TMI Tax Updates - e-Newsletter
June 17, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
GST
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Classification of services - Hostel Accommodation services - The service of hostel is optional and not coming out from the package and separate consideration will be charged for providing such hostel facility to the students. In fact, the hostel fees are not a part of any package concerning commercial training & coaching services rendered by the applicant. The Applicant is exclusively providing the Hostel Accommodation Service in isolation and no other service is clubbed or bundled along with the Hostel Accommodation Service. Thus, there is no question of Composite Supply u/s 2 (30) of the GST Act or Mixed Supply u/s 2(74) of the GST Act in the Case of the Applicant - Benefit of exemption is available if value per day is upto Rs. 1000/- - AAR
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Classification of goods - appropriate rate of GST - U-bolt - Front Spring Bolts - Spring Pins - Since in the Commercial parlance the goods in question are known as Nuts and Bolts namely U-bolt, Front Spring Bolt, and Spring Pin and not by any other name and as held by Hon’ble Supreme Court that the Classification of goods is to be determined by commercial identity test and not by functional test i.e. as to how they are referred to in the market by those who deal with them - AAR
Income Tax
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Bogus LTCG - genuine v/s sham transaction - burden of proof - penny stock purchases - colourable devices adopted in the process or not? - The assessee cannot take shelter under the opinion given by the experts as it is not the expert who has indulged in the transaction but it is the assessee. - the Tribunal committed a serious error in setting aside the orders of the CIT(A) who had affirmed the orders of the Assessing Officer and equally the Tribunal committed a serious error both on law and fact in interfering with the assumption of jurisdiction by the Commissioner under Section 263 - HC
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Penalty u/s 271(1)(c) - Period of limitation - denial of deduction u/s 11 - As the petitioner was well aware of the fact that this is the case of filling of inaccurate particulars in the returns and the petitioner has also replied to the same in the notices issued to the petitioner. The petitioner had earlier filed writ petition long after the notices were issued, after the assessment orders were passed by the Assessing Officer. It is only by way of an afterthought the petitioner had challenged the notices. - No relief - HC
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Levy of tax on Anonymous donation u/s 115BBC - Section 68 has no application in the instant case because the assessee has disclosed the donation as its income and applied the same for charitable purpose. In view of the above, we are of the considered view that the assessee has established the identity of the donors as provided U/s. 115BBC of the Act and hence the donations received by the assessee cannot be categorized as anonymous donations and cannot be subjected to tax as per the provisions of section 115BBC - AT
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Penalty u/s 271G - requirement of maintenance of segment profitability between AEs and non-AEs transactions - non-maintenance of details in terms of section 92D(3) of IT Act r.w. Rule 10D of Income Tax Rules, 1962 - in the instant case there was reasonable cause for non-maintaining the details, which were required in terms of Rule 10D of the Rules - CIT(A) rightly deleted the penalty - AT
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Exemption u/s 11 - UP Awas Evam Vikas Parishad - AO denied exemption holding that the assessee was hit by the proviso to section 2(15) of the Act as the assessee has been doing the activities which amounts to carrying on of business or trade - in view of the fact that CBDT itself has considered similar activities as being undertaken by various assessees being of non commercial nature, the activities undertaken by the assessee also cannot be said to be of commercial nature. - AT
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Addition on account of deposit of cash during the demonetization period - allegation of sham transactions - the AO has acted on mere surmise and conjectures without duly appreciating the undisputed fact that he himself has accepted the books of account as well as the book results. - the impugned addition was not called for especially when the assessee’s books of account have not been rejected and all the income and expenses and the book results have been accepted except the cash deposit without there being any iota of evidence - AT
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Penalty u/s 271(1)(c) - LTCG on purchase of plot - A.O. has not clearly mentioned the limb, on the basis of which, penalty was proposed to be imposed. - concealment of income or furnishing of inaccurate particulars of income are two different forms and they cannot be inter mixed, therefore, we quash the penalty proceedings initiated U/s 271(1)(c) of the Act. - AT
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Disallowance u/s. 40(A)(2)(b) - excessive salary payment - payment to close associates / related parties - AO can disallow only that portion of the total expenditure, which in his opinion, is excessive or unreasonable. The onus is on the AO to form an opinion that the expenditure claimed as excessive/unreasonable having regard to the fair market value for which the payment is made. This opinion of the AO cannot be arbitrary but must be on the basis of determining the fair market value for which payment is made. - AT
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Unexplained expenditure - Addition on the basis of contents of the seized document - keeping in view the fact that the assessee has offered the amounts mentioned on the impounded material which has been accepted by the revenue and also keeping in view that revenue has not brought anything on record to prove that the assessee is liable to pay the taxes more than what has been already disclosed - additions deleted - AT
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Disallowance of Corporate Social Responsibility (CSR) expenses u/s 37(1) - prior to insertion of Explanation – 2 to section 37(1) of the Act, w.e.f., 01.04.2014, as per settled legal position, it is an allowable expenditure under Section 37(1). A specific bar for allowing such expenditure u/s 37(1) of the Act was brought to the statue by Finance Act, 2014 effective from 01.04.2014. The amendment, no doubt, will apply prospectively. - AT
Customs
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Maintainability of application before Settlement Commission - A person who may not be an Importer or Exporter, can still file such an application u/s 127-B of the Act before the Settlement Commission if he is served with a show cause notice charging him with duty. - The Settlement Commission is directed to examine the application of petitioner on merits and in accordance with law and dispose the application on merits within 12 weeks from today - HC
Service Tax
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SEZ unit - Refund of Service Tax - Service Tax paid on Banking and Other Financial Services - mere technical discrepancy in the invoices cannot be the ground for denying substantive benefit of refund available to SEZ unit. It is the policy of the Government to exempt or refund the input tax incurred by the SEZ unit. - AT
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Refund of CENVAT Credit - whether mere procedural irregularity can curtail the substantial benefit or not - In the present case the amount in question was deposited under mistake of law, hence, was a deposit instead of being duty. Section 11B of Central Excise Act, 1944 and the time bar therein cannot be applied to the present case. - AT
VAT
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Issuance of Garnishee Notices - composition scheme - dispute over turnover - execution of civil work relating to construction of roads - If there is payment of tax under the composition scheme, question of regular assessment would not arise. In such circumstances receipt or nonreceipt of pre-assessment notices or assessment orders would have no significance or bearing as those are besides the point. When an action is without jurisdiction, the fact that the same has been put to challenge after two years would not be of material consequence. - HC
Articles
Notifications
Customs-
22/2022 - dated
15-6-2022
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ADD
Seeks to levy anti-dumping duty on Fluoro Backsheet excluding transparent backsheet originating in or exported from China PR for a period of five years, 2022
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50/2022 - dated
15-6-2022
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Cus (NT)
Fixation of Tariff Value of Edible Oils, Brass Scrap, Areca Nut, Gold and Silver
GST - States-
38/1/2017-Fin(R&C)(228)/412 - dated
8-6-2022
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Goa SGST
Amendment in Notification No. 38/1/2017-Fin(R&C)(38)/323, dated the 12th January, 2018
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6/2022 – State Tax - dated
13-6-2022
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Jharkhand SGST
Seeks to extend the due date of payment of tax, in FORM GST PMT-06, for the month of April, 2022
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5/2022-State Tax - dated
13-6-2022
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Jharkhand SGST
Seeks to extend the due date of filing FORM GSTR-3B for the month of April, 2022
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4/2022 – State Tax - dated
31-5-2022
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Jharkhand SGST
Seeks to amend Notification No. 14/2019-State Tax, dated the 26th April, 2019
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3/2022 – State Tax - dated
31-5-2022
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Jharkhand SGST
Seeks to amend Notification No. 10/2019-State Tax, dated the 26th April, 2019
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424/XI-2-22-9(47)/17-T.C.183-U.P.Act-1-2017-Order- (236)-2022 - dated
9-6-2022
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Uttar Pradesh SGST
Seek to waive off late fee under section 47 for the period from 01.05.2022 till 30.06.2022 for delay in filing Form GSTR-4 for FY 2021-22
Income Tax-
63/2022 - dated
15-6-2022
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IT
Central Government notifies transfer of capital asset from NTPC Limited u/s 47(viiaf)
Insolvency and Bankruptcy-
IBBI/2022-23/GN/REG087 - dated
14-6-2022
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IBC
Insolvency and Bankruptcy Board of India (Inspection and Investigation) (Amendment) Regulations, 2022
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IBBI/2022-23/GN/REG085 - dated
14-6-2022
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IBC
Insolvency and Bankruptcy Board of India (Information Utilities) (Amendment) Regulations, 2022
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2022 (6) TMI 697
Classification of services - Hostel Accommodation Charges per Hostel Seat provided by the Mody Education Foundation (MEF) to the students of Mody University of Science and Technology (MUST) having value of service upto Rs. 1000/- composite supply - charitable activities or not - Applicability of exemption under entry no. 14 of the notification no. 12/2017 dated 28-06-2017 - HELD THAT:- In the present case, it is observed that the applicant will provide single service of 'hostel accommodation' for a single price of less that Rs. 1000/- per Hostel Seat. Being single taxable service, the supply is not a Mixed Supply under GST - supply of 'hostel accommodation service' by the applicant in the present matter is neither a composite supply nor a mixed supply. Rather it is a supply of 'residential or lodging service' at Hostel which would be provided to students of MUST. On gone through of exemption Entry No. 14 of the Notification No. 12/2017-CT (R) Dated 28.06.2017 as well as CBIC's Circular No. 32/06/2018-GST dated 12 February, 2018, it is found that the description of service is user based, meaning that, if the accommodation is used for residential or lodging purpose then it is immaterial who the user is. The said entry mentions Services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes . The word 'hostel' not being specifically mentioned implies that the same would be covered under the term 'Whatever name called' - the scope of the entry is restricted to use of the accommodation unit for residential and lodging purpose only. The service of hostel is optional and not coming out from the package and separate consideration will be charged for providing such hostel facility to the students. In fact, the hostel fees are not a part of any package concerning commercial training coaching services rendered by the applicant. The Applicant is exclusively providing the Hostel Accommodation Service in isolation and no other service is clubbed or bundled along with the Hostel Accommodation Service. Thus, there is no question of Composite Supply u/s 2 (30) of the GST Act or Mixed Supply u/s 2(74) of the GST Act in the Case of the Applicant - Considering the provisions of Entry No. 14 of the Notification No. 12/2017-CT (R) Dated 28.06.2017 and clarification given by CBIC in Circular No. 32/06/2018-GST dated 12th February 2018, it is concluded that, the applicant's activity is satisfying the conditions of Entry No. 14 of said Notification No. 12/2017-CT (R) Dated 28.06.2017 and hence would be exempted from GST.
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2022 (6) TMI 696
Classification of goods - appropriate rate of GST - U-bolt - Front Spring Bolts - Spring Pins - covered under Chapter 73 or Chapter 87? - HELD THAT:- At Section XV the expression parts of general use has been defined to include (a) Articles of Headings 7307, 7312, 7315, 7317 or 7318 and similar articles of other base metal; and (b) Springs and leaves for springs, of base metal, other than clock or watch springs (Heading 9114) but in SECTION XVII the expression parts and pans and accessories has been excluded for Parts of general use, as defined in Note 2 to Section XV, of base metal (Section XV). Further, a conjoint reading of the notes, suggest that the articles falling under Heading 7318 do not fall under the expression parts and parts and accessories of motor vehicles, Accordingly, the articles falling under 7318 will be covered exclusively under this category for tariff purpose. The heading 7318 includes all types of fastening bolts and metal screws regardless of shape and use, including U-bolts, bolt ends (i.e., cylindrical rods threaded at one end), screw studs (i.e., short rods threaded at both ends), and screw studding (i.e., rods threaded throughout) and find that as per the HSN explanatory notes, U-Bolt which is made of steel, is a type of bolt which is specifically covered under the CTH 7318, therefore, these are classifiable under the CTH 7318. Front Spring Bolt - HELD THAT:- The Front Spring Bolt in question, which is also made up of Steel, fulfils the description as given in the HSN explanatory note and is designed to engage a nut is also classifiable under CTH 7318. Spring Pins - HELD THAT:- Spring Pins manufactured and supplied by the applicant are made up of various types of steel and are in the nature of a spring and hence provided under the sub-heading Other , covered under the CTH 7320 which aptly covers springs and leaves for springs, of iron or steel. Accordingly, the Spring Pins are classifiable under Tariff Item 7320 90 20. Hon ble Supreme Court of India in the case of G.S. AUTO INTERNATIONAL LTD. VERSUS COLLECTOR OF C. EX., CHANDIGARH [ 2003 (1) TMI 700 - SUPREME COURT] has held that the goods in question cannot but be regarded as parts of automobiles, it has to be held that they are suitable for use primarily with articles of Chapter Heading Nos. 87.01 to 87.05 It follows that the goods in question cannot be treated as falling under Chapter Heading No. 73.18 and that they can properly be classified under Chapter Heading No. 87.08 of the Central Excise Tariff Act, 1985. Since in the Commercial parlance the goods in question are known as Nuts and Bolts namely U-bolt, Front Spring Bolt, and Spring Pin and not by any other name and as held by Hon ble Supreme Court that the Classification of goods is to be determined by commercial identity test and not by functional test i.e. as to how they are referred to in the market by those who deal with them, be it for the purpose of selling, purchasing or otherwise, they are to be classified as a generic product. Hence we are of the view that if the generic goods as known in commercial parlance find specific mention in a particular Tariff Head and is also not covered in exclusion clause in any chapter note; the classification of goods has to be determined by commercial identity test and not by functional test.
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Income Tax
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2022 (6) TMI 695
Reopening of assessment u/s 147 - notice against a dead person - HELD THAT:- This Court is of the view that the issue in the present case is covered by the Division Bench judgment in Savita Kapila 2020 (7) TMI 441 - DELHI HIGH COURT which was followed by this Court in Mrs. Sripathi Subbaraya Manohara L/H late Sh. Sripathi Subbaraya Gupta 2021 (7) TMI 695 - DELHI HIGH COURT wherein the notice under Section 148 of the Act against a dead person was held to be null and void and all consequential proceedings/orders, including the assessment order and subsequent notices were set aside. Keeping in view the aforesaid mandate of law, the order passed under Section 148A(d) of the Act and the consequential notice issued under Section 148 are set aside. - Decided in favour of assessee.
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2022 (6) TMI 694
Reopening of assessment u/s 147 - gross violation of principles of natural justice - Assessee argued for non-supply of documents and details not being afforded with an opportunity of cross-examination of the concerned person etc - HELD THAT:- AO has concluded the assessment proceedings solely based upon the information which was available before the commission stated to have been furnished by Wadhwa Group. Admittedly, the assessee was not a party to the proceedings before the Settlement Commission. That apart, while issuing the notice under Section 148, in the annexures contained therein, this information was not disclosed. AO sought to reopen the assessment proceedings based upon the information obtained from JCIT(OSD), Central Circle 5(4), Mumbai which admittedly is a third party information. It is no doubt true that the assessing officer would state that he has analysed the information and made certain inquiries thereon. However, the fact remains that the request made by the assessee for supply of details and documents was not complied with. The reasons given by the assessing officer that the entire information pertaining to the search and seizure of the portion of Wadhwa Group cannot be furnished to the assessee. AO may be justified in coming to such conclusion. Nevertheless, if a portion of the information obtained from Wadhwa Group or certain findings rendered by the Settlement Commission concerning the assessee, that portion of the information ought to have been furnished. Nonfurnishing of such information which is relevant information would render the proceedings in violation of principles of natural justice. We agree with the findings of the learned Single Judge that the court cannot decide the correctness of the decision of the assessing officer but would be well-justified in examining as to whether there is any error in the decision making process. We have no hesitation to hold that there has been gross violation of principles of natural justice in the decision making process rendering the entire proceedings to be not sustainable. Therefore, we are inclined to interfere with the order passed by the assessing officer. For all the above reasons, the appeal is allowed and the order passed in the writ petition is set aside.We make it clear that the entire information concerning the Wadhwa Group are not required to be furnished to the assessee but that part of the information relevant to the assessee has to be furnished including the findings rendered by the Settlement Commission qua the assessee.
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2022 (6) TMI 693
Foreign tax credit - Claim denied for non-filing of From 67 before the due date of filing of the return U/s. 139(1) - HELD THAT:- We find that the Form 67 was not filed by the tax consultant of the assessee due to oversight and pleaded that mistake may be considered as technical mistake and there was a reasonable cause. We find no merit in the submissions made by the assessee s representative that the above reason mentioned by the assessee in its written submissions is reasonable. The assessee has realized the filing of Form 67 only after the scrutiny proceedings were initiated by the AO. We also note that Form 67 has been filed with a delay of more than two years without any valid and reasonable cause. From the plain reading of Rule 128(9) of the IT Rules, it is clear that the statement in Form-67 shall be furnished on or before the due date specified for furnishing the return of income under sub-section(1) of section 139 of the Act. Therefore, we are of the considered view that since the word shall has been used in the Rule 128(9) that it is mandatory in nature and not directory as claimed by the Ld. AR. We therefore find no infirmity in the order of the Ld. CIT(A), NFAC and hence no interference is required. - Decided against assessee.
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2022 (6) TMI 692
Penalty u/s 271(1)(c) - Bogus purchases - HELD THAT:- As purchases has been held to be bogus in view of the information received from Sales Tax Department of Maharashtra and the assessee failed to substantiate those purchases. Even the efforts made by the Assessing Officer for verification of those purchases by way of issue notice under section 133(6) and 131 of the Income Tax Act could not succeed as those parties were not traceable. The assessee was duly confronted with those facts and was asked to produce those purchase parties, however the assessee failed to do so. In the circumstances both the Ld. CIT(A) and ITAT has confirmed disallowance of part of the bogus purchases. In such circumstances, it is not a disallowance of expenses merely an estimate basis, but it is a disallowance in respect of a wrong committed by the assessee, which has resulted in furnishing of inaccurate particulars by the assessee. In our opinion, the Ld. CIT(A) has passed a reasoned order and we do not find any infirmity in the same. Accordingly, we uphold the both the impugned orders of the Ld. CIT(A) and dismiss the grounds raised by the assessee
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2022 (6) TMI 691
Deduction u/s 80G - applicant has filed an application in Form No. 10G dated 04.03.2020 for seeking approval under section 80G(5)(vi) delayed - critical times during the Pandemic period - Assessee could not produce any documentary evidence in support of the charitable activities carried out by the assessee trust - HELD THAT:- Keeping in view the circumstances faced by the assessee society during the Covid-19 pandemic which prevented the assessee society to submit the necessary documents before the ld. CIT (Exemptions) for approval under section 80G(5)(vi) we are of the considered view that it will appropriate and in the interest of justice to remand the matter back to the file of the ld. CIT (Exemptions) to decide the matter afresh after affording a reasonable opportunity to the assessee society to submit documents as desired by him.
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2022 (6) TMI 690
Addition on account of deposit of cash during the demonetization period - cash deposits which the AO has held to be sham transactions, were routed through the books of account maintained by the assessee - HELD THAT:- We fully agree with the contention of the Ld. AR that the AO had no sound reason to reject the contention of the assessee vis- -vis the source of cash deposits made in the bank account of M/s Syna Creations especially when the deposits have been routed through the regular books of account of the assessee. It is also a case in point that books of account have not been rejected and the AO has accepted the sales as well as purchases and also the expenses claimed by the assessee and has only found fault with the quantum of cash deposits during the demonetization period. Thus, apparently, this impugned addition has been made without any foundation and in our considered view, the AO has acted on mere surmise and conjectures without duly appreciating the undisputed fact that he himself has accepted the books of account as well as the book results. The Ld.CIT(A) has also upheld the findings of the AO without assigning any cogent reason and he also seems to have simply approved the addition without proper appreciation of facts. As also to be noted that on the same set of facts, the AO has accepted the cash deposit of Rs.17 lacs in another proprietorship concern of the assessee namely M/s Wool World but has proceeded to doubt the cash deposited in the proprietorship concern M/s Syna Creations without any cogent reason. We are of considered view that the impugned addition was not called for especially when the assessee s books of account have not been rejected and all the income and expenses and the book results have been accepted except the cash deposit without there being any iota of evidence, which would point out that the assessee had deposited her unaccounted money under the garb of sales or receipts from sister concern M/s Rajan Enterprises. AO has proceeded in a very hasty and an illogical manner without taking a holistic view of the entire case record before him. It is also to be noted that the captioned case was a search case and even during the course of search no incriminating material was found which would point out towards the assessee introducing her unaccounted cash into the books of account under the garb of sales or receipts from sister concern. Therefore, we find ourselves unable to confirm the view taken by the Ld.CIT(A) in upholding the addition of Rs.10 lacs and we set aside the order of the Ld.CIT(A) on the issue and direct the AO to delete the same.- Decided in favour of assessee.
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2022 (6) TMI 689
Penalty u/s 271(1)(c) - LTCG on purchase of plot - HELD THAT:- After having gone through the erroneous order passed by the lower authorities and the documents placed on record more particularly the assessment order as well as notice U/s 274 r.w.s. 271(1)(c) of the Act, we noticed that the A.O. has not clearly mentioned the limb, on the basis of which, penalty was proposed to be imposed. The A.O. has simply mentioned in his order with regard to initiation of penalty by stating that the assessee has concealed the income or furnishing inaccurate particulars of income by introducing non-genuine. This Tribunal in the case of M/s Vijay Kedia [ 2021 (8) TMI 335 - ITAT JAIPUR] wherein identical issue had been decided in favour of the assessee, therefore, we are of the view that concealment of income or furnishing of inaccurate particulars of income are two different forms and they cannot be inter mixed, therefore, we quash the penalty proceedings initiated U/s 271(1)(c) of the Act. Hence, Ground of the appeal is allowed.
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2022 (6) TMI 688
Disallowance of Provision for Entry Tax - HELD THAT:- Assessee had paid advance entry tax to the tune of Rs. 1,44,64,585/- which is shown under the other current asset under Schedule E of balance sheet and during the year entry tax of Rs. 8,95,771/- debited into profit and loss A/c and also shown the said entry tax amount under the current liabilities, as the assessee already advance payment was made under entry tax and such provision will be adjusted from advance entry tax after disposal of writ petition which is still pending before the Hon ble Gauhati High Court and the assessee had already paid the entry tax in advance, although the said provision was made only for adjustment after the disposal of the writ petition by the Hon ble Gauhati High Court and accordingly we allowed Rs. 8,95,771/- on account of provision of entry tax made by the assessee since assessee had already paid advance entry tax. As made clear that the provision made by the assessee will be adjusted from the advance payment entry tax after the disposal of the writ petition which is still pending before the Hon ble Gauhati High Court and consequential tax effects should be taken into consideration in terms of such order passed by the Hon ble Gauhati High Court. Appeal of assessee allowed.
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2022 (6) TMI 687
Penalty under Section 271C - non deduction of tax at source as per provisions of Chapter XVII-B towards amount paid as External Development Charges (EDC) to Directorate of Town and Country Planning, Haryana (Haryana Government) (DGTCP) through banking channel favouring Haryana Urban Development Authority (HUDA) - HELD THAT:- The issue is no longer res Integra. The identical issue has come up for adjudication before the Co-ordinate Bench of Tribunal in the case of Spaze Tower Pvt. Ltd. [ 2022 (5) TMI 1344 - ITAT DELHI ] Thus the assessee has not committed any violation of provision of Chapter XVII B of the Act by making payment towards EDC charges to DGTCP Haryana through HUDA without deduction of TDS. - Decided in favour of assessee.
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2022 (6) TMI 686
Revision u/s 263 by CIT - unexplained cash deposits were made out of the sale proceeds of cotton seed cake - HELD THAT:- Parliament had conferred the power of revision on the Commissioner of Income Tax u/s 263 of the Act in case the assessment order passed is erroneous and prejudicial to the interests of revenue. In order to invoke the power of revision, the above two conditions are required to be satisfied cumulatively. References in this regard can be made to the decision of Malabar Industrial Co. Ltd. [ 2000 (2) TMI 10 - SUPREME COURT] and in the case of CIT vs. Max India Ltd. [ 2007 (11) TMI 12 - SUPREME COURT] - The error in the assessment order should be one that it is not debatable or plausible view. In a case where the Assessing Officer examined the claim took one of the plausible views, the assessment order cannot be termed as an erroneous . Applying the above principles to the facts of the present case, no doubt in the present case the assessment was selected for limited scrutiny under CASS for the purpose of verification of cash deposits in Savings Bank Account are more than turnover. From perusal of the original assessment order, it would clearly indicate that the Assessing Officer merely accepted the explanation of the assessee that unexplained cash deposits were made out of the sale proceeds of cotton seed cake without examining any evidence. Similarly, the Assessing Officer estimated the gross receipts from the agricultural produce without examining the reasonableness of the yield of cotton per hectare. Thus, it is clear that the assessment order was passed by the Assessing Officer suffered from lack of necessary enquiries and the Explanation 2 to provisions of section 263 of the Act is squarely applicable to the present case. Hence, we uphold the order of revision passed by the ld. PCIT u/s 263 - Decided against assessee.
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2022 (6) TMI 685
Disallowance u/s. 40(A)(2)(b) - excessive salary payment - payment to close associates / related parties - HELD THAT:- Section 40A(2) of the Act, puts a curb on expenditure in respect of which payment has been made to close associates having substantial interest in the company for goods, services and facilities. AO can disallow only that portion of the total expenditure, which in his opinion, is excessive or unreasonable. The onus is on the AO to form an opinion that the expenditure claimed as excessive/unreasonable having regard to the fair market value for which the payment is made. This opinion of the AO cannot be arbitrary but must be on the basis of determining the fair market value for which payment is made. AO must establish that the payment is excessive or unreasonable which should be on the basis of material on record and cannot be based on merely surmises and conjectures. The reasonableness of the expenditure is to be seen from the view point of the businessmen and not from the view of Revenue authorities. The expediency, legitimacy and the business needs will have to be examined from the assessee's point of view and not from the department's view as held in the case of Voltamp Transformers Pvt. Ltd. [ 1980 (10) TMI 35 - GUJARAT HIGH COURT] We further find that Hon'ble Rajasthan High Court in the case of CIT vs. Consulting Engineering Group Ltd [ 2014 (4) TMI 970 - RAJASTHAN HIGH COURT] has held that it is for an assessee as a businessman to come to a conclusion as to what remuneration of the salary is to be paid to the employees and the reasonableness of the expenses is to be judged from the angle of a businessman rather than from angle of an Assessing Officer. AR has also submitted that the respective persons, to whom the payments have been made, have offered the receipts as their respective income and those individuals are assessed to tax at maximum tax rates. The aforesaid contention of the Learned AR is not controverted by Learned DR. We find that in the present case the AO has only compared the salary payment made by the assessee in the year under considered with that of earlier year to come the conclusion of excessive salary payment. The aforesaid conclusion is not based on any material on record as contemplated u/s. 40(A)(2)(b) of the Act. Considering the totality of the aforesaid facts, we are of the view that the AO was not justified in disallowing the expenditure by invoking the provisions of Section 40(A)(2)(b) of the Act. We accordingly set aside the addition made by AO and CIT(A). Thus the ground of assessee is allowed.
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2022 (6) TMI 684
Revision u/s 263 - Deduction u/s. 54 of the act is not allowable - HELD THAT:- As it is not the case that the AO has not made enquiry. Indeed, the Pr. CIT initiated proceedings under section 263 of the Act on the ground that the AO has not made enquiries or verification which should have been made in respect of exemption claimed under section 54 - It is not the case of the Pr. CIT that the Ld. AO did not apply his mind to the issue on hand or he had omitted to make enquiries altogether. In the instant set of facts, the Ld. AO had made enquiries and after consideration of material placed on record accepted the genuineness of the claim of the assessee. We thus find no error in the order of Ld. AO so as to justify the initiation of 263 proceedings by the Ld. Pr. CIT. assessee's contention is thus allowed. We find that the AO based on the BU permission from Ahmedabad Urban Municipal Corporation dated 29-09-2011 has concluded that the construction was completed for the property after the date of transfer of the property. Admittedly, the BU permission is issued by the local authority which evidences that the construction of the building is within the parameters laid down by the government agencies and therefore the same can be used for the object for which it was constructed. To our understanding, the BU permission appears to be of significant document which is necessary to reach to the conclusion that the construction of the building has been completed in all respects. Thus, we deemed it fit to hold that the AO has taken one of the possible view which cannot be termed as erroneous insofar prejudicial to the interest of revenue in the manner as provided under section 263 of the Act. We hold that there is no error in the assessment framed by the AO under section 143(3) causing prejudice to the interest of revenue. Thus, the revision order passed by the learned PCIT is not sustainable and therefore we quashed the same. Hence the ground of appeal of the assessee is allowed.
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2022 (6) TMI 683
Unexplained expenditure - Addition on the basis of contents of the seized document - amount as unexplained and invoking section 69C - HELD THAT: - The impounded material reflects receipts and payments and the assessee has already paid the difference of the amounts to taxation after going through the entire set of papers. The property 62/1, Ajmal Khan Park has been purchased on 08.11.2012 whereas the notings reflect 04.12.2012. The transaction of purchase of the said property has culminated on 08.11.2012. Hence, the probability of any payment post, purchase of a property is also ruled out. The assessee has offered to tax the amount on account of the payments A/c and receipts A/c Assessing Officer shall have the basis for assuming that the assessee has not disclosed the income for taxation. Reliance was also placed on the decision of Hon'ble Supreme Court in the case of CBI Vs. V.C. Shukla [ 1998 (3) TMI 675 - SUPREME COURT - In the case of ACIT Vs. Sharad Chaudhary [ 2014 (8) TMI 309 - ITAT DELHI] it was held that the loose paper found on standalone could not be used as a basis for making the addition without the company of any other supportive material and evidence, more so when the contents were not interlinked. Hence, keeping in view the fact that the assessee has offered the amounts mentioned on the impounded material which has been accepted by the revenue and also keeping in view that revenue has not brought anything on record to prove that the assessee is liable to pay the taxes more than what has been already disclosed and also keeping in view the fact that the transactions of Ajmal Khan Park, 62/1 stands culminated, we hereby direct that the addition made be deleted. - Decided in favour of assessee.
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2022 (6) TMI 682
Penalty u/s 271(1)(c) - disallowance of business loss claimed as bad debts - Whether there was no concealment of particulars of its income on the part of the assessee nor the furnishing of inaccurate particulars of such income warranting levy of penalty under Section 271(1)(c) ? - HELD THAT:- Such disallowance made originally at Rs. 1,38,45,181/- by the Assessing Officer was sustained by the Tribunal only to the extent of Rs. 5,02,181/- and while sustaining this very meager amount of disallowance, the claim made by the assessee was not found to be false and it was only that the explanation of the assessee was not found acceptable. As held by the Hon'ble Supreme Court in the case of CIT vs. Reliance Petroproducts P. Ltd [ 2010 (3) TMI 80 - SUPREME COURT] , a mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars of his income attracting the penal provision of Section 271(1)(c) of the Act. Moreover, as held by Hon'ble Gujarat High Court in the case of Director of Income-Tax Vs. Skanska Cementation International Ltd [ 2016 (7) TMI 1647 - GUJARAT HIGH COURT] .when substantial additions on merits have been deleted, nothing survives in favour of Revenue for levy of penalty under Section 271(1)(c). Disallowance u/s 14A r.w.r. 8D - Disallowance made originally by the Assessing Officer at Rs. 17,99,34,022/- was related to the interest to the extent of Rs. 11,04,23,814/- as worked out under Rule 8D(2)(ii). The Tribunal deleted entirely the disallowance on account of interest made as per Rule 8D(2)(ii) and also deleted a further disallowance of Rs. 1,56,62,640/- made under Rule 8D(2)(i). As regards the balance disallowance made under Section 14A as per Rule 8D(2)(iii) on account of common administrative expenses, the Tribunal directed the Assessing Officer to re-compute the said disallowance by taking into consideration only those investments which had actually yielded exempt income to the assessee in the year under consideration. As submitted by the learned Counsel for the assessee at the time of hearing before us and not disputed by the learned DR, the disallowance under Section 14A r.w. Rule 8D(2)(iii), as recomputed as per the direction of the Tribunal, would be less than the suo moto disallowance already offered by the assessee and thus there would be no question of imposing any penalty in respect of disallowance under Section 14A as finally sustained by the Tribunal. Moreover, as held by the Hon'ble Supreme Court in the case of Gruh Finance Limited [ 2018 (10) TMI 1674 - SUPREME COURT OF INDIA] , penalty under Section 271(1)(c) of the Act is not justified in respect of disallowance made under Section 14A of the Act. We, therefore, find no justifiable reason to interfere with the impugned order of the learned CIT(A) cancelling the penalty imposed by the Assessing Officer under Section 271(1)(c) Appeal of revenue dismissed.
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2022 (6) TMI 681
Disallowance of Corporate Social Responsibility (CSR) expenses u/s 37(1) - HELD THAT:- As per section 135 of the Companies Act, 2013, every company having net worth of Rs. 500/- crores or more, or turnover of Rs. 1000/- crores or more, or a net profit of Rs. 5 crores or more during the immediately preceding financial year has to spent a certain percentage out of their profit towards CSR activities. Prior to amendment to section 37(1) of the Act by the Finance Act, 2014 by insertion of Explanation 2, CSR expenses were allowed as deduction under section 37(1) of the Act, as, there was no specific bar either u/s 37(1) of the Act or under any other provision for claiming deduction for CSR expenses. There are number of judicial precedents which have expressed the aforesaid view, some of these decisions have been cited before us by learned counsel for the assessee. Thus, prior to insertion of Explanation 2 to section 37(1) of the Act, w.e.f., 01.04.2014, as per settled legal position, it is an allowable expenditure under Section 37(1). A specific bar for allowing such expenditure u/s 37(1) of the Act was brought to the statue by Finance Act, 2014 effective from 01.04.2014. The amendment, no doubt, will apply prospectively. Thus, following the various judicial precedents cited before us, we hold that CSR expenses incurred by the assessee are allowable as deduction under section 37(1). Disallowance made under section 14A read with Rule 8D - assessee suo motu worked out the disallowance under section 14A by applying the methodology provided under Rule 8D(2)(iii) - HELD THAT:- Undisputedly, while computing the income in the return of income filed for the impugned assessment year, the assessee has suo motu disallowed an amount of Rs.3.50 crores under section 14A read with Rule 8D. However, in course of assessment proceeding, the assessee filed a revised working of disallowance under rule 8D(2)(iii) by computing the disallowance of Rs.5.33 lakhs. While AO completely ignored the revised computation - Commissioner (Appeals) rejected assessee s claim. Before us, learned counsel for the assessee submitted that the methodology adopted by the assessee in the revised computation of disallowance under section 14A read with Rule 8D was also adopted by the assessee in assessment years 2008-09 and 2009-10 and while giving effect to the direction of the learned Commissioner (Appeals), the AO has adopted such methodology and computed disallowance under Section 14A read with Rule 8D. We direct the Assessing Officer to examine the revised computation of disallowance under section 14A read with Rule 8D of the Act as filed by the assessee and if it is found similar to the methodology adopted by the assessee in assessment years 2008-09 and 2009- 10, which, as submitted, were accepted by the AO while giving effect to the orders of Commissioner (Appeals) in assessment year 2008-09 and 2009-10, assessee claim may be accepted. Appeal is allowed for statistical purposes. We direct the AO to examine the revised computation of disallowance under section 14A read with Rule 8D of the Act as filed by the assessee and if it is found similar to the methodology adopted by the assessee in assessment years 2008-09 and 2009- 10, which, as submitted, were accepted by the AO while giving effect to the orders of Commissioner (Appeals) in assessment year 2008-09 and 2009-10, assessee claim may be accepted. Needless to mention, assessee must be provided due opportunity of being heard before deciding the issue. This ground is allowed for statistical purposes.
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2022 (6) TMI 670
Bogus LTCG - genuine v/s sham transaction - burden of proof - penny stock purchases - colourable devices adopted in the process or not? - reliance on expert advice to buy shares - manipulation of share prices Surabhi Chemicals and Investment Limited as part of colourable device to generate fictitious LTCG with the aim to evade taxes due - as per AO transactions were stage managed with the object to facilitate the assessee to plough back its unaccounted income in the form of fictitious Long Term Capital Gains - revision u/s 263 by CIT set aside by ITAT - Whether Tribunal erred in ignoring the direct and circumstantial evidence brought on record by the Assessing Officer to establish that the assessee had indulged in manipulation of the share prices of Surabhi Chemicals and Investment Limited with a view to record fictitious Long Term Capital Gains claiming these as exempt from taxation? - HELD THAT:- Mere production of incorporation details, PANs or the fact that the third persons or the companies had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up. The assessee cannot take shelter under the opinion given by the experts as it is not the expert who has indulged in the transaction but it is the assessee. Therefore by following such experts advice if the assessee gets into an web it is for him to extricate himself from the tangle and he cannot reach out to the expert to bail him out. The assessees cannot be heard to say that they had blindly followed advice of a third party and made the investment. Selection of shares to be purchased is a very complex issue, it requires personal knowledge and expertise as the investment is not in a mutual fund. None of the assessees before us have shown to have to made any risk analysis before making their investment in a penny stock . If according to them they have blindly taken a decision to invest in insignificant companies they having done so at their own peril have to face the consequences. Thus, the conduct of the assessees before us probabilities the stand taken by the revenue, rightly the mind of the assessee as an investor was taken note to deny the claim for exemption. It is in this background that the human probabilities would assume significance. As observed earlier the doctrine of preponderance of probabilities could very well be applied in cases like the present one. We say human probabilities to be the relevant factor as on account of the fact that the assessees are of individuals or Hindu Undivided Families and the trading has been done in the name of the individual assessee or by the Karta of the HUF. None of the assessee before us have been shown to big time investor. This is evident from the income details of the assessee which has been culled out by the respective assessing officers. Assuming that the assessee is a regular investor as was submitted to us by the learned advocates for the assessees that in any manner cannot improve the situation as the claim for LTCG has been only restricted to the shares which were purchased and sold by the assessees in penny stocks companies. Therefore merely because the assessee had invested in other blue chit companies had earned profit or incurred loss cannot validate the tainted transactions. It has been established by the department that the rise of the prices of the shares was artificially done by the adopting manipulative practices. Consequently whatever resultant benefits which accrue from out of such manipulative practices are also to be treated as tainted. However, the assessee had opportunity to prove that there was no manipulation at the other end and whatever gains the assessee has reaped was not tainted. This has not been proved or established by any of the assessee before us. Therefore, the assessing officers were well justified in coming to a conclusion that the so called explanation offered by the assessee was not to their satisfaction. Thus, the assessee having not proved the genuineness of the claim, the creditworthiness of the companies in which they had invested and the identity of the persons to whom the transactions were done, have to necessarily fail. In such factual scenario, the Assessing Officers as well as the CIT(A) have adopted an inferential process which we find to be a process which would be followed by a reasonable and prudent person. Assessing Officers and the CIT(A) have culled out proximate facts in each of the cases, took into consideration the surrounding circumstances which came to light after the investigation, assessed the conduct of the assessee, took note of the proximity of the time between the buy and sale operations and also the sudden and steep rise of the price of the shares of the companies when the general market trend was admittedly recessive and thereafter arrived at a conclusion which in our opinion is a proper conclusion and in the absence of any satisfactory explanation by the assessee, the Assessing Officers were bound to make addition under Section 68 . Benefit of the Vivad Se Viswas Scheme - As there is no vested right for an assessee to come under the Scheme and this finding was rendered by us after examining the provisions of the V.S.V. Act, secondly we have held that cases cannot be decided based on hypothesis nor can the Court read the mind of the assessee that in the event, the revenue had filed appeal on time, the assessee may have availed the benefit under the V.S.V. Scheme. In fact, we find that the Comptroller and Auditor General has also severely commented upon the action taken by the Income Tax Department on such issues and that no uniform procedure had been followed by the various Income Tax Officers and in certain cases the assessments were not even reopened. Therefore, merely because in certain cases, appeals were preferred within the relevant time enabling, those assessees to avail the benefit of the V.S.V. Scheme can in no manner advance the case of the assessees before us. The SEBI Regulations cast very onerous responsibilities on the share brokers. However, the trend appears that the penny stock companies have no business or very little business got involved with the stock brokers and it is stated that the share brokers receive commission for allowing the paper entities to trade through their terminal and some of the brokers have also stated to be performing the trading activity themselves on behalf of the paper companies. The report states as to why the department has taken an investigation as a project, largely due to huge syndicate of the entry operators, share brokers and money launderers. The report states that Kolkata is a very distinctive place among the cities of India, so far as the accommodation entry is concerned and action has been initiated against more than thirty share broking entities and more than twenty entry operators working in Kolkata. The report states that almost everyone has accepted its activity, participation in providing accommodation entry of LTCG. The investigation has also indicated as to how the scheme of merger is being misused. Though the scheme of merger is approved by the Company Court, in the event it is found that such merger was done/ obtained by playing fraud, the Company Court is empowered to revoke the order and it appears that the Income Tax Department has not taken any steps in this regard to approach the Company Court or the Tribunal with such a prayer. Thus, we have no hesitation to hold that the orders passed by the CIT(A) affirming the orders passed by the Assessing Officers as well as the orders passed by CIT under Section 263 of the Act were proper and legal and the Tribunal committed a serious error in reversing such decisions. The substantial questions of law suggested by the revenue is with regard to the correctness of the order of the Tribunal in interfering with the order of the CIT(A) who affirmed the order of the Assessing Officer making the addition under Section 68 For all the above reasons, we hold that the Tribunal committed a serious error in setting aside the orders of the CIT(A) who had affirmed the orders of the Assessing Officer and equally the Tribunal committed a serious error both on law and fact in interfering with the assumption of jurisdiction by the Commissioner under Section 263 - Decided in favour of revenue.
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2022 (6) TMI 669
Penalty u/s 271(1)(c) - Period of limitation - denial of deduction u/s 11 - HELD THAT:- As per the proviso to the Section 275(1), an order imposing penalty shall be passed before the expiry of the financial year, in which proceedings, in the course of which an action for imposition of penalty has been initiated, are completed within 1 year from the end of the financial year, in which the order of the Deputy Commissioner (Appeals) or the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever is later. The facts on record indicate that the petitioner is well aware of the fact that the petitioner was not entitled to claim exemption under Sections 11 and 12 of the Income Tax Act, 1961, once the registration under Section 12A of the Act had been cancelled on 30.12.2010. The Tribunal has also affirmed the views and therefore, the petitioner is in appeal. As on date, the petitioner is not entitled to claim exemption as a charitable institution. Therefore, while filing the successive returns under Section 139 of the said Act, the petitioner has to arrived at the correct taxable income and pay the tax thereon. Even if the petitioner wants to claim exemption, it is for the petitioner to have arrived at the correct tax that was payable by the petitioner as ordinary tax assessee, who does not enjoy the exemption and file returns. As the petitioner was well aware of the fact that this is the case of filling of inaccurate particulars in the returns and the petitioner has also replied to the same in the notices issued to the petitioner. The petitioner had earlier filed writ petition long after the notices were issued, after the assessment orders were passed by the Assessing Officer. It is only by way of an afterthought the petitioner had challenged the notices. There is no merits in the present writ petitions. The petitioner has to workout the remedy against the orders passed under Section 274 r/w Section 271 (1) (C) of the Income Tax, Act 1961 before the Appellate Commissioner.
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2022 (6) TMI 668
Penalty u/s 271(1)(c) - repair and maintenance expenses on account of charity and donation on account of part deduction in Section 80IC - HELD THAT:- On perusal of assessment order, it is noticed that no satisfaction has been formed in the course of assessment for committing any default contemplated under Section 271(1)(c) in respect of such addition. Thus, the imposition of penalty on such addition claimed in the books of account is not justified at the first instance. The action of the CIT(A) is accordingly reversed. Deduction under Section 80IC on certain other income which inter alia included profit on sale of asset - AO disallowed the claim of deduction under Section 80IC terming it to be incidental income and thus cannot be said to be derived from manufacture or produce of any article or thing - Assessing Officer relied upon the judgment rendered in the case of CIT vs. Sterling Foods [ 1999 (4) TMI 1 - SUPREME COURT ] wherein the Court observed that the industrial undertaking itself had to be the source of profit and the business of industrial undertaking had to directly yield that profit. The action of the Assessing Officer is clearly governed by the interpretation rendered by the Hon ble Supreme Court on expression derived from and is based on the stance that while the income so reflected in the books may be attributable to the business undertaking but cannot be equated with the expression derived from the manufacturing activity. Thus, the deduction reduced on account of interpretative process cannot per se be equated with furnishing of inaccurate particulars of income. In the absence of any culpability, the imposition of penalty owing to denial of deduction on such interpretation on nicety of law does not warrant imposition of onerous penalty u/s 271(1)(c). The penalty imposed is thus cancelled.- Appeal of assessee allowed.
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2022 (6) TMI 667
Levy of tax on Anonymous donation u/s 115BBC - letters from the donors have been obtained and provided before the Ld. Revenue Authorities or not? - HELD THAT:- We find merit in the arguments of the Ld. AR that the submissions were made online in piecemeal due to size restrictions. We also note from the paper book submitted by the Ld. AR that the names and addresses of every donor is being submitted and available in records. We also note that the donations were made either by cheque or DD or through other banking channels only. Further, we also observe that the assessee has published advertisements requesting for donations. We find force in the argument of the Ld. AR that section 115BBC requires the recipients to maintain record of identity, name and address of the person making such contribution. In the instant case, the Ld. AR has provided the details of 2300 donors along with the names and addresses of the donors before the AO. We find that the AO has failed to scrutinize the donations received from various donors. We also find from the paper book filed by the Ld. AR that confirmation letters from the donors have been obtained and provided before the Ld. Revenue Authorities. Mere absence of PAN in the confirmation letters of the donors does not give raise to suspicion that they are anonymous donations as the maintenance of name and address details of the contributors is a sufficient document as prescribed u/s. 115BBC of the Act. It is also seen from the order of the Ld. AO that he has not doubted the genuineness of the donations in the assessment order. Section 68 has no application in the instant case because the assessee has disclosed the donation as its income and applied the same for charitable purpose. In view of the above, we are of the considered view that the assessee has established the identity of the donors as provided U/s. 115BBC of the Act and hence the donations received by the assessee cannot be categorized as anonymous donations and cannot be subjected to tax as per the provisions of section 115BBC of the Act. - Decided against revenue.
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2022 (6) TMI 666
Penalty u/s 271G - non-maintenance of details in terms of section 92D(3) of IT Act r.w. Rule 10D of Income Tax Rules, 1962 - CIT-A deleted the penalty levy - whether in case of the diamond manufacturer, can any penalty be levied under section 271G of the Act for non-maintenance of segment profitability between AEs and non-AEs transactions? - HELD THAT:- We find that coordinate Bench of the Tribunal in the case of Navin Chandra exports Private Limited [ 2017 (11) TMI 1307 - ITAT MUMBAI] and other appeals has after a detailed discussion, held that there was reasonable cause for non-maintaining the said details. Also confirmed by HC [ 2018 (7) TMI 2099 - GUJARAT HIGH COURT] Since identical issue of non-maintenance of segment profitability for AEs and non-AEs transactions and consequent levy of penalty under section 271G of the Act is involved in the instant case before us, respectfully following the finding of the coordinate Bench of the Tribunal and Hon ble Gujarat High Court, we hold that in the instant case there was reasonable cause for non-maintaining the details, which were required in terms of Rule 10D of the Rules and accordingly we do not find any error in the order of Ld. CIT(A) and uphold the order of the Ld. CIT(A) on the issue-in-dispute. The grounds raised by the Revenue are accordingly dismissed.
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2022 (6) TMI 665
Penalty u/s 271(1)(c) - estimation of income on Disallowance of bogus purchases - HELD THAT:- We find that the Hon ble ITAT, SMC Bench in [ 2019 (9) TMI 1648 - ITAT MUMBAI] have dealt with similar issue, more so particularly, in assessee s own case and had ruled that when sales are not in doubt, then 100% disallowance for bogus purchases cannot be made and relied on Hon ble jurisdictional High Court in Nikunj Eximp Enterprises Pvt Ltd. [ 2013 (1) TMI 88 - BOMBAY HIGH COURT ] and Principal Commissioner of Income-tax vs M. Haji Adam Co [ 2019 (2) TMI 1632 - BOMBAY HIGH COURT ] We do not find any infirmity in aforementioned decision and thereby set aside the matter to the Assessing Officer with the direction to restrict the addition on gross profit rate of bogus purchases at the same rate as that of the genuine purchases after giving opportunity to the assessee to present its case. Further, we hold that levy of interest under section 234B and 234C are consequential and initiation of penalty under section 271(1(c) is premature.
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2022 (6) TMI 664
TP adjustment - international transactions relating to loans advanced to the subsidiary company - assessee has offered rate of interest of 3.5% but AO chose to apply 13.87% - HELD THAT:- The assessee has offered rate of interest of 3.5% on international transaction of loans advance to its AE. How this rate has been arrived at is not specified. AO has considered the same @ 13.87%. which was done on the basis of addition of 200 basis point on the interest rate of 12.30% being Indian bank, SBI Prime Lending Rate. We note that Hon'ble Delhi High Court has disproved the comparison with prevailing rates in Indian banking system for international transaction in the case of Cotton Naturals [ 2015 (3) TMI 1031 - DELHI HIGH COURT] As decided in own case [ 2022 (5) TMI 819 - ITAT DELHI] noted that LIBOR with certain markup was to be applied after taking into account the decision of Hon'ble Delhi High Court in case of Cotton Natural (I)(P.) Ltd.[supra] - Following the same, ITAT chose to remit the issue before them to the AO to consider appropriate LIBOR rate plus markup. The ITAT in the said case has taken note that the Ld. CIT(A) has applied LIBOR plus certain basis points on those years. Since IT AT in assessee's own case had earlier remitted the issue to the file of AO with certain directions, we find it appropriate to remit this issue to the file of AO. The AO shall follow the directions of the ITAT as referred above and decide accordingly. Appeal of the Revenue is allowed for statistical purposes.
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2022 (6) TMI 663
Exemption u/s 11 - Exemption denied as assessee has not filed its return of income before the date prescribed under Section 139(1) - none attended on behalf of the assessee - HELD THAT:- CIT(A) has observed that the assessee has not filed its return of income before the date prescribed under Section 139(1) and therefore in view of Section 139(4A), the effect of Sections 11 and 12 cannot be given in the case of Assessee herein. It was further noticed that the surplus of income over expenditure exceeds 15%. In other words 85% of the income derived from charitable activity has not been allegedly applied for charitable objects and thus the assessee is not entitled to relief available under Sections 11 and 12 of the Act. In the absence of any rebuttal of such allegations, no interference with the findings of the CIT(A) is called for. The CIT(A) has given findings on merits which are self explanatory and in the absence of relevant facts to dislodge the factual finding, we are not inclined to interfere with such findings in ex-parte proceedings. Consequently, we decline to interfere with the order of the CIT(A). Appeal of the assessee is dismissed ex-parte.
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2022 (6) TMI 662
Unexplained credits u/s. 68 - identity of creditor not established - HELD THAT:- As it can be held that the settled proposition of law so far is that when identity of creditor is established then the assessee is not under obligation to establish the source of source of the creditor. It is for this reason that now an amendment has been brought in Section 68 of the Act and which is to take effect from 1st April, 2023 to apply in relation to the assessment year 2023-24 and subsequent assessment years, whereby it is provided that the nature and source of any sum, whether in form of loan or borrowing, or any other liability credited in the books of an assessee, shall be treated as explained only if the source of funds is also explained in the hands of the creditor or entry provider. In the case in hand even the source of source was explained or to say discovered by the Ld. AO during the remand proceedings but then by putting suspicion on the transactions of the source of source, the amounts in the hands of assessee have been considered to be unexplained credits u/s. 68 - Decided in favour of assessee.
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2022 (6) TMI 661
Addition u/s 68 - unsecured cash creditors - Assessing Officer (A.O) has received information that the assessee has obtained the unsecured loan and interest on loan - Onus to prove - HELD THAT:- We find the Ld. CIT(A) has dealt on the submissions of the assessee supporting the loan creditor with confirmation ledger, PAN, Bank Statement of loan creditor. We find that the assessee has to satisfy the 3 ingredients with respect to identity, creditworthiness and genuineness of the transaction. CIT(A) has discussed on the provisions of the Act and Primafacie the CIT(A) has not accepted the identity, credit worthiness and the genuineness of the transactions. We are of the opinion that the assessee has discharged the burden of proof in filling the documents before the A.O and the CIT(A). But the A.O has taken the different view and over looked the explanations of the assessee. Accordingly, we set-aside the order of the CIT(A) and direct the Assessing officer to delete the addition of unsecured loan and allow this ground of appeal in favour of the assessee. AO has disallowed the interest on unsecured loan - Since we have directed the A.O to delete the addition of unsecured loans in the abovePara-6, therefore the interest on the unsecured loan has to be allowed. Accordingly, we direct the A.O to delete the addition and allow the interest claim of the assessee on the unsecured loan creditor. Appeal of assessee allowed.
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2022 (6) TMI 660
TP Adjustment - assessee provided corporate guarantee for a loan availed by assessee's AE M/s. Trianz Incorporated, USA for a loan taken by the said AE from a bank in USA - whether the transaction of providing bank guarantee would amount to an international transaction or not? - HELD THAT:- The law by now is well settled and this Tribunal in the case of United Spirits Ltd [ 2022 (4) TMI 1408 - ITAT BANGALORE] held that providing bank guarantee was an international transaction. The Bench, however, took the view that charging of guarantee commission at 0.5% in the value of the corporate guarantee would be an appropriate addition. As the assessee himself had offered 0.875% as the appropriate arm's length guarantee commission and therefore the said decision will not be applicable as a precedent in other cases. We are therefore inclined to follow the decision of the Bengaluru Benches of the Tribunal in the case of United Spirits (supra) and hold that 0.5% of the amount of the loan for which the assessee stood as a guarantee would be the appropriate arm's length guarantee commission that the assessee ought to have earned and this addition is accordingly directed to be restricted to 0.5% of the loan amount. Adjustment pertaining to interest on delayed receivable - delayed realisation of receivables from the AE - TPO/Learned AO to recompute the interest adjustment on delayed receivables after allowing credit period of 30 days - HELD THAT:- As the facts and circumstances in the present Assessment Year is identical to the facts and circumstances as it prevailed in Assessment Year 2015-16 [ 2021 (11) TMI 1076 - ITAT BANGALORE] Accepting the prayer of the parties, the issue is set aside to the TPO/AO for consideration afresh on the lines indicated by the Tribunal in the order passed for Assessment Year 2015-16 in assessee's own case. Disallowance under section 14A - HELD THAT:- As been the submission of the learned Counsel for the assessee that it did not earn any exempt income during the relevant previous year and therefore there can be no disallowance under section 14A of the Act. In this regard, he relied on the decision of the Tribunal in assessee's own case in Assessment Year 2015-16 [ 2021 (11) TMI 1076 - ITAT BANGALORE] wherein the Tribunal held that in the absence of any exempt income, no disallowance under section 14A of the Act can be made. However, on perusal of the order of the Revenue authorities as well as ground No. 18 raised by the assessee, it appears that the assessee earned dividend income and there is no specific ground in the grounds of appeal on this issue that the assessee did not earn any exempt income. In these circumstances, we are of the view that it would be just and appropriate to set aside this issue to the AO for fresh consideration, after affording assessee opportunity of being heard. Set- off of Brought forward losses not granted - HELD THAT:- It would be sufficient if the AO is directed to give effect to brought forward business loss and unabsorbed depreciation in accordance with law after due verification. Deduction under section 10AA of the Act not recomputed - HELD THAT:-The Hon'ble jurisdictional High Court in the case of M Pact Technology Services Pvt. Ltd. [ 2018 (8) TMI 202 - KARNATAKA HIGH COURT] had held that deduction u/s. 10AA of the I.T. Act should be computed on the assessed income and not on the returned income.
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2022 (6) TMI 659
Exemption u/s 11 - AO denied exemption holding that the assessee was hit by the proviso to section 2(15) of the Act as the assessee has been doing the activities which amounts to carrying on of business or trade - CIT(A) allowed the exemption - question of law -when can Hon'ble Supreme Court be said to have laid down any law - assessee is a Parishad namely The Uttar Pradesh Awas Evam Vikas Parishad which has been incorporated by the Legislative Assembly vide Uttar Pradesh Awas Evam Vikas Parishad Adhiniyam 1965. The scope of activities to be performed by the Parishad are strictly circumscribed by the provisions contained under section 15 of the said very enactment under the head function of the board and through the Parishad it is the Government of Uttar Pradesh itself which has been carrying on the objects of general public utility HELD THAT:- Revenue had placed heavy reliance on the order of Hon'ble Supreme Court in the case of Greater Cochin Development Authority [ 2015 (9) TMI 1727 - SC ORDER] wherein it was claimed that under similar facts and circumstances, Hon'ble Supreme Court had dismissed the appeals filed by the assessee. We observe that the Learned counsel for the assessee had not elaborated on this argument of the Revenue therefore, the cases were refixed and were finally heard on 17/05/2022. Learned counsel for the assessee filed supplementary written submissions, which has been made part of this order. In the supplementary written submissions, the Learned counsel for the assessee has argued that the judgment of Hon'ble Supreme Court in the case of Greater Cochin Development Authority is not applicable to the facts and circumstances of assessee. Elaborating on such judgment, Learned counsel for the assessee, through her written submissions, had submitted that in that case the Hon'ble ITAT had held that the activities of the assessee were hit by the proviso to section 2(15) of the Act and Hon'ble High Court [ 2014 (12) TMI 1314 - KERALA HIGH COURT] had dismissed the appeal of the assessee by holding that no substantial question of law arose in that appeal and in this respect our attention was invited to the judgment of Hon'ble Kerala High Court dated 19/12/2014. We find force in this argument of the ld. Counsel as Hon'ble High Court did not frame any question of law therefore, the Special Leave Petition dismissed by Hon'ble Supreme Court does not lay down any law in this respect and therefore, the judgment of Hon'ble Supreme Court is not a binding precedent. We further find that the judgment of Hon'ble High Court of Jammu Kashmir in the case of Jammu Development Authority [ 2013 (11) TMI 1578 - JAMMU AND KASHMIR HIGH COURT] is also not applicable to the assessee as that case related to the denial of registration u/s 12A of the Act and in the present cases there is no dispute regarding registration u/s 12A of the Act as the assessee is duly registered u/s 12A of the Act. Moreover, in this case also the Hon'ble High Court had not framed any question of law. We find that Hon'ble Punjab Haryana High Court in the case of the Tribune Trust Chandigarh vs. CIT [ 2017 (1) TMI 53 - PUNJAB AND HARYANA HIGH COURT] has observed that where the High Court had not framed any question of law, the SLP dismissed by Hon'ble Supreme Court do not lay down any law. We find from the findings of Hon'ble High Court of Kerala and further from the findings of Hon'ble Jammu Kashmir High Court in the case of Jammu Development Authority that Hon'ble High Courts had not framed any question of law and had dismissed the appeals of the assessees based upon the facts of those assessees and therefore, the dismissal of SLP, filed by the assessee, by Hon'ble Supreme Court, cannot be said to have laid down any law and therefore, the findings of Hon'ble Supreme Court in the case of Greater Cochin Development Authority and in the case of Jammu Development Authority, will not be applicable to the cases of the assessee as in the case of the assessee, the jurisdictional High Court of Allahabad [ 2017 (7) TMI 1421 - ALLAHABAD HIGH COURT] has already decided the issue in favour of the assessee wherein the Hon'ble court has held that the activities of the assessee are not hit by the proviso to section 2(15) of the Act. Since admittedly by both parties, there has not been any change in the activities undertaken by the assessee therefore, the activities undertaken by the assessee during these years under consideration will not be hit by the proviso to section 2(15) of the Act. As in M/S YAMUNA EXPRESSWAY INDUSTRIAL DEVELOPMENT AUTHORITY, M/S GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY, M/S NEW OKHLA INDUSTRIAL DEVELOPMENT AUTHORITY, NOIDA [ 2017 (4) TMI 1154 - ALLAHABAD HIGH COURT] after discussing various provisions of section 12A, 11A and 2(15) of the Act, along with the proviso to section 2(15), the Hon'ble High Court has answered all these three questions in favour of the assessee and against the Revenue. Therefore, their Lordships while considering question No. 2, exhaustively examined the activities of the assessee and held them to be non commercial in nature. As with the insertion of section 10(46) of the Act, introduced by the statute by the Finance Act 2011, the specified income arising to a body or trust or Board or Trust or Commission, which has been established or constituted by a Central or a State Act, for any activity for the benefit of general public and which is not engaged in any commercial activity has been held to be exempt. The Greater Noida Industrial Development Authority, which again is set up by UP State Government and which is engaged in industrial development activity in the Greater Noida, has been held to be engaged in non commercial activities vide order dated 26/02/2018 by Hon'ble Delhi High Court and Hon'ble Supreme Court has dismissed the SLP filed by the Revenue vide order dated 25/11/2019. We further find that CBDT, vide notification dated 23/06/2020, has allowed exemption u/s 10(46) for assessment year 2013-14 to 2016-17 to Greater Noida Industrial Development Authority. The said notification allows the activities undertaken by Greater Noida Industrial Development Authority, as activities for charitable purposes. Similarly, vide notification dated 24th December, 2020 in the case of Yamuna Expressway Industrial Development Authority, which again has been set up by UP State Government and wherein again similar income, arising from similar activities as in the case of Greater Noida Industrial Development Authority, has been held to be eligible for exemption u/s 10(46) of the Act. The activities being undertaken by the assessee are similar which includes the money received from disposal of land, building and other properties movable and immovable and also money received by way of rent, lease charges from the immovable properties. Therefore, in view of the fact that CBDT itself has considered similar activities as being undertaken by various assessees being of non commercial nature, the activities undertaken by the assessee also cannot be said to be of commercial nature. Admittedly, under the definition of charitable purposes, the objects of the assessee fall into advancement of any other object of general public utility. Therefore, the proviso inserted by the Finance Act, 2012 with effect from 01/04/2009 will be quite relevant in the case of the assessee. Such examination and effect of insertion of proviso to section 2(15) has already been made by Hon'ble Allahabad High Court, which is a jurisdictional High Court in the case of the assessee itself [ 2017 (7) TMI 1421 - ALLAHABAD HIGH COURT] where the Hon'ble High Court,has held that the activities carried on by the assessee are not hit by the proviso to section 2(15) Whether CIT(A) has failed to comply with the provisions of section 11(2) ? - We find that this provision requires an assessee to spend 85% of the income earned to be eligible for exemption u/s 11 of the Act. From the order of the Assessing Officer, it is observed that the Assessing Officer has not raised any observation regarding non spending of income earned by the assessee and therefore, neither assessee filed any grounds of appeal before learned CIT(A) against the order of the Assessing Officer in this respect. However, we find that since the Assessing Officer had outrightly disallowed the exemption u/s 11 of the Act, he has not examined the provisions of section 11(2) of the Act which necessitates that exemption u/s 11 will be available to the assessee only if it fulfills the provisions contained in section 11(2) of the Act. The provisions of section 11(2), as already noted by us above, relates to spending of 85% of the income and accumulation of 15% of the income, which aspect can be examined by the Assessing Officer while allowing exemption u/s 11 of the Act. Therefore, the Assessing Officer is directed to examine this aspect while allowing exemption u/s 11 of the Act. In view of the above, ground No. 2 of the additional grounds of appeal is allowed for statistical purposes. Whether CIT(A) has not taken into account the provisions contained in section 13(1)(d)? - The provisions contained in section 13(1)(d) of the Act relate to investments of the accumulated fund in the specified modes as contained in sub section 5 of section 11 of the Act. This aspect can also be examined by the Assessing Officer while granting exemption u/s 11 of the Act. In view of the above, ground No. 3 of the additional grounds of appeal is allowed for statistical purposes. Non consideration of provision contained in section 13(3) - We find that this provision relates to use of funds of the assessee by the author of the trust or the founder of the institution or any person who has made a substantial contribution to the trust or institution, or any relative of any such author, founder, person, member, trustee or manager or any concern in which any of the persons referred to in clauses (a), (b), (c) and (d) has a substantial interest. As in the present case, it is undisputed fact that the assessee was allowing discount to its employees, therefore, this case law is not applicable. However, we find that such stay order was passed in assessment year 2017-18 whereas the present cases relate to earlier years therefore, the Assessing Officer can again examine these facts while granting exemption u/s 11 of the Act in the present previous years. However, while examining such facts, the Assessing Officer will have to consider the ratio of judgment in the case of Tata Steel Ltd [ 1993 (1) TMI 32 - PATNA HIGH COURT] where employees of the assessee had been held to be not part of persons mentioned in section 13(3) of the Act. Revenue appeal dismissed. Additional Ground 1 - wheher the provisions contained in section 13(8) of the Act, introduced by the Finance Act, 2012 with retrospective effect from 01/04/2009 is applicable - HELD THAT- Admittedly, under the definition of charitable purposes, the objects of the assessee fall into advancement of any other object of general public utility. Therefore, the proviso inserted by the Finance Act, 2012 with effect from 01/04/2009 will be quite relevant in the case of the assessee. Such examination and effect of insertion of proviso to section 2(15) has already been made by Hon'ble Allahabad High Court [ 2017 (7) TMI 1421 - ALLAHABAD HIGH COURT] , which is a jurisdictional High Court in the case of the assessee itself where the Hon'ble High Court, has held that the activities carried on by the assessee are not hit by the proviso to section 2(15) - additional ground No. 1 is dismissed. Additions Ground 2 - Accumulation of income - compliance with the provisions of section 11(2) - HELD THAT:- The provisions of section 11(2), as already noted by us above, relates to spending of 85% of the income and accumulation of 15% of the income, which aspect can be examined by the Assessing Officer while allowing exemption u/s 11 of the Act. Therefore, the Assessing Officer is directed to examine this aspect while allowing exemption u/s 11 of the Act. Additions Ground 3 - Investment of Accumulation of income in specified manner - HELD THAT:- This aspect can also be examined by the Assessing Officer while granting exemption u/s 11 of the Act. In view of the above, ground No. 3 of the additional grounds of appeal is allowed for statistical purposes. Additions Ground 4 - allotment of plots were made to the employees of the assessee - use of funds of the assessee by the author of the trust or the founder of the institution or any person who has made a substantial contribution to the trust or institution, or any relative - Scope of provision of Section 13(3) - HELD THAT:- in the present case, it is undisputed fact that the assessee was allowing discount to its employees - AO can again examine these facts while granting exemption u/s 11 of the Act in the present previous years. However, while examining such facts, the Assessing Officer will have to consider the ratio of judgment in the case of Tata Steel Ltd. [ 1993 (1) TMI 32 - PATNA HIGH COURT] where employees of the assessee had been held to be not part of persons mentioned in section 13(3) of the Act. Though main appeal of the revenue dismissed, 3 additional grounds admitted for statistical purpsoe.
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2022 (6) TMI 658
Reopening of assessment u/s 147 - notice against a dead person - HELD THAT:- This Court is of the view that the issue in the present case is covered by the Division Bench judgment in Savita Kapila 2020 (7) TMI 441 - DELHI HIGH COURT which was followed by this Court in Mrs. Sripathi Subbaraya Manohara L/H late Sh. Sripathi Subbaraya Gupta 2021 (7) TMI 695 - DELHI HIGH COURT wherein the notice under Section 148 of the Act against a dead person was held to be null and void and all consequential proceedings/orders, including the assessment order and subsequent notices were set aside. Keeping in view the aforesaid mandate of law, the order passed under Section 148A(d) of the Act and the consequential notice issued under Section 148 are set aside. - Decided in favour of assessee.
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2022 (6) TMI 657
Reopening of assessment u/s 147 - violation of principle of natural justice - HELD THAT:- As interfere with the impugned assessment order for the reason that it is an appealable order and further that there is no procedural illegality or infirmity during the impugned reassessment proceeding and in passing the impugned assessment order. The principles of law and guidelines as laid down in the case of GKN Driveshafts (India) Ltd. 2002 (11) TMI 7 - SUPREME COURT has also been fully observed and there is no violation of principle of natural justice in this case since against the impugned notice under Section 148(b) of the Act, recorded reason was furnished to the petitioner. Opportunity to file objection to the same was given. Even draft assessment was served and opportunity to make objection against the same was also furnished to the petitioner. Thereafter the impugned final assessment order has been passed. This Court in exercise of its constitutional writ jurisdiction under Article 226 of the Constitution can consider the decision making process but not the decision itself.
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2022 (6) TMI 656
TP Adjustment - adjustment made on account of interest of loan on the amount advanced by the assessee to its AE - HELD THAT:- We find that identical issue arose in Revenue s appeal for A.Y. 2011-12, 2013-14 2014-15. The Co-ordinate Bench of Tribunal after noting the fact that identical issue arose in assessee s own case in earlier years and the Tribunal in A.Y. 2008-09 2009-10 [ 2022 (5) TMI 819 - ITAT DELHI] has decided the issue in favour of the assessee. The Co-ordinate Bench of Tribunal thereafter upheld the findings of CIT(A) and dismissed the appeal of the Revenue. Before us, Revenue has not placed any material on record to demonstrate that the facts in the case in the year under consideration and that of earlier years are different and distinguishable and further no material has been placed by the Revenue to demonstrate that the decision rendered by the Tribunal in assessee s own case for earlier years has been stayed/ set aside/ overruled by higher judicial forum. In such a situation, we find no reason to interfere with the order of CIT(A). Thus grounds of the Revenue are dismissed.
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Customs
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2022 (6) TMI 680
Anti-dumping duty - Sunset Review - N/N. 7/22/2021 (Case No. AD-(SSR) 18/2021) dated11th March 2022 - HELD THAT:- Directions are issued to Respondent No.1 to take a decision in the matter as expeditiously as possible and not later than ten days from today. Writ petition disposed off.
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2022 (6) TMI 679
Maintainability of application before Settlement Commission - eligibility of petitioner to file the application - re-export of equipments that were imported for its contract with ONGC - Section 127-B of Customs Act - HELD THAT:- Plain reading of Section 127-B of the Customs Act, would indicate that the term any other person appearing in the said Section would mean any other person to whom show cause notice has been issued charging him with duty and such any other person can file an application. Use of the words filed bill of entry would not mean that a bill of entry in the case has to be necessarily filed by him. Only requirement is that there must be a case properly relating to applicant with reference to a bill of entry filed and in this case, case relating to petitioner has been pending before proper Officer. Indisputably, a show cause notice had been issued to petitioner and therefore, a proceeding under this Act for the levy, assessment and collection of customs duty was pending before an adjudicating authority when the application under Section 127B was made. A person who may not be an Importer or Exporter, can still file such an application u/s 127-B of the Act before the Settlement Commission if he is served with a show cause notice charging him with duty. Similar view was taken by a Division Bench of Gujarat High Court in MAHENDRA PETROCHEMICALS LTD. VERSUS UNION OF INDIA [ 2009 (6) TMI 576 - GUJARAT HIGH COURT ]. The Settlement Commission is directed to examine the application of petitioner on merits and in accordance with law and dispose the application on merits within 12 weeks from today - petition allowed.
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Insolvency & Bankruptcy
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2022 (6) TMI 678
Seeking recovery of the dues of the Corporate Debtor from the respondents - dues pertain to the period prior to the initiation of CIR process of the Corporate Debtor - Section 60(5) of IBC, 2016 read with Rule 11 of the NCLT Rules, 2016 - adjudicating authority, appropriate forum for recovery of dues or not - HELD THAT:- If any dues have to be claimed by the Corporate Debtor through its RP or Liquidator, the same can only be claimed under Section 43, 45, 66 of IBC, 2016 - since there is no averment made in the application that the transaction mentioned in the application are either preferential, undervalued or fraudulent, the question of exercising our jurisdiction does not arise. The Liquidator is eligible to file Civil Suit by taking due permission of this Adjudicating Authority in terms of Section 33(5) of IBC, 2016. From the conjoint reading of Section 63 of IBC, 2016 and proviso under Section 33(5) of IBC, 2016, it can be inferred that if a Liquidator is eligible or required to institute a suit or other legal proceeding on behalf of the corporate debtor, it can do so with prior approval of this Adjudicating Authority - further, the Adjudicating Authority is not a substitute to a Court of recovery therefore, this is not the appropriate forum to adjudicate such transactions. Application dismissed as being not maintainable.
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Service Tax
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2022 (6) TMI 677
Reversal of CENVAT Credit - capital goods - transfer and merger of PIA of the appellant as per the scheme of arrangement - formation of infrastructure company to which the capital goods have been transferred - physical removal of capital goods took place or not - Rule 3(5) / Rule 3(5A) of CENVAT Credit Rules, 2004 - HELD THAT:- There is no dispute that even after transfer, the capital goods are continued to be used by the appellant for providing output service. The Tribunal in the appellant s own case has analyzed the very same issue. The Tribunal relied upon the decision of the Hon'ble Supreme Court in the case of JK. COTTON SPINNING AND WEAVING MILLS LTD. AND ANOTHER VERSUS UNION OF INDIA AND OTHERS [ 1987 (10) TMI 51 - SUPREME COURT] to observe that removal means physical and actual removal of the goods from the factory to any other place - In the present case, there is no physical removal of capital goods from the premises of the appellant - In para 9 of the said order, the Tribunal held that appellant is not required to reverse the CENVAT credit as the capital goods have not been physically removed from the premises where they were initially installed. The demand cannot sustain. The impugned order is set aside - Appeal allowed - decided in favor of appellant.
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2022 (6) TMI 676
SEZ unit - Refund of Service Tax - Service Tax paid on Banking and Other Financial Services - rejection of refund on the ground that the provisions of the Notification No.12/2013-ST dated 01.07.2013, Notification No.17/2011-ST dated 01.03.2011 and Notification No.40/2012-S.Tax dated 20.06.2012 have not been properly followed - proper document admissible in terms of said notification - HELD THAT:- The documents submitted by the claimant relating to banks which are not signed by any the banks Authority the Computer Generate Advice of Foreign Import Bill Transaction Advice for CUSTID; 507991965/Foreign Remittance Advice for CUSTID; 507991965/Import Letter of Credit Issuance Advice/Debit Advice for outward Remittance of the aforesaid document can be obtained as many times as they like and utilization of the same in different occasion cannot be ruled out - the benefit of Notification No.12/2013-ST dated 01.07.2013, Notification No.17/2011-ST dated 01.03.2011 and Notification No.40/2012-S.Tax dated 20.06.2012 can be availed in either way i.e. the service provider may not tax the amount or the service recipient being SEZ can claim refund. Mere technical discrepancy in the invoices cannot be the ground for denying substantive benefit of refund available to SEZ unit. It is the policy of the Government to exempt or refund the input tax incurred by the SEZ unit. Keeping the policy of the Government in mind and specifically in the light of section 7 and section 51 of the SEZ Act, 2005, it is found that denial of refund claim on this ground is not sustainable - Regarding re-conciliation of Service Tax payment with evidence of challans, it is found that the same was produced before the lower authority and the same is satisfactory. If the service recipient is a SEZ unit, they should pay Service Tax to the service provider and claim the refund of the amount. In the case in hand, the fact that the appellant is SEZ unit is not disputed and the receipt of the services is also not disputed as also the payment of Service Tax to the service provider. In the absence of any adverse findings on these issues, it is found that the appellant herein is eligible for claiming refund of the Service Tax paid by the service provider which is in consonance with the law. Appeal allowed - decided in favor of appellant.
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2022 (6) TMI 675
Refund of CENVAT Credit - refund rejected for the sole reason of non-compliance of para 2 (h) of Notification No.27/2012 dated 18.06.2012 - whether mere procedural irregularity can curtail the substantial benefit or not - HELD THAT:- No doubt, in terms of para 2 (h) Notification No.27/2012 dated 18.06.2012 the amount that is claimed as refund should have been debited by the assessee from his Cenvat Credit account as maintained under Cenvat Credit Rule. Commissioner (Appeals) has observed that there is no condition in the Notification empowering the dispensation of said procedural compliance and the said finding has become the sole reason for rejection of the claim. The issue is no more res-integra. Hon ble Apex Court in the case of CCE VERSUS M/S HARI CHAND SHRI GOPAL [ 2010 (11) TMI 13 - SUPREME COURT ] has held that a mere attempted compliance may not be sufficient, but actual compliance of those factors which are considered as essential. In the case of BNP Paribas Global Securities Operations Pvt. Ltd. Vs. the Assistant Commissioner of GST and Central Excise [ 2021 (4) TMI 783 - MADRAS HIGH COURT] it has been held that for the transaction pertaining to the period prior to 30.6.2017, the assessee since could not file the ST 3 return post July, 2017, any reversal/ credit shown in his private accounts/ the Books of accounts become the statutory documents as admissible in evidence. Further perusal of this decision shows that the facts of the said case were identical to that of present one in the terms that the appellants in both the cases are exporter of the services - Hon'ble High Court had held that refund of Cenvat Credit to such an exporter of services in terms of Rule 5 of Cenvat Credit Rules, 2004 read with Notification No.. 27/2012 date 18.6.2012 is the denial of legitimate export incentive coming to the exporter of services. Same cannot be denied merely because of intervening changes. In the present case the amount in question was deposited under mistake of law, hence, was a deposit instead of being duty. Section 11 B of Central Excise Act, 1944 and the time bar therein cannot be applied to the present case. Appeal allowed - decided in favor of appellant.
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2022 (6) TMI 674
Refund of pre-deposit made under section 35 F of Central Excise Act - whether refund of deposit made u/s 35F flows ipsofacto? - rejection of refund on the ground of unjust enrichment, for the reason that the amount in question is an amount of pre-deposit instead of being the amount of duty - presumption of law u/s 12B of CEA - HELD THAT:- Irrespective the amount was deposited on the behest of recovery notice of the Department it ultimately was an amount under section 35 F which was to be refunded in terms of section 35 FF and in terms of the aforesaid circulars. The appellant was otherwise held not liable to reverse the credit it being rightly availed. No appeal was filed by the Department against the said order. The issue is otherwise no more res integra. Hon ble Apex Court also in the case of SANDVIK ASIA LIMITED VERSUS COMMISSIONER OF INCOME-TAX AND OTHERS [ 2006 (1) TMI 55 - SUPREME COURT] has held that any amount deposited during investigation pending litigation is ipso facto an amount of pre-deposit and even interest is payable on such amount to the assessee being successful in appeal from the date of deposit till the date of refund. Rejection on the ground of unjust enrichment - HELD THAT:- Once it has already been held that the amount in question was an amount of pre-deposit and the amount was not the liability in the form of duty/tax to be paid by the appellant, the question of invoking presumption of section 12 B of Central Excise Act about passing of the incidence of such amount does not at all arise. Section 12B can be invoked if and only if the amount in question is an amount of duty - section 12B has wrongly been invoked by Commissioner (Appeals). He is also observed to have failed to appreciate para 26 (ii) of Circular dated 10th March, 2017. Both the grounds of rejection of the refund of appellant are not sustainable. Commissioner (Appeals) has committed an error while invoking the wrong provisions - Appellant is held entitled for the refund of Rs.2,74,997/- alongwith the interest at the rate of 12% from the date of deposit till the date of realization - Appeal allowed.
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2022 (6) TMI 673
Short payment of service tax - non-payment of service tax on reverse charge basis - irregular availement of Cenvat credit - late fee imposed for late filing, non-filing of return - Penalty u/s 77(1) for failing to appear on the date fixed for hearing - Non inclusion of receipts under the head other income in their taxable turnover - HELD THAT:- Service tax is not attracted on receipt for replacement of parts received from the manufacturing company - demand set aside. Depot charges - HELD THAT:- The same are in the nature of renting of immovable property, or for use of space, accordingly this amount is held to be taxable - demand upheld. Taxability under RCM on legal and professional expenses - HELD THAT:- Most of the payments are towards municipal tax, court fee, stamp paper expenses, chartered accountant fee, etc. Thus, it is held that only the amount of Rs. 1,32,626/- is taxable for the period 2016-17 and Rs. 43,751/- for the period April, 2017 to June, 2017. Repair and maintenance expenses - HELD THAT:- There is no contract of service entered into with any particular service provider and amount has been incurred for repair and maintenance by way of petty expenses, most of them are below Rs. 1000/-. Accordingly, it is held that there is no service tax attracted on repair and maintenance expenses - demand set aside. Service tax on security charges under Reverse Charge Mechanism - HELD THAT:- The appellant have already paid service tax on security services under Reverse Charge basis, and have also declared the same in the returns - demand set aside. Disallowance of Cenvat credit of 3,06,939/- for the period October 2016 to June 2017 - disallowed on the ground that the appellant-assessee have not filed their ST-3 return - HELD THAT:- There is no adverse finding as regards not taking of credit within a period of 12 months from the date of the voucher. Accordingly this ground is allowed and it is held that Cenvat credit is allowed to the appellant. Penalties - HELD THAT:- Considering the fact that the appellant have maintained proper books of accounts and also paid the service tax. However, for the admitted delay in filing the returns, that the appellant have not filed return for the period October 2016 to June 2017. In this view of the matter, the imposition of penalty under Section 77(1) is upheld, however, the amount of penalty is reduced in total to Rs. 25,000/- - So far the penalty of Rs. 10,000/- is concerned for not appearing on the date of hearing, it is found from the record of personal hearing in the order-in-original, there is no specific default pointed out by the adjudicating authority. Appeal allowed in part.
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Central Excise
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2022 (6) TMI 672
CENVAT Credit - input - input services - capital goods - invocation of extended period of limitation - rejection of credit on the ground that the concerned invoices appeared to more than one year old on date of taking credit - HELD THAT:- The appellant have maintained regular books of accounts and records in the normal course of business. Further, they have been subjected statutory audit by the department time to time. On such facts and circumstances, the extended period of limitation is not invokable. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2022 (6) TMI 671
Issuance of Garnishee Notices - non-service of pre-assessment notices as well as assessment orders - composition scheme - dispute over turnover - execution of civil work relating to construction of roads - HELD THAT:- Any VAT dealer who executes a contract and opts to pay tax by way of composition, must register himself as a VAT dealer and he shall pay tax at the rate of 5% of the total consideration received or receivable. In a case where the VAT dealer opts for composition he shall before commencing execution of the work notify the prescribed authority in Form VAT 250 details of the contract on which composition option has been exercised. On receipt of the payment by the VAT dealer, he shall calculate the tax at 5% of the amount received and shall enter such details in Form VAT 200 whereafter the tax due shall be paid along with the return in Form VAT 200. In Koothattukulam Liquors v. Deputy Commissioner of Sales Taxes [ 2014 (3) TMI 782 - SUPREME COURT ] Supreme Court examined the concept of payment of tax under composition scheme. That was a case under the Kerala General Sales Tax Act, 1963 whereunder the appellant had opted for composition of tax in terms of Section 17 thereof. After the appellant had closed his business, he had approached the assessing authority to cancel the permission granted for payment of tax under the composition scheme. It was in that context that the question for consideration before the Supreme Court was whether the appellant could request for a regular assessment in the same year after opting for composition of tax under Section 17 of the Kerala General Sales Tax Act, 1963 - Supreme Court held that composition of tax is nothing but an alternative route to assessment regulated by the terms of the contract between the assessee and the assessing authority to arrive at the same destination. Therefore, the dealer who had voluntarily and with full knowledge of the alternate method of taxation had opted to be governed by it, he cannot in the lean season claim that his assessment for the very same assessment year be made under regular assessment. Once the contract is affected by way of payment of composition tax and acceptance thereof, both the parties are bound by the contract. In the instant case there is no dispute that for the assessment periods under consideration petitioner had already paid tax under the composition scheme. Respondents have also not disputed the turnover figures of the petitioner. If that be the position and having regard to the law laid by the Supreme Court in Koothattukulam Liquors v. Deputy Commissioner of Sales Taxes [ 2014 (3) TMI 782 - SUPREME COURT ] it was not open to the respondents to have resorted to regular assessments of the petitioner for the very same assessment periods and thereafter levy tax at a much higher rate - receipt or non-receipt of pre-assessment notices or assessment orders would have no significance or bearing as those are besides the point. When an action is without jurisdiction, the fact that the same has been put to challenge after two years would not be of material consequence. Petition allowed.
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