TMI Tax Updates - e-Newsletter
July 11, 2023

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise

Articles

1. Provisional attachment of bank account is to be lifted up after one year

   By: Bimal jain

2. Appellate Authority cannot pass Order beyond the allegations made in Show Cause Notice

   By: Bimal jain

News

1. Union Commerce and Industry Minister to visit UK for FTA negotiations; to review progress on TEPA with EFTA

2. DRI seizes 48 kg Gold Paste worth ₹25.26 crore at Surat International Airport under Operation Goldmine

3. DPIIT announces One District One Product Awards; application process remains open till 31.07.2023

Notifications

DGFT

1. 18/2023 - dated 10-7-2023 - FTP

Revision of General Notes regarding Import Policy under Schedule I (lmport Policy) ITC (HS), 2022 - Relevant details regarding Food Import Entry Points, in sync with the relevant FSSAI Notifications, updated

GST - States

2. 05/2023-State Tax (Rate) - dated 6-7-2023 - Delhi SGST

Seeks to amend Notification No. 11/2017- State Tax (Rate), dated the 30th June, 2017

Circulars / Instructions / Orders

DGFT

1. 21/2023 - dated 10-7-2023

Amendments under Para 2.92 and Annexure-V of Appendix-2A of HBP 2023 under India-Australia Economic Cooperation and Trade Agreement (Ind-Aus ECTA)

Highlights / Catch Notes

Income Tax

• Reopening Assessment u/s 147 Unnecessary: Assessee Already Declared Sale, Paid STCG and LTCG Taxes, No Income Escaped.

  Case-Laws - HC : Reopening of assessment u/s 147 - Assesseee had already disclosed the receipt by way of sale consideration from the transaction in question and has bifurcated the said amount under the head of Building (Depreciable Assets) and under the head of Land (Other Assets) towards the sale consideration, which have been shown. - Assessee has also paid STCG and LTCG - It cannot be said that the income chargeable to tax has escaped assessment in the hands of the assessee. - HC
  Visit to Get Source

  ---

• Revenue Imposes Surcharge and Education Cess on Tax Credit Exceeding Applicable Rate u/s 115JAA.

  Case-Laws - AT : Minimum alternate Tax (MAT) - Tax credit u/s 115JAA - surcharge and cess - Revenue (CPC) has admittedly applied surcharge and education cess on a tax credit u/s. 115JAA i.e., at 9.062%, or at a higher than applicable rate of 8.15%, resulting in an additional charge. As it appears, the levy of surcharge/cess while allowing tax credit, has not been on the amount of credit, but on Rs. 259.07 lacs, the tax payable under the regular provisions of the Act. - Whatever may be the behavior of the surcharge and cess rates over the two years, there is, per the said manner of allowing credit, it may be appreciated, no breach of the principle of non-double levy and, besides, is consistent with s. 115JAA. - AT
  Visit to Get Source

  ---

• Assessee Delays Revenue Reporting Due to Low Project Completion; Interest Expenses to be Capitalized per Matching Principle.

  Case-Laws - AT : Disallowances of interest and capitalizing in inventory of work in progress - matching concept - it is an admitted position that the assessee has not offered revenue from the project to tax on the grounds that it is the first year of operations and less than 15% of the project is completed. Therefore, applying the matching principle, the interest incurred needs to be transferred to WIP and would be liable to be claimed in the year that revenue is earned - AT
  Visit to Get Source

  ---

• Court Upholds Disallowance of Expenses u/s 57(iii) for Lack of Direct Link to Fixed Deposit Interest Income.

  Case-Laws - AT : Disallowance of Expenditure u/s 57 (iii) - Nexus of expenditure with Interest Income - Employee remuneration, salary, legal expenses, board meeting expenses, Director sitting fees cannot be attributable to the interest earned from the fixed deposits. - Additions confirmed - AT
  Visit to Get Source

  ---

Customs

• Customs Broker's License Revocation Overturned: Authorized Individuals' Presence at Customs Stations Impliedly Permitted by Regulations.

  Case-Laws - AT : Revocation of Customs Broker License - attempt to smuggle ‘red sanders’ out of the country - The requirement to permit authorized persons - The presence of such person to handle off-location stuffing is not an offence and presence in a customs station cannot but be implied permission owing to regulatory stipulations of entry into such places. Therefore, it cannot be said that appellant had utilized unauthorized persons in discharge of its obligations in a customs station. - AT
  Visit to Get Source

  ---

Service Tax

• Service Under Joint Venture Not Classified as Franchisee: No Profit Sharing or Asset Contribution; Tax Demand Confirmed.

  Case-Laws - AT : Classification of service - Franchisee service or not - Joint Venture Agreement - sharing of profits - it is found that there is no arrangement of sharing of profits and losses between the parties nor there is contribution of assets by the appellant in implementing the project; entire burden of raising the infrastructure, maintenance, etc., rests with the Institute only. - Demand of service tax confirmed for the normal period of limitation - AT
  Visit to Get Source

  ---

• Service Tax on Adda Fees Unjustified: Entity Acts as Statutory Authority, Not Business Promoter.

  Case-Laws - AT : Support Services of Business and Commerce or not - Adda Fees/ bus stand fee - collection of Adda Fee cannot be equated to “Business Support Service” as they are discharging their functions as a statutory authority rather than promoting the business of bus operators - the demand on this count cannot be sustained. - AT
  Visit to Get Source

  ---

Central Excise

• Appellant's Rebate Recovery for Exported Medicaments Upheld; Rule 6(3) Cenvat Credit Demand Unsubstantiated u/r 6(6)(v.

  Case-Laws - AT : Recovery of Rebate - Export of exempted goods under Bond / LUT - Export of medicaments - The fact in this case is the appellant have cleared the goods under LUT which was accepted by the revenue at the time of export therefore the clearance is clearly covered under Rule 6(6)(v) of Cenvat Credit Rules, 2004. - revenue has not made out the case for violation of condition 42/2001-CE(NT) - The allegation of revenue for demand of an amount under Rule 6(3) Cenvat Credit Rules, 2004 cannot be sustained. - AT
  Visit to Get Source

  ---

• Goods for UN-Financed Project Granted Tax Exemption Despite Late Certificate Submission; Criteria Met Post-Clearance.

  Case-Laws - AT : Exemption on goods to be supplied to a project financed by the said United Nations or the international organization - appellant has not produced the certificate before the clearance of the goods in question - the certificate produced later on - the appellant has produced the certificate although late but the said certificate fulfills the criteria of exemption available to the appellant - Benefit of exemption allowed - AT
  Visit to Get Source

  ---

• Charge of Clandestine Removal Unsustainable Without Concrete Evidence Beyond Audit Discrepancies Between Reports and ER-1 Returns.

  Case-Laws - AT : Clandestine Removal - It is found that time and again it is held by the judicial pronouncements that merely on the basis of difference in the figures of audit report and ER-1 return without establishing the parameters of clandestine manufacture and removal of goods, the charge of clandestine removal is not sustainable. - AT
  Visit to Get Source

  ---

• CBEC Accepts Court Rulings: No Suppression Found, Extended Limitation Period Not Applicable for Duty Demand. Normal Duty Period Applies.

  Case-Laws - AT : Extended period of limitation - Undervaluation of goods - non-inclusion of the VAT amount - In view of the fact that, CBEC (Board) has accepted the decision of High Court and Supreme Court, no suppression involved in these cases and accordingly, extended period cannot be invoked to demand the duties - after excluding the extended period of limitation, the Appelant 1 is liable to pay the duty for the normal period along with interest. - AT
  Visit to Get Source

  ---

• CENVAT Credit Allowed: Proceedings Initiated Solely on Audit Report Without Further Investigation by Department.

  Case-Laws - AT : CENVAT Credit - inputs - Proper invoices or not - Merely on the basis of Audit Report, the proceedings have been initiated. No investigation was conducted by the Department on the detailed reply filed by the Appellant with the Audit Team - It is seen that there is no dispute about the eligibility of Cenvat Credit on account of the Invoices raised - Credit allowed - AT
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2023 (7) TMI 380
  Reopening of assessment u/s 147 - relevant material on which a reasonable person could have formed a requisite belief - petitioner has not shown capital gain on sale of the property in question in the return of income - HELD THAT:- Validity of opening of the assessment shall have to be determined with reference to the reasons recorded for reopening of the assessment. Power to reopen a complete assessment u/s 147 has been given to the AO if he has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. In the present case petitioner has not shown capital gain on sale of the property in question in the return of income and the officer has reason to believe that the income has escaped assessment at the hands of the petitioner for the year under consideration. Petitioner has submitted objections/ reply, wherein it has been specifically pointed out that he had already disclosed the receipt by way of sale consideration from the transaction in question and has bifurcated the said amount under the head of Building (Depreciable Assets) and under the head of Land (Other Assets) towards the sale consideration, which have been shown. Petitioner has also paid STCG and LTCG - Therefore, it cannot be said that the income chargeable to tax has escaped assessment in the hands of the assessee. Thus looking to the aforesaid facts of the present case, we are inclined to entertain the present petition. Decided in favour of assessee.

  ---

• 2023 (7) TMI 379
  Addition u/s 68 - unexplained cash credits - introduction of Share Capital, Share Application money and unsecured loans - onus to prove - HELD THAT:- We find that the assessee has simply filed documents but has not given any explanation to the adverse observations in respect of the bank statements. Even the CIT(A) has ignored the specific findings of the AO that cash were deposited immediately before issuing the cheque. Merely because the lenders / applicants are promoters / directors of the company would not discharge the assessee from initial onus of proving the credit entries in his books of account. Assessee has grossly failed in discharging the initial burden and the CIT(A) erred in accepting the submissions of the assessee without verifying the same. All the additions made u/s. 68 confirmed. Decided against assessee. Addition u/s 36(1) - disallowance of interest expenses - interest on borrowed capital but has also given interest free loans and advances as per AO all the advances are on account of capital expenditure and the assessee has used its interest bearing funds for the purpose of creating capital assets, therefore, the interest expenditure is of capital nature and made the addition disallowing the proportionate interest charged to P L account - HELD THAT:- We find that the assets were put to use prior to the claim of interest. It is also an undisputed fact that the borrowed capital were utilized for giving advances to the suppliers of the milk which cannot be on capital account. No error or infirmity in the findings of the CIT(A). The ground dismissed. Undisclosed investment in land - assessee had failed to substantiate the reason of difference between circle rate of the land in question and price actually paid to the seller as contended that section 50C is not applicable to the assessee as there is no sale of capital asset - HELD THAT:- CIT(A) was convinced that the relevant provisions applied by the AO are not applicable on the facts of the case and no other evidences have been brought on record to show that the assessee has paid consideration over and above the registered value the additions were accordingly deleted. Appeal of the revenue is partly allowed.

  ---

• 2023 (7) TMI 378
  Disallowance u/s 14A - earning of exempt income - HELD THAT:- There is no dispute that during the year under consideration the assessee has earned nil exempt income. The Hon ble High Court of Delhi in the case of Delhi International Airport Private Limited [ 2022 (10) TMI 300 - DELHI HIGH COURT] has held that sec 14A would not be applicable if no exempt income was received or receivable during the previous year. Also see Era Infrastructure India Limited [ 2022 (7) TMI 1093 - DELHI HIGH COURT] - Decided in favour of assessee.

  ---

• 2023 (7) TMI 377
  Cash deposit as unexplained income u/s 69 - During the course of rectification proceedings, the assessee has filed sales abstract for the period April, 2016 to March, 2017 - HELD THAT:- We are of the considered opinion that the assessee, being a retail seller of mobile phone could have savings out of drawings atleast to the extent of Rs.. 2,00,000/-, in fact, the assessee has produced sales abstract for the period April, 2016 to March, 2017 before the authorities below. Accordingly, out of the addition we sustain the addition of Rs.. 1,50,000/- as unexplained income.Appeal filed by the assessee is partly allowed

  ---

• 2023 (7) TMI 376
  Disallowance of other expenses u/s 14A r.w.r. 8D - whether assessee has not incurred any expenditure for earning exempt income? - appellant submits that the assessee has offered during assessment proceedings Rs. 45,000 for disallowance but AO has added Rs. 30,63,380 instead of Rs. 45,000 offered meaning by even if such expenses are disallowable than such expenses should not exceed Rs. 45,000. It is 0.5% of the average investment as per Rule 8D is not disallowable. HELD THAT:- Tribunal observed that involvement of top executives and use of other business office equipment like compute etc. and office premises in respect of investment activities cannot be ruled out. Therefore, the Tribunal in A.Y. 2013-14 restricted the disallowance under administrative expenditure to the amount of Rs. 4,00,000/-. At the time of hearing it appears that the assessee has made investment of Rs. 102.72 crore and profit for the year was Rs. 28.38 crore. The interest expenditure was Rs. 44.38 lakhs and therefore, in the present case also the calculation of Rs. 4,37,612/- is justifiable under administrative expenditure. Therefore, the appeal of the assessee is partly allowed.

  ---

• 2023 (7) TMI 375
  Delayed employees contribution to PF and ESIC - due date for making payment - whether the payments of contribution in the present case were made within 15 days (allowed with further grace period of 5 days) from the close of the respective months during which the disbursement of the salary/wages were actually made? - HELD THAT:- As decided in case of The Master Polishers[ 2023 (4) TMI 1224 - ITAT MUMBAI] it will be appropriate if the term every month specified in Provident Fund scheme, whether it is the month for which salary/wages are due or month of the payment is referred to Relevant Authorities for finding out with reference to any judicial precedent in respect of provisions of the relevant Act. Accordingly, restored this issue back to the file of the AO with the direction to find out from the relevant PF authorities about the term every month as mentioned in clause 38 of the employees provident fund scheme. Similarly, he may find out from the ESI Authorities. Thus we restore this issue to the file of the AO to decide the issue. Expenses incurred on employees stock option scheme - allowable deduction u/s 37 or not? - HELD THAT:- We find that the issue is covered in favour of the assessee in the case of Pr. CIT Vs. Lemon Tree Hotels Pvt. Ltd [ 2019 (4) TMI 602 - SC ORDER] We also notice that the ld. CIT (Appeals) while allowing the claim of the assessee followed the decision of PCIT Vs. Lemon Tree Hotels Pvt. Ltd. [ 2018 (4) TMI 1680 - DELHI HIGH COURT] and also case of CIT Vs. Biocon Ltd [ 2020 (11) TMI 779 - KARNATAKA HIGH COURT] Thus, we see no infirmity in the order passed by the CIT (A) in allowing the claim of ESOP expenses under section 37(1) of the Act. The ground raised by the Revenue is rejected.

  ---

• 2023 (7) TMI 374
  Minimum alternate Tax (MAT) - Tax credit in respect of tax paid on deemed income relating to certain companies u/s 115JAA - Non-reference to surcharge and cess - manner in which tax credit u/s. 115JAA, of the tax paid u/s. 115JB, or the analogous sec. 115-JA, is to be allowed - whether inclusive or exclusive of the surcharge (and education cess), for the years for which sec.115JAA, reading as under, becomes applicable? - Special provisions relating to certain companies - HELD THAT:- Surcharge and cess, both levies on tax, could not be levied on the tax paid earlier, the credit in respect of which is being allowed, i.e., on the tax becoming payable under the regular provisions of the Act. There is, further, no question of set off of the surcharge/cess, as in the case of tax, in the absence of specific provisions in its respect. Accordingly, the tax credit is to be allowed against the tax per se , paid earlier. Surcharge and cess would therefore, if at all, become payable only on the balance tax . No amount of tax would accordingly suffer surcharge/cess twice. In fact, proceeding in the manner in which we have, i.e., allowing set off of tax strictly against the tax per se , is not only consistent with the relevant provision of the Act (sec.115JAA), as indeed the decision in Tulsyan NEC Ltd . [ 2010 (12) TMI 23 - SUPREME COURT] it also renders irrelevant the payment of surcharge/cess on the tax paid earlier. That is, it would be of no consequence inasmuch as the same stands suffered in relation to the tax paid for an earlier year, in which the same was attracted and, besides, there would be no occasion for the same being paid again. This, incidentally, also provides an answer to the complete non-reference to surcharge and cess, i.e., even by way of proviso or Explanation , in the provision allowing tax credit. Succinctly stated, surcharge and cess, irrespective of whether the same stand paid along with tax on book-profit and, further, irrespective of the variation in its rate subsequently, would stand to be paid only for the year for which the tax is payable under the regular provisions of the Act, i.e., at an amount net of tax credit, and at the rate applicable for that year. Revenue (CPC) has admittedly applied surcharge and education cess on a tax credit u/s. 115JAA i.e., at 9.062%, or at a higher than applicable rate of 8.15%, resulting in an additional charge. As it appears, the levy of surcharge/cess while allowing tax credit, has not been on the amount of credit, but on Rs. 259.07 lacs, the tax payable under the regular provisions of the Act. Not only, thus, the issue cannot be said to be, as projected, one of tax credit at inclusive or exclusive of surcharge, the Revenue s stand is inexplicable as the levy has to necessarily be at that obtaining for the current year, i.e., 8.15% or, as apparent, on a sum other than for which credit is being allowed. If it was required to, that where the same rate is adopted, the manner of allowing credit with reference to surcharge and cess incident thereon, becomes academic and of no consequence, a non-issue, as exhibited at para 2.8 of this order (Case 3A 3B). A perfect example of much ado about nothing. The impugned demand is accordingly directed for deletion.

  ---

• 2023 (7) TMI 373
  Revision u/s 263 - disallowance of expenditure u/s 40(a)(ia) - Appellant has not deducted tax at source on commission on sales debited to profit and loss account - HELD THAT:- AO has examined the impugned transaction in detail during the course of assessment proceedings for the year under consideration. The assessee, during the course of assessment proceedings, had also admittedly placed on record the distribution agreement and the debit notes. From this, the only inference that can be drawn is that AO has taken a conscious decision in not making the disallowance under section 40(a)(ia). PCIT s reasoning that the AO has not examined the issue in accordance with law and has not conducted necessary enquiries, is incorrect. Since the AO has taken a plausible view, the said Assessment Order cannot be subjected to revision u/s 263 - See MAX INDIA LTD. [ 2007 (11) TMI 12 - SUPREME COURT] . It is pertinent to mention that for the above said Assessment Years, the AO had called in question the allowability of the commission payments during the course of assessment proceedings and the assessee had filed similar reply as it was filed for the impugned Assessment Year. No disallowance of the expenditure was made u/s 40(a)(ia) - For Assessment Year 2018-19, the Final AO was passed subsequent to the impugned order passed u/s 263 of the Act, for the relevant Assessment Year. We quash the impugned revisionary order since the AO has taken a plausible view and had not made disallowance of impugned expenditure u/s 40(a)(ia). Decided in favour of assessee.

  ---

• 2023 (7) TMI 372
  Assessment u/s 153A - unexplained cash shortages - incriminating material found during the search - HELD THAT:- As evident from the above that the addition made by the A.O. which was sustained by the CIT(A) is without their being any incriminating material found during the search and the addition has been made only based on the personal cash book produced by the AR of the Assessee during the assessment proceedings. The judgment in the case of ABHISAR BUILDWELL P. LTD. [ 2023 (4) TMI 1056 - SUPREME COURT] is squarely applicable to the present case. Addition made by the A.O. in the absence of any incriminating material found during the search operation conducted u/s 132 is liable to be deleted. Decided in favour of assessee.

  ---

• 2023 (7) TMI 371
  Revision u/s 263 - disallowance of purchases - AO had disallowed only a partial sum - Assessee applied for VSV scheme - HELD THAT:- Once the conclusion is reached that M/s Meet Enterprises was engaged in providing accommodation entries in the form of providing bogus sale bills, the ld. AO ought to have disallowed the entire purchases made by the assessee from the said party. Strangely the ld. AO had disallowed only a partial sum representing payments made to M/s Meet Enterprises during the year. The ld. AO had ignored the fact that though the payment was made only for Rs 73,45,040/-, the assessee herein had claimed deduction for purchases to the tune of Rs 1,06,80,540/-. This is a grave error committed by the ld. AO in his assessment. Though the assessee had sought to settle the dispute arising out of reassessment order under VSV scheme, it would be limited only to the extent of disallowance / addition made in the said reassessment . The assessee is not given any blanket immunity so as to prevent the revenue from looking into other matters relating to such assessment year. We hold that the ld. PCIT was duly justified in invoking his revisionary jurisdiction u/s 263 of the Act by cancelling the reassessment framed by the ld. AO as erroneous and prejudicial to the interest of the revenue. Accordingly, the grounds raised by the assessee are dismissed.

  ---

• 2023 (7) TMI 370
  Revision u/s 263 by CIT - assessment of assessee s notional interest income on non-performing assets NPAs on accrual basis as per provisions of the Act vis- -vis applicability of the newly introduced ICDS-IV read with CBDT s circular no. 10/2017 dated 23.03.2017 - PCIT s revision directions holding the National e-Assessment Centre, Delhi s assessment dated 15.03.2021 to have been completed without making the necessary enquiries and verifications thereby rendering the same as an erroneous one causing prejudice to interest of the revenue - HELD THAT:- We find no merit in the Revenue s stand supporting the PCIT s revision directions under challenge in light of the tribunal s decision in assessee own case [ 2023 (7) TMI 292 - ITAT PUNE] DR could hardly dispute that all these standards uniformly contain this uniform clause thereby paving way for applicability of the provisions of the Act wherein the assessee has already succeeded on the instant issue of accrual of interest on NPAs right up to hon ble jurisdictional high court having attained finality [ 2019 (4) TMI 378 - BOMBAY HIGH COURT] . That being the case, we hold that the CBDT s circular issued in tune with the foregoing Income Computation and Disclosure Standards ICDS also would not apply once the assessee is not required to recognize its accrued interest on NPAs as income on accrual basis. PCIT has erred in law and on facts in terming the Assessing Officer s sec. 143(3) regular assessment as an erroneous one causing prejudice to interest of the Revenue Thus we reverse the PCIT s impugned revision directions once the assessee s interest income on NPAs is not assessable to tax on accrual basis. Decided in favour of assessee.

  ---

• 2023 (7) TMI 369
  Deduction u/s 80P(2)(d) - dividend income received from IFFCO claimed as exempt u/s 10(34) - assessee is a cooperative society engaged in the business of banking activities - AO observed that the exemption u/s 10(34) of the Act could be claimed by the assessee only when the amount has been subjected to dividend distribution tax in the hands of the payer in terms of section 115-O - HELD THAT:- We find that the issue in dispute is squarely covered by the decisions of this Tribunal in assessee s own case in [ 2018 (9) TMI 1172 - ITAT DELHI ] and [ 2022 (5) TMI 1564 - ITAT DELHI] dividend received from IFFCO and UP Cooperative Bank Ltd. are exempt u/s 80P(2)(1). Disallowance of depreciation on fixed assets as per section 32 of the Act and making the addition u/s 69 r.w.s. 115BBE - assessee has not filled the depreciation figure in the relevant column of ITR - HELD THAT:- Mentioning of depreciation figure in column No. 39 under the head Other expenses was a mistake, still, the depreciation figure together with the computation thereon had been enclosed and claimed properly by the assessee in the return of income. This figure of depreciation duly tallies with the depreciation figure mentioned in the P L Account of the assessee also. Hence, we do not appreciate the action of the lower authorities in disallowing the genuine claim of depreciation on a very flimsy reason. We also condemn the action of the lower authorities in invoking the provisions of section 69 of the Act r.w.s. 115BBE for the purpose of disallowing the claim of depreciation of the assessee, without even understanding and appreciating the fact that the provisions of section 69 of the Act, by no stretch of imagination, could be applied in the instant case. We direct the ld. AO to allow depreciation. Appeal of the assessee is allowed.

  ---

• 2023 (7) TMI 368
  Royalty expenses - Allowable capital expenditure or revenue expenditure - 100% of Royalty paid should be considered as Revenue Expenses or 25% should be disallowed as done by AO - HELD THAT:- Admittedly, the CIT(A) has dismissed the appeal of the assessee in cryptic and summary manner without even reiterating the ground of appeal raised by the appellant before him. Grievance of the assessee has been pertaining to its claim of royalty as revenue expense but the Ld. CIT(A) has not even touched the word of royalty and thus, the issue of royalty claimed as a revenue expenditure, the peculiar fact of the instant case remain unaddressed by CIT(A). It is noted that the CIT(A) has merely stated in its judgment that hence, both the limbs of Malabar Industrial Co. [ 2000 (2) TMI 10 - SUPREME COURT ] are satisfied. Hence, the AO is justified in making addition on the basis of judgment of Hon ble Supreme Court in the case of Southern Switch Gear [ 1997 (12) TMI 105 - SC ORDER ] CIT(A) is liable to pass a speaking order on merits by rebutting the contention raised by the appellant before him and distinguishing the citations relied upon in support thereof. In our view, such a cryptic and non-speaking order of the CIT(A) is against the principles of natural justice and bad in law. We consider it deem fit to restore back the matter to the file of the Ld. CIT(A) to adjudicate the appeal afresh on the issue of claim of royalty expense after considering the written submission and evidences filed on record and may be filed before him during the fresh proceedings after granting sufficient opportunity of being heard to the assessee

  ---

• 2023 (7) TMI 367
  Disallowances of interest and capitalizing in inventory of work in progress - scope of matching concept allowance to set off the interest expenses as and when the revenue is recognized for the purposes of taxation - expenditure incurred and claimed in the nature of interest is for completion of the project (on which no income has been offered for tax during the year) or for buying a capital asset or for any other business activity - HELD THAT:- Under the matching concept, revenue and income earned during an accounting period, irrespective of actual cash in-flow, is required to be compared with expenses incurred during the same period, irrespective of actual out-flow of cash. In the instant case, it is an admitted position that the assessee has not offered revenue from the project to tax on the grounds that it is the first year of operations and less than 15% of the project is completed. Therefore, applying the matching principle, the interest incurred needs to be transferred to WIP and would be liable to be claimed in the year that revenue is earned We deem it fit to remand the matter to the file of the A.O. and the assessee is directed to provide the details of interest that has been capitalized in work in progress (WIP) and the interest that has been deducted in the Profit and Loss Account. After receiving the assessee s submission, the A.O has to examine the nature of interest expense and verify why only Rs. 93,13,592/- forms part of WIP while the remaining interest is claimed as an expense. If the expense is incurred for any other business activity, then it would be allowable in the year under consideration. The A.O is directed to verify the nature of the interest expense and accordingly pass an order in line with the observations/directions made above. Appeal filed by the assessee is allowed for statistical purposes.

  ---

• 2023 (7) TMI 366
  Disallowance of Expenditure u/s 57 (iii) - expenditure in the P L account in the form of salary, maintenance and other expenses which had been disallowed - AO noted that the appellant had earned interest on FDRs against which the appellant had claimed expenditure - HELD THAT:- Under the scheme of Income tax act, the total income of the company is chargeable to tax under section 4 of the Act. The total income has to be computed in accordance with the provisions of the Act - The income of the assessee rightly falls under the head Income from other sources . As per the provisions of Section 57(iii), all the expenditure laid out or expended wholly and exclusively for the purpose of making or earning such income has to be allowed as deduction. We find that employee remuneration, salary, legal expenses, board meeting expenses, Director sitting fees cannot be attributable to the interest earned from the fixed deposits. Reliance is being placed on the judgment of CIT Vs. V.P. Gopinathan [ 2001 (2) TMI 10 - SUPREME COURT] wherein held that there should be a nexus between the expenditure incurred and the income earned. Hence, the facts and circumstances of the instant case, we hereby affirm the order of the ld. CIT(A). Appeal of the assessee is dismissed.

  ---

• Customs

• 2023 (7) TMI 365
  Revocation of Customs Broker License - forfeiture of security deposit - levy of penalty - attempt to smuggle red sanders out of the country - HELD THAT:- The appellant has furnished the authorization received by them and its provenance is not in dispute. The obligation in regulation 10(a) prescribes obtaining of authorization which is, undeniably, with them. From this, there can be no doubt that beach of regulation 10(a) of Customs Broker Licencing Regulations, 2018 has been incorrectly attributed to them. It has been held that the appellant had, in fact, been aware of the breach insofar as client is concerned from transacting the business through non-authorized person with whom an arrangement for sharing of spoils , so to speak, had been devised. On the bare facts made available to us, mere deployment of an unauthorized person does not, ipso facto, constitute breach of obligations in regulation 10(b) of Customs Broker Licencing Regulations, 2018. The requirement to permit authorized persons is restricted to customs station. The presence of such person to handle off-location stuffing is not an offence and presence in a customs station cannot but be implied permission owing to regulatory stipulations of entry into such places. Therefore, it cannot be said that appellant had utilized unauthorized persons in discharge of its obligations in a customs station. Failure to verifiy the antecedents and correctness of Importer Exporter Code (IEC) Number - HELD THAT:- Insofar as regulation 10(n) of Customs Broker Licencing Regulations, 2018 is concerned, it is not alleged that the said ascertainment had not been done but that, in the absence of contractual engagement with exporter, the appellant could not have carried out the necessary verifications. This argument is not tenable as the appellant could yet have not been relieved of that responsibility which should have been discharged on the basis of data availability. In failing to acknowledge so in the finding on the doubt, required to be complied therein, the same cannot be said to exist through alternative Regulations. It is directed that the matter be taken up for disposal restricted only to alleged breach of regulation 10(n) of Customs Broker Licencing Regulations, 2018 - appeal disposed off by way of remand.

  ---

• Service Tax

• 2023 (7) TMI 364
  Classification of service - Franchisee service or not - Joint Venture Agreement - sharing of profits - services provided by the appellant under written agreement dated 20.05.2006 with Institute of Hotel Management Studies - existence of relation of franchisor and franchisee or not - HELD THAT:- A cumulative reading of the stipulations/conditions under the said agreement does not lead to an inference that the arrangement between the appellant and the Institute is that of a Joint Venture. More or less similar circumstances were considered by this Tribunal in the case of The THE DELHI PUBLIC SCHOOL SOCIETY VERSUS CST, NEW DELHI [ 2013 (8) TMI 92 - CESTAT NEW DELHI] . In that case, while summarising the arrangement between The Delhi Public School Society and several schools in Delhi and elsewhere in India, the Tribunal had an occasion to examine and lay down the characteristics in identifying between Joint Venture agreement and that of a franchisee. After referring to the principles relating to interpretation of the agreements laid down by the House of Lords in series of cases, the Tribunal observed In the totality of circumstances neither the indicia of a partnership or a joint venture is discernable from the terms and conditions of the agreements between the parties, particularly since there is neither a contribution of assets nor a sharing of profits and / or losses provided in the agreements between the parties. These normative ingredients of a partnership or a joint venture are absent. Applying the principle laid down in the said judgment of the Tribunal, it is found that there is no arrangement of sharing of profits and losses between the parties nor there is contribution of assets by the appellant in implementing the project; entire burden of raising the infrastructure, maintenance, etc., rests with the Institute only. Also, there is no participation in preparing the syllabus but exclusively under the control of the appellant. The Trade name or logo of the appellant has been used and displayed for advertisement of the course, and it cannot be liberally used by the Institute - In the present case, the Institute is given right to use their logo etc., and advertise the said project to attract students to join the training programme and thereby representational right has been extended by the appellant to the Appellant. The demand is issued for normal period, on the basis of interpretation of the relevant provisions, in scrutinising the the claim of the assessee that that the arrangement with the institute is not a franchisee services, but joint venture agreement, hence imposition of penalty, in the facts of the present case under various provisions of Finance Act,1994 is not sustainable. Appeal allowed in part.

  ---

• 2023 (7) TMI 363
  Classification of services - Support Services of Business and Commerce or not - Adda Fees/ bus stand fee - management and maintenance of non-commercial Government business - time limitation - penalty - HELD THAT:- It is evident from the records of the case that the appellants are paying service tax on account of selling space for advertisement purposes on the premises of the bus stand as well as on the buses. The appellants have paid the amount of Rs.27,25,073/-(for the period 01.05.2006 to 30.06.2008) and Rs.6,86,145/- (for the period May 2009 to June 2010) on being pointed out for provision of space for advertisement. The dispute is in relation to the Adda Fees collected by the undertaking - collection of Adda Fee cannot be equated to Business Support Service as they are discharging their functions as a statutory authority rather than promoting the business of bus operators - the demand on this count cannot be sustained. However, the appellants are already discharging the service tax on space rented out for advertisement. Time Limitation - Penalties - HELD THAT:- Whereas the demands are relatable to the period 01.05.2006 to 30.06.2008. Show cause notice has been issued on 21.01.2010, clearly beyond the limitation. On this count too, major portion of the demand raised in the show cause notice cannot be upheld. More so, penalties imposed cannot be sustained. Appeal allowed.

  ---

• 2023 (7) TMI 362
  Levy of Service Tax on sub-contractor, when the main contractor had paid the service tax - Commercial or Industrial Construction Service - demand of service tax on the services rendered to the main contractors - applicability of trade notice 98 ST dated 14.10.1998 - Extended period of limitation - HELD THAT:- The issue whether sub-contractor is liable to pay service tax on the services on which the main contractor had paid the service tax, there were contrary decisions on this issue among the various benches of the Tribunal and the matter was referred to the Larger Bench and the Larger Bench has settled the issue in the case of COMMISSIONER OF SERVICE TAX VERSUS MELANGE DEVELOPERS PVT. LTD. [ 2019 (6) TMI 518 - CESTAT NEW DELHI] . Further, it is found that in the case of M/S. VINOTH SHIPPING SERVICES VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, TIRUNELVELI [ 2021 (8) TMI 1117 - CESTAT CHENNAI] where the Division Bench of the Tribunal after following the Larger Bench Decision has held A sub-contractor would be liable to pay Service Tax even if the main contractor has discharged Service Tax liability on the activity undertaken by the sub- contractor in pursuance of the contract. Thus, there are no hesitation to hold that the appellant/sub-contractor is liable to pay the Service Tax even if the main contractor has discharged the liability. The issue on merits is found against the assessee and in favour of the Department. Extended period of Limitation - HELD THAT:- The issue whether in such cases extended period of limitation can be invoked or not was also considered by various benches of Tribunal and in this regard the Delhi Tribunal in the case of M/S MAX LOGISTICS LIMITED VERSUS CCE, JAIPUR [ 2016 (9) TMI 1024 - CESTAT NEW DELHI] where it was held that the service tax liability of both RSIC and the appellant has common source agreement. As such, we find the demand for extended period is not sustainable in the present case - extended period cannot be invoked to demand service tax from the appellant and in the present case the entire demand is barred by limitation as the demand pertains to the year 2004-05 and 2005-06 whereas show cause notice was issued on 28.03.2009 which is completely time barred. Appeal disposed off.

  ---

• 2023 (7) TMI 361
  Non-payment of Education Cess and SHE Cess - payments were made as soon as the payments were pointed out by the officials - validity of proceedings as per Section 73(3) of Finance Act, 1994 - HELD THAT:- It is not in dispute that the Education Cess and SHE Cess has been paid along with interest by the Appellant immediately on being pointed out by the Audit Officials much before the Show Cause Notice was issued on 08/102015. In terms of Section 73(3) of the Finance Act, in such case, no Show Cause Notice should have been issued. The Hon ble karnatka High Court in the case of COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX VERSUS M/S ADECCO FLEXIONE WORKFORCE SOLUTIONS LTD [ 2011 (9) TMI 114 - KARNATAKA HIGH COURT] , has held Though the law does not say so, authorities working under the law seem to think otherwise and thus they are wasting that valuable time in proceeding against persons who are paying service tax with interest promptly. This Tribunal in the case of M/S. SEN BROTHERS VERSUS COMMISSIONER OF CENTRAL EXCISE, BOLPUR [ 2013 (12) TMI 433 - CESTAT KOLKATA] has held once the appellant has already discharged Service Tax liability and the interest thereon and no additional liability has been adjudged in the adjudication proceedings, provisions of Section 73(3) will be applicable in this case and there was no necessity of issuing any show cause notice to the appellant. In such cases no penalty is imposable by virtue of Explanation 2 to sub-section (3) of Section 73 of the Finance Act, 1994. Extended period of limitation - Penalty u/s 78 - HELD THAT:- It is seen that inspite of having full knowledge that the Appellant has made the payment of Service Tax along with interest on 12/11/2012, the Department has issued the Show Cause Notice on 08/10/2015 i.e. after about three years from the date of receipt of entire payment. They have invoked the provisions of extended period, which was not at all applicable in this case. Hence, the confirmed penalty under section 78 is required to be set aside, even on this count. Appeal allowed.

  ---

• Central Excise

• 2023 (7) TMI 360
  Recovery of Rebate - Export of exempted goods under Bond / LUT - Export of medicaments - Benefit fo Notification No.42/01-CE(NT) dated 26.06.2001 - demand based on the findings that since the goods exported were fully and unconditionally exempt from duty neither input stage rebate is admissible nor such goods could have been exported under Bond/LUT and hence, they were required to pay presumptive tax of 5% of the value of the exempted goods exported under Rule 6(3) of Cenvat Credit Rule - extended period of limitation - penalty. HELD THAT:- The entire case was made out by the revenue is that since the goods exported are exempted under Notification No. 4/2006-CE it is mandatory for the appellant to avail the exemption and either not to pay the duty nor clear the goods under bond for export, on the pretext that the exemption is unconditional and absolute so appellant was supposed to avail the exemption without any option. From the reading of the notification it can be seen that in both the entry the exemption was granted to not all the goods of the chapter mentioned at column No. 2 of the Table but in case of Sr. No. 54 only to some limited items for which list was appended to the notification, therefore, it cannot be said that the notification is absolute, moreover, in respect to entry Serial No. 59 specific condition is provided as explanation in column No.3 of the table of the notification. Therefore, the notification is not absolute and it is conditional one, therefore it was option for appellant either to avail the exemption under Notification No. 4/2006-CE or not. Accordingly, on this count which is the foundation of the entire case the demand is not sustainable. In catena of judgments, it has been held that even though if on any product duty is not payable for any reason but the assessee paid the duty the Cenvat cannot be denied consequently the provision of Rule 6(3) of Cenvat Credit Rules, 2004 will not be applied. The revenue has interpreted that as per the above condition the appellant was not supposed to clear the goods under Notification No 42/2001-CE(NT) dated 26.02.2001 therefore the clearance of goods cannot be treated as export under bond and consequently the benefit of Rule 6(6)(v) is not available to the appellant. We find that even though there is a condition in Notification No. 42/2001-CE(NT) but the fact in this case is the appellant have cleared the goods under LUT which was accepted by the revenue at the time of export therefore the clearance is clearly covered under Rule 6(6)(v) of Cenvat Credit Rules, 2004. If at all there is any violation it is violation of condition (1)(iv) of Notification No. 42/2001-CE(NT), however the revenue has not made out the case for violation of condition 42/2001-CE(NT) - In this position the allegation of revenue for demand of an amount under Rule 6(3) Cenvat Credit Rules, 2004 cannot be sustained. Extended period of limitation - HELD THAT:- At the time of export, the appellant have been filing application for removal of goods for export in form ARE-1 wherein the tax invoice showing exports under bond was made and the said ARE-1 were signed by Jurisdictional Central Excise authority as well as superintendent of Central Excise with certification of export under LUT-1 under Rule 19 - The appellant s records were audited by Audit party. In this fact, there is absolutely no suppression of facts on the part of the appellant. Accordingly the demand for extended period is clearly hit by limitation. Penalty of Rs 5,000/- under Rule 15A of Cenvat Credit Rules, 2004 - HELD THAT:- This penalty was imposed consequent to the confirmation of demand against the appellant company. As per above discussion since the demand of amount itself is not sustainable, personal penalty imposed on Shri Vinayak Shirodkar will also not sustain. Accordingly, the penalty is set aside. The demand under Rule 6(3) of Cenvat Credit Rules, 2004 in the impugned order is not sustainable on merit as well as on limitation - Appeal allowed.

  ---

• 2023 (7) TMI 359
  Exemption on goods to be supplied to a project financed by the said United Nations or the international organization - whether the assessee could have produced certification of exemption after clearance or not? - HELD THAT:- On going through the provisions of section 35E(2) of the Central Excise Act, 1944, it is found that the Commissioner of Central Excise (Appeals) may direct such authority to apply to the Commissioner(Appeals) for determination of such point arising out of a decision or order which means that the Commissioner can direct the adjudicating authority to file appeal before the Ld.Commissioner(Appeals) - Therefore, the provisions of the Central Excise Act are very much clear that the Commissioner of Central Excise can direct the Deputy Commissioner who has adjudicated the matter to file before the Ld.Commissioner(Appeals). Therefore, the Deputy Commissioner has rightly filed the appeal before the Ld.Commissioner(Appelas) in terms of section 35E(2) of the Central Excise Act, 1944. It is a fact on record that Notification No.108/95-CE dated 28.08.1995 allows the benefit of duty free clearance provided that before clearance of the said goods, the manufacturer produce before the Assistant Commissioner of Central Excise having jurisdiction over their factory a certificate from United Nation or an international organization that the said goods are intended for official use by the United Nations or the international organization or are to be supplied to a project financed by the said United Nations or the international organization and the said project has duly been approved by the Government of India - Admittedly in the case in hand, the appellant has not produced the certificate before the Assistant Commissioner of Central Excise before the clearance of the goods in question. Therefore, it is to be seen that the certificate produced later on, the appellant is entitled for benefit of the said Notification or not. In the case of COMMR. OF CUS. (IMPORTS), MUMBAI VERSUS TULLOW INDIA OPERATIONS LTD. [ 2005 (10) TMI 502 - SUPREME COURT] which the appellant have relied the Hon ble Apex Court held that eligibility criteria deserves strict construction although construction of the condition thereof may be given a liberal meaning. It was also held that once the assessee satisfies the eligibility clause, the exemption clause therein may be construed liberally. Further, it was held that it is well settled that Legislature always intends to avoid hardship. In a situation of this nature, the exemption notification cannot be construed in a way which would prove to be oppressive in nature. Admittedly in the case in hand the appellant has produced the certificate although late but the said certificate fulfills the criteria of exemption available to the appellant therefore following the decision in the case of Tullow India Operations Ltd., it is held that the appellant is entitled to take benefit of exemption Notification No.108/95-CE dated 28.08.1995. Appeal allowed.

  ---

• 2023 (7) TMI 358
  SSI Exemption - use of brand name/trade name of others - HELD THAT:- A plain reading of Brand Name or Trade Name are explained under Notification No.08/2003-CE dated 01.03.2003 indicates that the brand name may or may not be registered and that it should indicate a connection between the owner and the product in course of the trade. In the instant case, the brand Mankoo is understandably a family surname which is affixed to their products. The family business started in 1971. Even after the three companies formed in 1981 after the demise of the founder, all the companies have been using the same brand name albeit with some negligible differences. There was no complaint, whatsoever, by the so-called registered owner of the brand i.e. Mankoo International Limited against the other two companies for using the said brand. Understandably, the families understand that the brand belongs to the family and not to any individual. This Bench has decided the issue in their own family group case on the use of same brand. This Bench relied upon the decision by the Hon ble Apex Court in the case of COMMNR. OF CENTRAL EXCISE, PUNE-II VERSUS M/S. PETHE BRAKE MOTORS PVT. LTD. [ 2015 (5) TMI 491 - SC ORDER] where in the Apex Court has observed that the respondent/assessee therein was not using the brand name of another person and the name used was the surname of the Director of the assessee viz. Pethe and therefore, such usage does not come under the exceptions for availment of benefit of SSI exemption - the case laws relied upon by the Department are not applicable as the facts of the cases are different. Appeal allowed.

  ---

• 2023 (7) TMI 357
  Clandestine Removal - difference in the figures of audit report and ER-1 return - invocation of extended period of limitation - HELD THAT:- As revenue has raised the demand only on the basis of difference in the figures of audit report and ER-1 return which were available with them in time, in that circumstances as held by this Tribunal in the case M/S. TALLY SOLUTIONS PRIVATE LIMITED VERSUS THE COMMISSIONER OF CENTRAL EXCISE BANGALORE-I COMMISSIONERATE BANGALORE [ 2013 (11) TMI 1080 - CESTAT BANGALORE] the extended period of limitation is not invocable as show cause notice for the period 2006-07 has been issued on 01.03.2011 by invoking extended period of limitation. It is found that time and again it is held by the judicial pronouncements that merely on the basis of difference in the figures of audit report and ER-1 return without establishing the parameters of clandestine manufacture and removal of goods, the charge of clandestine removal is not sustainable. Therefore, on merits also, in the absence of any statement or investigation against the appellant with corroborative evidence, the impugned order is not sustainable. Accordingly, the same is set aside. Appeal allowed.

  ---

• 2023 (7) TMI 356
  Undervaluation of goods - non-inclusion of the VAT amount collected under the Assam Value Added Tax Act, 2003 and retained by them in violation of Section 4 of the Central Excise Act, 1944 - period May 2010 to April 2012 - Suppression of facts or not - extended period of limitation - HELD THAT:- The present issue has arisen on account of the decision of the Hon ble Supreme Court in the case of Super Synotex (India) Ltd. Vs. CCE Jaipur [ 2014 (3) TMI 42 - SUPREME COURT] , wherein the Hon ble Apex Court has approved the inclusion of the Sales Tax retained in the assessable value. It is observed that after the decision of the Hon ble Supreme Court, many High Courts and Tribunals have decided that in this issue there was no suppression involved and hence extended period of limitation not applicable. The Appellants particularly cited the decision of Hon ble Punjab and Haryana High Court in the case of Microtek Forgings [ 2016 (9) TMI 784 - PUNJAB AND HARYANA HIGH COURT] and subsequent clarification issued by Board vide Circular No. 1063/2/2018-CX dated 16/02/2018, in support of their contention that extended period not invocable in this case. After carefully considering the Board s Circular, the decision of Hon ble Punjab and Haryana High Court in the case of Microtek Forgings and the decision of the Hon ble Supreme Court in the case of Super Synotex, it is observed that there is no suppression involved in these cases and accordingly, extended period cannot be invoked to demand the duties - the demand in the appeal filed by Appellant 1 pertains to the period from April 2010 to March 2015 and the Notice was issued on 05/05/2015. Thus, after excluding the extended period of limitation, the Appelant 1 is liable to pay the duty for the normal period along with interest. In respect of Appellant 2, since the entire demand is set aside, their application for cancellation of Registration can be considered by the department now. the demands in respect of normal period is confirmed - demand pertains to the extended period set aside - appeal disposed off.

  ---

• 2023 (7) TMI 355
  CENVAT Credit - inputs - Invoices are falling within the definition of documents under Rule 9 of Cenvat Credit Rules, 2004 or not - HELD THAT:- It is seen from the Annexure A of the Show Cause Notice that while 45 items have been listed towards Cenvat Credit of Rs.2,78,521/- the objection has been made in the Remarks column only for about five or six items. No remarks have been made by the Department as to why all these items are not eligible for the Cenvat Credit. Even the remarks made in some cases are not very serious in nature. From the Show Cause Notice, it is observed that merely on the basis of Audit Report, the proceedings have been initiated. No investigation was conducted by the Department on the detailed reply filed by the Appellant with the Audit Team - It is seen that there is no dispute about the eligibility of Cenvat Credit on account of the Invoices raised. No facts have been brought in to the effect that Appellant has not recorded these inputs in their records and there is no dispute that the appellant was not making payments for such inputs used in their industry. Department has not brought in any concrete evidence to deny the Cenvat Credit taken by the Appellant. The Lower Authorities were in error in not addressing the item-wise details furnished by the Appellant. Therefore, the Appeal filed by the Appellant is allowed.

  ---