collected by him, to confront the assessee with that information. The case before us is that AO has relied upon the report of the investigation wing from Calcutta to make the addition. AO was also of the view that securities and board of India has carried out any enquiry against the assessee and those exist providers holding that they are involved in the price rigging of the shares of the company. Thus, the regulator who monitors, whether there is any irregularity committed by the assessee in transaction of shares has exonerated and categorically held that assessee is not at all involved any of the transactions which can be held to be fraudulent. Further price rise, market data etc have been held by the regulator in Dhanukas' case [ 2021 (6) TMI 1144 - SECURITIES APPELLATE TRIBUNAL MUMBAI] as mere conjectures and surmises. For making an addition holding that transaction are bogus, the LD AO should have made inquiries on the documents submitted by the Assessee. Most important is the inquiry based on date and Time stamp of the transactions at stock exchanges. Buy and sale timing based on date and time stamp of trade would have led to exit providers and where the securities have travelled after sale, who provided the funds to the buyers, how the broker of buyer of shares are involved in these transactions. Synchronized trade of sale is generally not possible unless the brokers of the buyer and sellers in collusion. There is not even a single inquiry by the LD AO. We are not at all impressed by the arguments of the assessee about the cross examination etc as we do not find that LD AO has made addition only on the basis of statements of third parties. When also it is the claim of the assessee that his name nowhere figures, in those statements, assessee does not have any reason to ask for their cross-examination. Thus, in view of categorical finding of the regulator SEBI exonerating the assessee, absence of any inquiry by the LD AO are the only reason for our decision in holding that the lower authorities have made the addition based on conjectures and surmises. Thus, we do not have any hesitation in deleting the addition made for both the years - Decided in favour of assessee.

  ---

• Customs

• 2023 (5) TMI 727
  Valuation - import of old and used Digital Multifunction Printer - license required for import before 28.02.2013 or not - enhancement of value on the basis of Chartered Engineer s Certificate without any corroborative evidence - HELD THAT:- The issue has already been settled by this Tribunal in the case of COMMISSIONER OF CUSTOMS (PORT) , KOLKATA VERSUS BHAWANI ENTERPRISES [ 2017 (11) TMI 974 - CESTAT KOLKATA] , wherein the Tribunal has held that i) mere enhancement of value on the basis of C.E. certificate cannot be a ground for treating declared value as mis-declared unless there is other corroborative evidence. (ii) except enhancement on the basis of C.E. s Certificate, there is no other material on record to inform that declared value was mis-declared. As in the case of Bhawani Enterprises for earlier import of identical goods, it was held that there was no restriction of import of the subject goods, it is held that no specific license is required for import of the impugned goods. Further for enhancement of value, the Chartered Engineer s Certificate cannot be relied upon unless there is corroborative evidence. Appeal of Revenue dismissed.

  ---

• 2023 (5) TMI 726
  Valuation of imported goods - redetermination of the value of the assessed goods by the assessing authority on the basis of contemporaneous data - Section 14 of the Customs Act, 1962 - HELD THAT:- It would be seen that though in a case where re-assessment has to be done under sub-section (4) of section 17 of the Customs Act, the proper officer is required to pass a speaking order on the reassessment, but if the importer or exporter confirms his acceptance of the re-assessment, a speaking order is not required to be passed - It is seen from a perusal of section 17(4) of the Customs Act that the proper officer can re-assess the duty leviable, if it is found on verification, examination or testing of the goods or otherwise that the self-assessment was not done correctly. Sub-section (5) of section 17 provides that where any re-assessment done under subsection (4) is contrary to the self-assessment done by the importer, the proper officer shall pass a speaking order on the re-assessment, except in a case where the importer confirms his acceptance of the said reassessment in writing. In the present case, the proper officer doubted the truth or accuracy of the value declared by the importers for the reason that contemporaneous data had a significantly higher value. It was open to the importers to require the proper officer to intimate the grounds in writing for doubting the truth or accuracy of the value declared by them and seek a reasonable opportunity of being heard, but they did not do so - It needs to be noted that section 124 of the Customs Act provides for issuance of a show cause notice and personal hearing, and section 17(5) of the Customs Act requires a speaking order to be passed on the Bills of Entry, except in a case where the importers/exporters confirm the acceptance in writing. It is no doubt true that the value of the imported goods shall be the transaction value of such goods when the buyer and the seller of goods are not related and the price is the sole consideration, but this is subject to such conditions as may be specified in the Rules to be made in this behalf. The Valuation Rules have been framed - The very fact that the importers had agreed for enhancement of the declared value in the letters submitted by them to the assessing authority, itself implies that the importers had not accepted the value declared by them in the Bills of Entry. The value declared in the Bills of Entry, therefore, automatically stood rejected. Further, once the importers had accepted the enhanced value, it was really not necessary for the assessing authority to undertake the exercise of determining the value of the declared goods under the provisions of rules 4 to 9 of the Valuation Rules. This is for the reason that it is only when the value of the imported goods cannot be determined under rule 3(1) for the reason that the declared value has been rejected under sub rule 2, that the value of the imported goods is required to be determined by proceeding sequentially through rule 4 to 9. The importers had accepted the enhanced value and there was, therefore, no necessity for the assessing officer to determine the value in the manner provided for in rules 4 to 9 of the Valuation Rules sequentially - the order passed by the Commissioner does not suffer from any illegality - Appeal dismissed.

  ---

• 2023 (5) TMI 725
  Revocation of Customs Broker License - Time Limitation - case of appellant are that neither is the corrigendum/addendum dated 05.11.2018 that was issued to the show cause notice dated 24.09.2018 issued by the Additional Commissioner of Customs, ICD-PPG, New Delhi an office report under regulation 17 of the 2018 Regulations, nor has the Principal Commissioner of Customs issued the notice in writing to the Customs Broker within a period of ninety days from the date of receipt of offence report - HELD THAT:- A perusal of the show cause notice dated 11.02.2019, which ultimately resulted in the passing of the impugned order dated 12.07.2019, shows that the offence report has been treated to be the corrigendum/addendum dated 05.11.2018 that was issued to the show cause notice dated 24.09.2018 issued by the Additional Commissioner of Customs, ICD-PPG and other ICDs, New Delhi. The show cause notice dated 11.02.2019 further mentions that the office had investigated that a number of exporters were engaged in filing shipping bills with a view to fraudulently claim inadmissible export benefits in respect of various consignments - It is clear from the show cause notice dated 11.02.2019 that the Department treated this corrigendum /addendum dated 5.11.2018, which was received on 14.11.2018, as the offence report. The corrigendum / addendum does not refer to any allegation against the appellant. In fact, a perusal of the said corrigendum / addendum to the show cause notice shows that it merely corrects the numbers of the relied upon documents mentioned in paragraph 9 (a), paragraph 34 and 36.1 of the show cause notice dated 24.09.2018. It cannot, therefore, be treated as an offence report. In this view of the matter, the show cause notice dated 11.02.2019, which has resulted in passing of the impugned order dated 11.07.2019, has to be set aside. It is true that the office notes do mention that corrigendum / addendum dated 05.11.2018 to the show cause notice dated 24.09.2018 was not received, but what also transpires from the office notes is that even in the absence of the show cause notice dated 24.09.2018, a draft of the proposed show cause notice dated 11.02.2019 was put up for approval and after approval, a fair copy of the show cause notice was put up for signatures of the officer on 08.02.2019 and it was signed by the Commissioner on 08.02.2019 - It cannot, therefore, be believed that prior to the issuance of the show cause notice dated 11.02.2019, the Commissioner (Airport General) was not possessed of the show cause notice dated 24.09.2018 and it can fairly be concluded that it is only to get out of the limitation provided under regulation 17(1) of the 2018 Regulations, that an attempt was made to treat the corrigendum / addendum dated 05.11.2019, which was received on 14.11.2019, as the offence report, even though, as stated above, it cannot under any circumstances be treated as an offence report. It is not possible to sustain the order dated 12.7.2019 passed by the Commissioner (Airport and General) revoking the Customs Broker License of the appellant - Appeal allowed.

  ---

• 2023 (5) TMI 714
  Transmission of shipping bills from Systems backend to DGFT for MEIS benefits - HELD THAT:- Noting the fact that a methodology has been evolved by the department to take care of the issues which we have highlighted in the judgment, no further orders are required to be passed, as petition is already disposed of.

  ---

• Insolvency & Bankruptcy

• 2023 (5) TMI 724
  Rejection of claim by Resolution Professional - Petitioners sought return of stock of their owned rice from the Corporate Debtor - whether the rice belonging to the Appellants, could be made part of liquidation estate of the Corporate Debtor? - HELD THAT:- This Appellate Tribunal observe that the claims of the Appellants need to be crystal clear and cannot be on the basis of assumptions and presumptions like Oral Agreements without any specific details, more so when the Corporate Debtor and the Suspended Director/ Corporate Debtor were allegedly involved in fraud with Bank for over Rs. 1700 crores and who were investigated by the CBI and case seems to be still on. This Appellate Tribunal note that the Respondents made averments during hearing that the one single visit was made by the rice expert on 09.10.2020 to the premises of the Corporate Debtor and reported with partially identification of the rice belonging to the Appellant involving huge quantity of stock at the factory premises of the Corporate Debtor including 291.33 MT of Gurudeo Exports Corporation Pvt. Ltd, 493.42 MT of Shree Kalka Global, 84.00 MT of Neon International Traders and 58.94 MT TLS Mercantile P. Ltd. and total rice claimed to have been identified by the rice expert was 927.69 MT of four Appellants altogether in one single visit by rice expert. The Resolution Professional/Liquidator is agreed upon, that the report of the rice expert perhaps has been prepared in hurry and can not be treated as conclusive and authentic and therefore cannot be fully relied upon in order to accept the claims of the Appellants - the Appellants have not disputed that the Corporate Debtor never issued any invoice of job work to the Appellants and the Appellants also admitted that they have not recorded the payment of job work consideration in their own Audited Books of Accounts. The Liquidator brought out the fact the CBI is already investigating the case against the Corporate Debtor involving Rs. 1,700 crores of the claims of the several banks and the stock claimed by the Appellants have not been proven belonging to them. There are no concrete evidence or documentary proof are available to substantiate the claims of the Appellants. It may be the case that earlier the Appellants and the Corporate Debtor were involved in such types of trade practices, even may be on the basis of oral agreements and sometimes in violation of relevant laws like Companies Act, 2013, GST or TDS under Income Tax Act, etc. but to accept the claims of the Appellants at the stage of Resolution and now Liquidation proceedings, the claims have to be real, based on solid documentary evidence and in accordance with law. These cannot be allowed on the basis of indirect or circumstantial or secondary evidence/ documents. There are no error in the impugned order - appeal dismissed.

  ---

• Service Tax

• 2023 (5) TMI 723
  Refusal to honour the liability of paying the service tax (on the part of LIC) - It is the contention of petitioner that he was merely the service provider and since the tax is payable by the person, who had availed the services i.e., the tenant, his only obligation, in law, was to collect the tax and remit it to the Department - obligation to pay the service tax by virtue of the provisions of Chapter V of Finance Act No. 1994 - HELD THAT:- As could be seen from clause VI (1) of the lease agreement, it is specifically stated that rent was inclusive of municipal as well as other taxes as are assessed and levied without any reduction of income tax at source under Section 194-I. Thus, the rent was inclusive of the municipal and other taxes which are assessed and levied on only the property and there is no obligation on the landlord to pay the service tax which is a tax, which is admittedly not levied on the property - As could be seen from this clause also, the lessor i.e., the petitioner was obliged to pay all the rates, taxes, ground rent, assessments and the outgoings payable to the municipality or any other Government departments in respect of the entire schedule property as applicable. It thus, makes it clear that whatever tax that was payable on the property, the petitioner became liable to pay the taxes. However, admittedly, service tax is not a tax which is payable on the property, but is a tax payable on the value of the services availed. It is therefore clear that the clauses in the lease agreement would not entitle the LIC to contend that he would not be liable to pay the service tax - The terms of the lease did not provide for the landlord to pay the service tax which, as stated above, is a separate tax levied on the value of the services availed and not on the property. It is, therefore, clear that the endorsements issued by the LIC refusing to pay the service tax paid by the petitioner are illegal and cannot be sustained. Though the person who provides the service, i.e., lessor, is liable to pay tax, he is entitled to pass on this liability to the recipient of the service - it is the obligation of the lessor to collect the service tax and thereafter remit it to the Department. A lessee being the person who avails of service cannot deny his liability to pay the service tax, especially an instrumentality of the State i.e., to the LIC. This argument is therefore rejected. It is to be borne in mind that the LIC being an instrumentality of the State should not take up technical pleas and attempt to evade its liability to pay a tax which it is bound to pay in the eye of law. Since the LIC is held liable to pay the service tax, the service tax paid by the petitioner shall be paid by the LIC to the petitioner within a period of one month from the date of receipt of a copy of this order - petition allowed.

  ---

• 2023 (5) TMI 722
  Denial of exemption - Demand beyond the scope of the Show Cause Notice (SCN) - Exemption under N/N. 18/2009 - ST dated 07.07.2009 and N/N. 31/2012 - ST dated 20.06.2012 - Procurement of GTA service for export - failure to file the shipping bills/bills of export and failure to file the details of use of subject services in exports - demand alongwith interest and penalty - HELD THAT:- There is no dispute as regards to the actual export of goods by the Appellant, which indicates that the Appellant has exported goods and availed GTA services for the same. A plain reading of the provisions of N/N. 31/2012 dated 20.06.2012 indicates that in order to avail the exemption enshrined in the said notifications, the appellant had to satisfy the condition indicated in Column 4 of the table. The said condition is that the exporter will have to produce the consignment note, or any document issued in his name, to claim the exemption - In the instant case, it is noted that the primary condition for seeking exemption for GTA, the requirement is to produce a consignment note, and for the commission agent, the amount is required to be indicated. There is neither any allegation in the show cause notice nor any finding in the impugned order that the appellant did not export the goods or that there was no consignment note, or any other document in his name. Therefore, the essential condition for availing the benefit of the said exemption notification stands satisfied. The exporter had to file the half yearly return within 15 days of the completion of the said six months. The notification also required the appellant enclose documents as indicated in the Table A and Table B of the return EXP-2 - When the return itself requires the details, there is no requirement for the show cause notice to specify in the said details, as has been submitted by the learned counsel for the appellant. It is seen that in COMMISSIONER OF CUSTOMS (IMPORT) , MUMBAI VERSUS M/S. DILIP KUMAR AND COMPANY ORS. [ 2018 (7) TMI 1826 - SUPREME COURT] , the Supreme Court is categorical in holding that an exemption notification should be interpreted strictly and the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification - the appellant has complied with the notification condition as enumerated in column 4 of the aforesaid table. In view of the same, the demand of duty and interest is set aside. Penalties u/s 77 and 78 of the Finance Act - HELD THAT:- Penalty under section 78 is imposed when there is a willful intention to evade the payment of tax. The delay in filing of the return for claiming the exemption cannot be termed as willful intention to evade payment of duty. Therefore, the penalties imposed under section 78 of the Act are set aside - the appellant was very prompt when filing the intimation for seeking the exemption under the said notifications, but did not show similar promptness while filing returns. It is also seen that while filing the returns, the appellant did not take due care to file the data/documents as required, despite having undertaken to file the same. Consequently, the penalty under section 77 is upheld for failure to file the returns in time. Appeal allowed in part.

  ---

• 2023 (5) TMI 721
  Validity of SCN - SCN failed to identify the alleged taxable service and the category of service - difference between the receipts in the profit loss account of the appellant and the taxable value declared in the ST-3 returns without even identifying the service and the taxable category - extended period of limitation - HELD THAT:- SCN mentions that the ST-3 returns and the balance sheet of the appellant had been perused and since the balance sheet shows Rs. 15,03,87,703/- and ST-3 returns show a taxable value as Rs. 10,34,19,681/-, the appellant would have to pay service tax of Rs. 54,49,215/- on the taxable value of Rs. 4,69,68,022/-. It is, therefore, clear that the show cause notice which was issued for the period April 01, 2007 to March 31, 2012 does not give any reason as to why the amount would be taxable and, if so, then under which category. What transpires from the show cause notice is that the difference between the amount shown in the balance sheet and the ST-3 returns has been construed to be a taxable amount. This issue regarding vagueness of the show cause notice in similar circumstances was examined by a Division Bench of the Tribunal in M/S HINDUSTAN ZINC LTD. VERSUS COMMISSIONER, CENTRAL EXCISE, UDAIPUR [ 2021 (9) TMI 859 - CESTAT NEW DELHI ] where it was held that Neither is there any allegation in the two show cause notices nor any finding has been recorded in the impugned order to demonstrate how the provisions of 66 read with 66A of the Finance Act and the Import Rules are attracted. In fact, neither the show cause notices nor the impugned order specify the category of service under which the demand has been confirmed against the Appellant. The demand has been proposed and confirmed merely because of difference between the figures in the balance sheet of the Appellant and the ST-3 Returns. In the present appeal also, the demand has been proposed in the show cause notice only because of the difference between the figures shown in the balance sheet of the appellant and the ST-3 returns. The show cause notice, therefore, is vague. The order passed by the Commissioner confirming the demand on this show cause notice, therefore, deserves to be set aside. Appeal allowed.

  ---

• Central Excise

• 2023 (5) TMI 745
  Recovery of duty alongwith Interest and penalty - Clandestine Removal - 3361.472 MT finished products i.e. MnO - delivery memos recovered from their premises which were used by the Appellant 1 for transportation/ clearance of the impugned goods from their premises to the premises of Appellant 2 -suppression and mis-representation of the facts or not - contravention of the provisions of Rule 4, 6, 8, 10, 11 and 12 of the Central Excise Rules, 2002 - extended period of limitation - CENVAT Credit - Revenue Neutrality - penalty. HELD THAT:- From the facts of the case it transpires that the Appellant 1 and Appellant 2 are two companies duly constituted engaged in the identical business. Both the companies have common Director who is Appellant 3. Entire goods whether on job work basis or as produce of appellant 1, have been transported at the instance of appellant 1 to appellant 2 entirely against the Delivery Memo issued by them. There is no case of clearance made to any third person. Further it is evident that no proper one to corelation can be established between the goods cleared on Delivery Memos and the invoices issued by the appellant. It is quite evident the goods were necessarily to be cleared on the invoice containing the details as prescribed by the rules. Even if the private records other than the invoice i.e. delivery memo were to be considered as proper documents for the purpose of clearance of the goods then also they should have carried the necessary details. The fact that delivery memos that were used for the clearance of the goods did not contain the details as required in terms of the above stated rules is not in dispute. The contention of the appellant that this omission on their part was for the reason of ignorance of law can never be admitted as valid defence for the reason that appellant were registered under Central Excise from 2005 onwards, and in case they had any difficulty in following any of the provisions or in understanding the same they could have approached the jurisdictional officers. Ignorance of law is not an excuse for conducting the business in manner not sanctioned as per the law. Any exercise taken to correlate the delivery memos with the invoices would not yield any results. Further the explanation of assigning certain clearances made on the delivery memos, either in part or in complete towards job work, is based only on some specialized knowledge or the information that is available with the appellants and not disclosed in any transparent manner on the documents. The submissions made on this account which are not based on transparency in the documents cannot be verified. Hence these submissions need to be out-rightly rejected. The case made out against the appellants by the revenue is in respect of the documents delivery memos recovered from their premises which were used by the Appellant 1 for transportation/ clearance of the impugned goods from their premises to the premises of Appellant 2. It is also interesting fact that Appellant 1 and Appellant 2 though separately constituted companies have common director who is Appellant 3 and who is only active Director looking after the work of both the companies. It is more interesting to note that the entire product line of the Appellant 1 and Appellant 2 including the inputs and raw materials of both the units is identical. From the facts stated, investigation conducted, evidences collected both documentary and circumstantial], omission, commission and admissions, as narrated, it appears to that Appellant No. 1 has deliberately and willfully suppressed the production and clandestinely cleared the Manganese Oxide falling under CETH No. 2820 manufactured by them and removed 3361.472 MT valued at Rs. 5,09,00,262/-, without payment of Central Excise duty of Rs. 60,22,723/- (BED Rs. 58,53,738/- + Ed. Cess Rs. 1,17,075/- + S H cess Rs. 51,911/-), during the period from 05.12.2006 to 14.10.2009, without issuing Excisable invoices, without maintaining the statutory records with intent to evade payment of Central Excise duty. They thus, contravened the provisions of Rule 4, 6, 8, 10, 11 and 12 of Central Excise Rules, 2002. The duty so evaded is recoverable from them by invoking extended period of five (5) years under proviso to Section 11 A of Central Excise Act, 1944. Extended period of limitation - Revenue Neutrality - HELD THAT:- In case of clandestine clearance against the delivery memo there could be no claim of CENVAT credit. The claim of revenue neutrality cannot be accepted in such case - by clearing the goods on the delivery memo, which cannot be co-related with the duty paying documents is an act of clandestine clearance and demand of duty against such clearances needs to be made by invoking the extended period of limitation as provided by the proviso to Section 11 A (1) of the Central Excise Act, 1944. Penalty - HELD THAT:- Since the demand of duty is upheld by invoking extended period of limitation, in view of the decision of the Hon ble Supreme Court in case Rajasthan Spinning and Weaving Mill [ 2009 (5) TMI 15 - SUPREME COURT] , penalty imposed on Appellant 1, under Section 11AC is justified. Since the penalty imposed under section 11AC of the Central Excise Act, 1944 on Appellant 1 is upheld, there are no justification for imposition of same amount of penalty under Rule 25 of the Central Excise Rules, 2002. Thus the penalty impose under Rule 25 on the Appellant 1 is set aside - Appellant 2 is the receiver of the goods cleared by the Appellant 1 against delivery memos. The finding recorded by the Commissioner, to the effect that these goods do not get reflected in their book of accounts is not challenged. Appellant 2 has knowingly dealt with goods which were liable for confiscation knowingly and hence penalty imposed under Rule 26 is upheld. Appeal partly allowed.

  ---

• 2023 (5) TMI 720
  Levy of differential liability - price variation clause - clearance of aluminium ingots and coils to the said sister units upon payment of excise duty, on the basis of 110% of the estimated cost of production - when the final cost of production was worked out for the FY 2009-10, it emerged that the Appellant had on an overall basis, paid excise duty on the value which is much more than 110% of the cost of production - Revenue Neutrality - Extended period of Limitation. HELD THAT:- When excess paid duty is adjusted against the short payment that net result is that there is no short payment by the Appellant. The Adjudicating Authority failed to do this adjustment. Demanding duty onlu on the short payment, ignoring the excess payment is bad in law. Accordingly we hold that the demand confirmed in the impugned order is not sustainable. Revenue Neutrality - HELD THAT:- The entire exercise is revenue neutral as the duty paid by them will be available as credit for their sister unit - As the entire exercise would be revenue neutral, there is no loss of revenue to the exchequer. The demand confirmed in the impugned order is not sustainable. Since the demand itself is not sustainable, the interest demanded and the penalty imposed against the Appellant in the impugned order is also not sustainable - Appeal allowed.

  ---

• 2023 (5) TMI 719
  CENVAT Credit - disallowed on supplementary invoices - levy of equivalent Penalty - period in dispute involved is August 2008 and September 2008 - whether cenvat credit is admissible to a service recipient if an invoice has been issued by the service provider much later than 14 days after the date of completion of service/receipt of payment as prescribed in Rule 4A(1) of the ST Rules? - HELD THAT:- The issue in dispute is no longer res integra as it stands settled in favour of the Appellant by decision of the Hon ble Madras High Court in THE COMMISSIONER OF CENTRAL EXCISE VERSUS M/S. JSW STEELS LTD., THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, [ 2017 (8) TMI 592 - MADRAS HIGH COURT] where it was held that Rule 4A of the Service Tax Rules, 1994, inter alia, at the relevant time, required the provider of taxable service, to issue, not later than fourteen days from the date of provisioning of taxable service, an invoice, bill or challan. The details, which were to be provided in such an invoice, bill or challan, are also set out in the Rule. Thus, cenvat credit cannot be disallowed in the hands of the service recipient by invoking Rule 4A (1) of the ST Rules even if the service provider issues such invoice beyond the prescribed period of 14days from the date of completion of service/receipt of payment. The obligation to issue the invoice timely has been cast on the service provider and not the service recipient. Moreover, the period prescribed in the said Rule is directory and not mandatory as has been held by the Hon ble High Court. Whether the supplementary invoices are specified documents in terms of Rule 9(1)(f) of CCR 2004? - HELD THAT:- This issue is also no longer res-integra asit is settled by the decision of the co-ordinate Bench of this Tribunal in M/S DELPHI AUTOMOTIVE SYSTEMS (P) LIMITED VERSUS CCE, NOIDA [ 2013 (12) TMI 156 - CESTAT NEW DELHI] where it was held that supplementary invoice evidencing payment of additional duty amount is not to be treated on a different footing vis-a-vis the original invoice evidencing original payment of duty as both these documents were issued under the same provisions of law. The submission is also agreed upon that during the period in dispute there was no restriction for availing cenvat credit and such credit would be admissible even assuming that the tax that has been paid by the service provider is due to deliberate evasion on his part for the period prior to 01.04.2011. The impugned order cannot be sustained and thus, the same is set aside. The demand for recovery of CENVAT Credit, interest and penalty are set aside - appeal allowed.

  ---

• 2023 (5) TMI 718
  CENVAT Credit - input services - expansion activities - Department took a stand that it amounts to setting of unit and taking ground that the words setting up have been excluded in the definition of the inputs under Rule 2 (l) of Cenvat Credit Rules, 2004 - HELD THAT:- It is seen that in the case of M/S MANGALAM CEMENT LIMITED VERSUS COMMISSIONER, CENTRAL GOODS, EXCISE SERVICE TAX, UDAIPUR [ 2023 (4) TMI 601 - CESTAT NEW DELHI] , the issue was identical and the Tribunal has held as The services so utilized for setting up of the factory which were availed prior to the commencement of production shall fall within the means clause of the definition of input service , which has been held to be wide enough to allow cenvat credit of services used in or in relation to manufacture whether directly or indirectly. Appeal allowed.

  ---

• CST, VAT & Sales Tax

• 2023 (5) TMI 744
  Levy of Sales Tax - consideration passed through credit notes - credit note issued by a manufacturer to a dealer of automobiles in consideration of the replacement of a defective part in the automobile sold pursuant to a warranty agreement being collateral to the sale of the automobile. Whether the judgment of this Court in MOHD. EKRAM KHAN SONS VERSUS COMMISSIONER OF TRADE TAX, UP. (AND ANOTHER APPEAL) [ 2004 (7) TMI 341 - SUPREME COURT] calls for reconsideration in terms of the Reference Order dated 05.12.2019? HELD THAT:- In Mohd. Ekram Khan, this Court distinguished the judgment in PREMIER AUTOMOBILES VERSUS UOI. [ 1971 (11) TMI 159 - SUPREME COURT] by holding that the fact situation there was different and the issues in the said case were also different by observing that one of the issues was, whether, the expenses on account of warranty and statutory bonus were to be excludable while working out the ex-works cost. It was noted therein that car manufacturers furnish warranty covering the cars sold by entering into an agreement with the manufacturers of components providing for a warranty so far as the components supplied are concerned. The whole object behind the warranty is that the consumer who has to make a heavy investment for the vehicle should be assured of a proper performance of the vehicle in a trouble-free manner for a reasonable length of time. Therefore, entire cost of warranty was to be borne by the manufacturer. Referring to Prem Nath Motors, it was observed in Mohd. Ekram Khan that the said case dealt with transfer of property in the part or parts replaced in pursuance of a stipulation or a warranty which is a part of the original sale of the car for the price fixed and received from the buyer or consumer. It was observed that the price so fixed and received was a consolidated price for the car and the parts that may have to be supplied by way of replacement in pursuance of the warranty. It was observed by this Court that the decision in Prem Nath Motors did not apply to the controversy in Mohd. Ekram Khan. This Court in Mohd. Ekram Khan distinguished the factual situation in Premier Automobiles and COMMISSIONER OF SALES TAX, DELHI ADMINISTRATION, VIKAS BHAWAN, NEW DELHI VERSUS PREM NATH MOTORS (P.) LTD. [ 1978 (5) TMI 108 - DELHI HIGH COURT] . In other words, after distinguishing the aforesaid cases, it was noted that in a case the manufacturer may have purchased from the open market parts for the purpose of replacement of the defective parts. For such transaction, it would have paid taxes. The position is not different because the assessee had supplied the parts and had received the price. In other words, in Mohd. Ekram Khan, a situation where a manufacturer has purchased the part from the open market for the purpose of replacement of the defective part and for which taxes have been paid by the manufacturer and a situation where the dealer/assessee supplies the part from his own stock and has received the price for the same in the form of credit note on return of the spare part to the manufacturer have been considered to be not different to each other, but the same. Whether, this Court in Mohd. Ekram Khan was right in equating both the factual situations and holding that in the latter case, the dealer was liable to pay sales tax on the premise that the transaction between the manufacturer and dealer was one of sale? - HELD THAT:- The entire controversy must be viewed in the perspective of a composite transaction and not in isolation as the dealer (assessee) would be acting under a warranty with there being a manufacturer on one end and the purchaser or customer of an automobile at the other end and the dealer acting on behalf of the manufacturer or an intermediary between the said customer and manufacturer. The said transaction cannot be viewed in a myopic sense by truncating or excluding the role or action of a dealer under the warranty and viewing it only from the perspective of a transaction simpliciter between manufacturer and a dealer. Such an approach is not only skewed from a commercial perspective but also jurisprudentially or in the legal sense. There need not be a reiteration of the significance of a warranty in a transaction of a sale of goods. When the transaction between the manufacturer and dealer is viewed in the larger canvas of a dealer discharging his obligations pursuant to a warranty appended to a sale of an automobile, the same cannot be narrowly construed. At the same time, whether the transaction resulting in payment by way of a credit note to a dealer/assessee is a sale within the definition of sale under the Sales Tax Acts of the respective States under consideration has to be considered. The aforesaid discussion could be illustrated better with reference to STATE OF TAMIL NADU VERSUS SRI SRINIVASA SALES CIRCULATION (AND OTHER APPEALS) [ 1996 (10) TMI 379 - SUPREME COURT] . Applying the aforesaid principles and the judgment of this Court to the case at hand, it is noted that when the dealer uses one of the spare parts from his stock for the replacement of a defective part in an automobile under a warranty, he is given a monetary benefit in the form of a credit note. The definition of credit note from various dictionaries and Law Lexicons have been adverted to above. A perusal of the aforesaid definitions would clearly indicate that a credit note issued by a manufacturer in favour of a dealer is a valuable consideration within the meaning of the definition of sale under both, Central Sales Tax Act as well as the respective State enactments under consideration - No doubt, cash is a money consideration but the definition of sale under the Central Sales Tax Act as well as under the State enactments does not imply price to mean only a money consideration in a narrower sense but in a wider sense to include different forms of money consideration such as deferred payment and also a valuable consideration which need not be restricted to cash or deferred payment only but a valuable consideration which would include a credit note which is to be read within the definition of price . A credit note is a valuable consideration which is essentially a document to inform a buyer that the buyer s account is being credited because of errors, returns or allowances. - Merely because the dealer is acting as an intermediary or on behalf of the manufacturer pursuant to a warranty and receives a recompense in the form of a credit note, the same cannot escape liability of tax under the Sales Tax Acts under consideration. The manufacturer gives the warranty to the consumer by making a representation with regard to the automobile. It is in the nature of a promise which the dealer assessee carries out on behalf of the manufacturer. The value of the credit note is a valuable consideration received which is in the nature of a benefit from the manufacturer which is exigible to tax. If the dealer had sold a spare part of the automobile from his stock to any other consumer across the counter, he would have collected the requisite sales tax along with the price from that consumer but in the instant case, the consideration is received in the form of a credit note from the manufacturer which is subject to sales tax. The person who pays the valuable consideration in a sale transaction is irrelevant so long as it is paid. Application of Indian Contract Act, 1872 Applying the definitions of Section 2(d) of the Indian Contract Act, 1872 to the facts of the present case, it would mean that as between the manufacturer of the automobile, the dealer and the customer, the manufacturer is the promisor who makes the proposal to recompensate the dealer when pursuant to a warranty clause, the dealer replaces a spare part from out of his own stock or by buying the same from the open market or from the manufacturer of the spare part. Thus, the dealer is the promisee. The occasion to replace the spare part is when the customer brings to the notice of the dealer a defect in a part of the automobile, pursuant to a warranty which has been given by the manufacturer to the customer. The dealer (promisee) agrees to replace a defective part which is a consideration for the promise and in turn, receives a recompense in the form of a credit note from the manufacturer. Thus, there is an agreement between the manufacturer and the dealer, and it would be in an instance of there being reciprocal promises. Conclusion: The transaction between the manufacturer and dealer while acting pursuant to a warranty in the circumstances explained above has to be construed as sale within the meaning and definition of sale under the Sales Tax Acts under consideration.

  ---

• 2023 (5) TMI 717
  Taxability - sale of old cars - incidental ancillary to the business of the appellant-assessee and covered under the definition of business as defined under Section 2 (c) of Punjab VAT Act, 2005 or not - imposition of penalty without proving any mens-rea on the part of the appellant - charging of interest when there is no mens-rea on the part of the appellant and tax has been paid as per returns. Whether the sale of old car and freight received through Transport Union, can be added to the taxable turnover of the assessee? HELD THAT:- In the above said case, it was held that sale of discarded and unserviceable items was intended only for reduction of the space and to save accommodation. The said sale was not integrated with (or connected with) the main business even, if, the same was of considerable volume and frequency. - the amount received from the sale of old cars cannot be included in the taxable income of the assessee. Levy of penalty - demand against wrongly claimed ITC - HELD THAT:- Before the Tribunal, learned counsel for the assessee-appellant had stated that he had wrongly claimed ITC on items bearing Nos. 41 to 59 as mentioned in Form VAT-24 and customer-wise summary. In view of the said fact, the appellant was not held entitled to claim ITC on the said items - Once, the assessee had himself admitted his mistake, whether penalty of Rs. 16,02,484/- under Section 56 of the Act can be imposed along with interest of Rs. 5,52,857/-. On this issue, reference can be made to a judgment passed by in COMMISSIONER OF INCOME-TAX VERSUS RELIANCE PETROPRODUCTS PVT. LTD. [ 2010 (3) TMI 80 - SUPREME COURT ] , wherein, Hon ble the Supreme Court was examining a case of imposition of penalty under Section 271 (1) (c) of the Income Tax Act. The assessee had claimed incorrect expenditure in his return. In that case, it was held that Tribunal, as well as, the Commissioner of Income-tax (Appeals) and the High Court have correctly reached this conclusion as where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars. Ratio of the aforesaid judgment is directly applicable on the facts of the present case. Before the Tribunal, learned counsel for the assessee had conceded that the appellant had wrongly claimed ITC on items bearing Nos. 41 to 59 as mentioned in Form VAT-24. The benefit of this ITC was never granted by the revenue. Hence, it was not a case, where wrong information was given. Only a claim was made, which was ultimately rejected. This would not amount to an intention to claim wrong relief and attract imposition of penalty. The appeal to the extent of imposition of penalty and interest is also liable to be allowed. Thus, the amount received from the sale of old cars cannot be included in the taxable income of the assessee. It is further held that the appellant-assessee is not liable to be penalized on claiming ITC on item Nos. 41 to 59 - appeal allowed.

  ---

• Indian Laws

• 2023 (5) TMI 716
  Dishonour of Cheque - Liability of Director of company - Company is under CIRP proceedings under IBC and Director is personal guarantor to the loan - debt is of petitioner or not - present Petitioner in the subject proceedings (personal guarantor to the loan) is a natural person u/s 141 of NI Act or not - whether the section 96 of the IBC is applicable to the petitioner? - HELD THAT:- In the present case, the petitioner s application for insolvency before NCLT related to the personal liability of the Petitioner in his capacity as a surety in contracts of guarantee to Respondent no. 2. However, the Petitioner in the proceedings pending before the Ld. MM, Patiala House Court was facing trial as a Natural Person under Section 141 of the NI Act i.e., for liability of the Company of which the Petitioner was the Managing Director/ person in charge - the case would have been different if the personal liability of the petitioner was in question. In that case, the moratorium will apply to the petitioner. But in the present case, the proceedings pending before the MM were for bouncing of cheques issued by company where petitioner was the Managing Director. The debt of the Respondent No. 2 company is not the personal debt of the petitioner. The petitioner is arrayed as an accused in his capacity as a Managing Director. The case of P. Mohanraj vs M/S. Shah Brothers Ispat Pvt. Ltd. [ 2021 (3) TMI 94 - SUPREME COURT] has held that natural persons, as defined under Section 141 of the Negotiable Instruments Act (NI Act), who are also accused as being in charge of and responsible for the affairs of the corporate debtor, can continue to be tried under Section 138/141 of the Act despite the commencement of insolvency proceedings against the corporate debtor and the imposition of a moratorium under Section 14. The provisions of the NI Act, 1881 and the Insolvency and Bankruptcy Code (IBC) do not equate the independent statutory liability of a director/person in charge of and responsible for the business of a company, i.e., the liability of a 'Natural Person' under Section 141 of the 1881 Act, with the coextensive liability of the company under insolvency. The judgment of P. Mohanraj is clear in this regard. Admittedly, in the present case, the petitioner had signed the cheque as the Managing Director of Respondent No. 2. The judgment of P. Mohanraj categorically states that the moratorium provisions u/s 14 IBC would apply only to the corporate debtor and the natural persons would continue to be liable. The petitioner is the natural person and merely because he has filed personal insolvency proceedings, the same would not bring him under the ambit of Section 96 IBC vis-a-vis the pending complaint under section 138 NI Act. The debt in the present case is not of the petitioner but that of Respondent No. 2. Section 141 of the NI Act fastens liability on every officer of the company who was in management and control of the affairs of the company - the provisions of Section 96 of the IBC would not be applicable in the facts of the present case as the petitioner is arrayed as an accused in the complaint u/s 138 NI Act in his capacity of the Managing Director of Respondent No. 2. There are no illegality in the impugned order - petition dismissed.

  ---

• 2023 (5) TMI 715
  Interpretation of statute - meaning of principles of obiter dicta and ratio decidendi - HELD THAT:- The judgment in VIDYA DROLIA AND OTHERS VERSUS DURGA TRADING CORPORATION [ 2020 (12) TMI 1227 - SUPREME COURT ] did not examine and decide the issue of effect of unstamped or under-stamped underlying contract on the arbitration agreement. As this issue and question has not been decided in Vidya Drolia, the decision is not a precedent on this question. Vidya Drolia did refer to the judgment in the case of GARWARE WALL ROPES LTD. VERSUS COASTAL MARINE CONSTRUCTIONS ENGINEERING LTD. [ 2019 (4) TMI 716 - SUPREME COURT ], but in a different context - reference to the decision in Garware Wall Ropes Limited (supra) was made to interpret the word existence , and whether an invalid arbitration agreement, can be said to exist? This examination was to decide who decides existence of an arbitration agreement in the context of Sections 8 and 11 of the Arbitration and Conciliation Act, 1996. The distinction between obiter dicta and ratio decidendi in a judgment, as a proposition of law, has been examined by several judgments of this Court, but we would like to refer to two, namely, State of Gujarat Ors. vs. Utility Users Welfare Association Ors. [ 2018 (4) TMI 1945 - SUPREME COURT] and JAYANT VERMA AND ORS. VERSUS UNION OF INDIA AND ORS. [ 2018 (2) TMI 1326 - SUPREME COURT ]. The first judgment in State of Gujarat applies, what is called, the inversion test to identify what is ratio decidendi in a judgment. To test whether a particular proposition of law is to be treated as the ratio decidendi of the case, the proposition is to be inversed, i.e. to remove from the text of the judgment as if it did not exist. If the conclusion of the case would still have been the same even without examining the proposition, then it cannot be regarded as the ratio decidendi of the case. In Jayant Verma, this Court has referred to an earlier decision of this Court in DALBIR SINGH VERSUS STATE OF PUNJAB [ 1979 (5) TMI 148 - SUPREME COURT ] to state that it is not the findings of material facts, direct and inferential, but the statements of the principles of law applicable to the legal problems disclosed by the facts, which is the vital element in the decision and operates as a precedent. Even the conclusion does not operate as a precedent, albeit operates as res judicata. Thus, it is not everything said by a Judge when giving judgment that constitutes a precedent. The only thing in a Judge's decision binding as a legal precedent is the principle upon which the case is decided and, for this reason, it is important to analyse a decision and isolate from it the obiter dicta. SLP dismissed.

  ---