TMI Tax Updates - e-Newsletter
July 14, 2023

Case Laws in this Newsletter:

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

Articles

1. GENERAL POWER OF ATTORNEY HOLDER IS TO TAKE GST REGISTRATION

   By: DR.MARIAPPAN GOVINDARAJAN

2. Presence of Advocates allowed during interrogation

   By: Bimal jain

3. No GST exemption on services of loading and unloading of imported pulses

   By: Bimal jain

News

1. Commerce and Industry Minister Piyush Goyal holds talks with Secretary of State for Trade of the United Kingdom, discusses Free Trade Agreement and trade relations

2. Successful meeting between Union Minister of Commerce & Industry and high-level EFTA delegation in London

3. Ms Leena Nandan, Secretary, MoEFCC inaugurates the IICA Certified ESG Professional: Impact Leader Programme’s second batch

4. Centre releases Rs.7,532 crore to the States for Disaster Response

Notifications

Customs

1. 52/2023 - dated 13-7-2023 - Cus (NT)

Rate of exchange of one unit of foreign currency equivalent to Indian rupees - Norwegian Kroner and Swedish Kroner - Seeks to amend Notification No. 50/2023-CUSTOMS (N.T.), dated 06th July, 2023

SEBI

2. SEBI/LAD-NRO/GN/2023/131 - dated 14-6-2023 - SEBI

SECURITIES AND EXCHANGE BOARD OF INDIA (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) (SECOND AMENDMENT) REGULATIONS, 2023

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/CFD/CFD-PoD-1/P/CIR/2023/123 - dated 13-7-2023

Disclosure of material events / information by listed entities under Regulations 30 and 30A of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015

2. SEBI/HO/CFD/CFD-SEC-2/P/CIR/2023/122 - dated 12-7-2023

BRSR Core – Framework for assurance and ESG disclosures for value chain

3. SEBI/HO/CFD/PoD2/CIR/P/2023/120 - dated 11-7-2023

Master circular for compliance with the provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 by listed entities

Income Tax

4. 12/2023 - dated 12-7-2023

Clarification regarding taxability of income earned by a non-resident investor from off-shore investments in investment fund routed through an Alternative Investment Fund

DGFT

5. 22/2023 - dated 13-7-2023

Condonation of delay in submission of installation certificate under EPCG Scheme to promote Ease of doing Business

6. Trade Notice No. 14/2023-24 - dated 12-7-2023

Curriculum for Skilling and Mentorship Obligation for Status Holders as per Para 1.30 of FTP 2023

Companies Law

7. 07/2023 - dated 12-7-2023

Merger of Multiple User IDs in V-2 Portal with new User ID in V-3 and deactivation of old User ID in V-2 Portal

Highlights / Catch Notes

GST

• Court Orders Refund with Interest for Exporter After 6-Month IGST Delay, Citing Section 56 Rights.

  Case-Laws - HC : Interest on delayed refund of IGST paid on export of the goods along with duty drawback - The refund of the petitioner was withheld for almost six months and after six months, petitioner was put in the category of ‘Risky Exporter’ without providing any reason - The provision of section 56 entitles the petitioner to claim interest on the delayed refunds. - Direction for release of the refund and interest on delayed refund issued. - HC
  Visit to Get Source

  ---

• High Court Orders Refund Claim Restoration, Transfers Case to Assistant Commissioner for Action on Export Transactions.

  Case-Laws - HC : Jurisdiction of state government in the matters relating to export transaction - rejection of refund claim by Deputy Commissioner of Sales Tax - The refund application of the petitioner is restored and the same be transferred to the Assistant Commissioner (Central Taxes) for appropriate orders to be passed - HC
  Visit to Get Source

  ---

• GST Applies to Employer-Provided Canteen Services: Employees Pay Nominal Fee for Subsidized Meals Under Factories Act, 1948.

  Case-Laws - AAAR : Levy of GST - Providing canteen services to employees - recovery of nominal amount from the employees for making payment to the third-party service provider, providing food in canteen as mandated in the factories Act, 1948 - The supply of the food/beverages, although at subsidized rates, by the Appellant/employer to their employees is certainly an activity amounting to supply of service and attracts levy of GST on that part of the consideration being charged for such supply. - AAAR
  Visit to Get Source

  ---

• Input Tax Credit Applies to Overhead Crane Materials; Structural Support Classified as Plant u/s 17 TNGST Act 2017.

  Case-Laws - AAAR : Input Tax Credit - Steel, cement and other consumables - overhead crane fixed in the factory premises - The integrated factory building per se is not to be categorized as plant and machinery. The overhead crane and its proportionate structural support would be categorized as plant and machinery as per the explanation to Section 17 of the TNGST Act, 2017. Such structural support would not fall under the category of blocked input tax credit. - AAAR
  Visit to Get Source

  ---

• Gold Jewelry Not Classified as 'Second-Hand' u/r 32 for Valuation Purposes; Must Prove Dealing in Such Goods.

  Case-Laws - AAR : Valuation - purchase of used / second-hand gold jewellery or ornaments - the term ‘second hand’ does not hold any meaning when it comes to items such as gold, land, currency etc. In order to qualify for inclusion under the valuation of supply as envisaged under sub-rule (5) of rule 32, it has to be proved that the applicant is dealing in second-hand goods. Unfortunately, gold in any form fails to pass the test of ‘second-hand goods’. - AAR
  Visit to Get Source

  ---

• Bodybuilding on Another's Vehicle Chassis Classified as Service under CGST Act, 2017, per Schedule II, Para 3.

  Case-Laws - AAR : Classification of supply - rate of GST - process of bodybuilding by fabrication on chassis of motor vehicles - the applicant is fabricating the body on the chassis belonging to another person and hence the activity is squarely covered under Para 3 of Schedule II of the CGST Act, 2017 as a treatment or process (which is applied to another person's goods and accordingly is a supply of services. - AAR
  Visit to Get Source

  ---

• Kerala Irrigation Services Denied GST Exemption for Sand and Mud Extraction Rights at Mangalam Dam Reservoir.

  Case-Laws - AAR : Exemption from GST - Pure services - applicant is the recipient of service supplied by the Irrigation Department of the Government of Kerala by way of transfer of right to extract the sand and mud lying underneath the reservoir of Mangalam Dam and to appropriate the same - Benefit of exemption not available - AAR
  Visit to Get Source

  ---

• GST Rates for Villas: Classified as Residential Projects; Rates Set at 1.5% or 7.5% Based on Conditions.

  Case-Laws - AAR : Rate of GST - construction and sale of villas - From the definition of the term “apartment”; “residential apartment” “real estate project” and “promoter”, it is clear that the residential villas being constructed by the applicant fall within the definition of residential apartment and the projects undertaken by the applicant fall within the definition of real estate project and the applicant fall within the definition of “promoter” - Application rate of GST is 1.5% / 7.5% as the case may be - AAR
  Visit to Get Source

  ---

Income Tax

• High Court Dismisses Revenue's Appeal; ITAT Limits Bogus Purchase Additions to 12.5% Due to Lack of Evidence.

  Case-Laws - HC : Estimation of income on Bogus purchases - scam was unearthed by the Sales Tax Department in respect of bogus parties who provided accommodation entries - ITAT confirmed the order of CIT(A) restricting the addition to 12.5% of the purchases - There is nothing to indicate whether the profit element should be more than 12.5%. - Revenue appeal dismissed - HC
  Visit to Get Source

  ---

• High Court Quashes Show Cause Notice u/s 148A(b) for Unexplained Property Purchases; AO Satisfied with Bank Details.

  Case-Laws - HC : Reopening of assessment u/s 147 - unexplained properties purchased - AO was certainly satisfied with all the details provided by petitioner. If he was not, in other words, if petitioner had not furnished copy of the statement of bank accounts from which the payment was made as mentioned in the notice certainly the AO would not have passed the Assessment Order the way he had passed. - SCN issued u/s 148A(b) quashed - HC
  Visit to Get Source

  ---

• ITAT Removes Penalty for Mistaken LTCG Claim and Dividend Stripping Error, Cites Reasonable Human Error u/s 271(1)(c.

  Case-Laws - HC : Penalty u/s 271(1)(c) - wrongful claim of lower LTCG - Disallowance u/s 94(7) - Dividend Striping - proof of bonafied mistake - ITAT deleted the penalty - Since the assessee had voluminous transactions, it committed an error while posting the relevant dividend entry, which was covered by one voucher since it was received on the same security. - Tribunal has observed that it was a reasonable human error - The assessee has proven that it was a bonafide mistake and no substantial question of law would arise - Appeal of the revenue dismissed - HC
  Visit to Get Source

  ---

• High Court Rules Tax Evasion Petition Lacks Grounds for Reassessment Under IT Act Sections 147 and 148.

  Case-Laws - HC : Reopening of assessment u/s 147 - reassessment proceeding was triggered based on a Tax Evasion Petition (TEP) - Bald assertions in the TEP that the petitioner had claimed bogus expenses towards salary and other heads, in our view, was not sufficient for commencement of the reassessment proceeding under Section 147 read with Section 148 of the Act. - HC
  Visit to Get Source

  ---

• CIT Revises Assessment: AO Failed to Address Unexplained Cash Credits & Depreciation Claims u/s 263 for Accurate Tax Reporting.

  Case-Laws - AT : Revision u/s 263 by CIT - CIT observed that, unexplained cash credit u/s. 68 and additional depreciation claimed on railway siding not considered by AO which leads to under reporting of income - A.O while framing the assessment had not called for any confirmation letter for the outstanding liabilities under consideration. - Revision order sustained - AT
  Visit to Get Source

  ---

• Taxpayer's Rectification Request Accepted; No Need for Revised Audit Report u/s 154, Section 143(1)(a) Additions Challenged.

  Case-Laws - AT : Disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return - Additions while processing ITR u/s 143(1)(a) at CPC - The argument of the revenue that, the assessee instead of filing revised audit report rides on wrong bus and has applied the provisions u/s. 154 of the Act for rectification of mistakes, cannot be acceded to and rejected. - AT
  Visit to Get Source

  ---

• Section 68: Unexplained Cash Credit from Land Sale Deemed Legal if Accepted by Sub-Registrar, Says Income Tax Department.

  Case-Laws - AT : Additions u/s 68 - Unexplained cash credit in bank account subsequent to sale deed - Once the sale consideration is accepted as a sale consideration by Sub-Registrar local (Revenue) / Sub-Registrar concerned, it cannot be treated illegal by Income Tax Department, when the assessee right from the very beginning is asserting that credit in his bank account is a part of sale consideration on rural agricultural land. - AT
  Visit to Get Source

  ---

• Appeal on Excess TDS Deduction Maintainable u/s 248; Challenges Rate Imposed by Section 206AA vs. DTAA.

  Case-Laws - AT : Maintainability of appeal before CIT(A) - Refund of excess TDS deducted - withholding of taxes - assessee has deducted tax at source at higher rate of 20% in the absence of PAN of the deductee (Non resident) - Applicable TDS rate u/s 195 read with section 115A and Section 206AA - We hold that the deductor can challenge excess deduction u/s. 248 seeking that the rate of tax should be as per DTAA and not as per Section 206AA, if it is found that otherwise income is chargeable to tax in India and then certainly an appeal would be maintainable u/s. 248 seeking relief/refund for excess tax deducted. - AT
  Visit to Get Source

  ---

• Court Upholds Fraud Ruling on Anonymous Donations; Section 115BBC Confirms Tax Liabilities Due to Translation Errors.

  Case-Laws - AT : Addition of cash donations as ‘Anonymous’ u/s 115BBC - onus to proof - The plea of the appellant that the clerk in the first instance submitted the incorrect list as the original list was maintained in a language other than english hence certain errors were crept-in which has been rectified before the first appellate proceedings by bringing on record new list of correct donors failed to inspire any confidence to us, thus deserves to be rejected - Thus all cash donation transactions are sham, a make believe story, a device adopted created to sleeve undisclosed income through anonymous donations - Additions and tax liability confirmed - AT
  Visit to Get Source

  ---

• Gift Mistakenly Executed as Sale Deed to Daughter-in-Law; No Capital Gain Calculated Due to Lack of Payment.

  Case-Laws - AT : Capital gain on property gifted - Execution of sale deed instead of gift deed wrongly in favor of Daughter in law (DIL) - DIL has not paid the amount as mentioned in the sale deed - No capital gain can be computed in respect of the sale deed executed in favour of Donee as it is only a gift to close relative and not a sale - AT
  Visit to Get Source

  ---

• Interest Expenses on Share Acquisition: Capitalization Permitted if No Taxable Event Impacted, per Accounting Standard 16.

  Case-Laws - AT : Cost of Acquistion of investment in Shares - Capitalization of interest expenses - Borrowing cost - Accounting Standard 16 - When in the years under consideration there is no taxable event that is adversely affected by the capitalization of interest by the assessee in the books of accounts, the CIT(A) / AO cannot hold that the interest capitalized cannot be part of the cost of acquisition. - AT
  Visit to Get Source

  ---

• Section 69B: AO Must Find Concrete Evidence for Alleged On-Money Cash Payments; Unverified Data Not Enough.

  Case-Laws - AT : Addition u/s 69B - On-money payment in cash - Unless something is brought on record or AO conducts inquiry that the said person in whose possession it was found has given the details or has confirmed or AO founds some other information or material, addition cannot be made simply relying on uncorroborated data or entry in third party books. Thus, on merits, we do not find any justification for making an addition u/s. 69B for alleged payment of On-money in cash - AT
  Visit to Get Source

  ---

Customs

• Court Rules DFIA Benefits Apply If Titanium Dioxide Matches SION Criteria, No Actual Use Proof Needed.

  Case-Laws - AT : DFIA - Denial of Exemption from payment of Basic Customs Duty - import of Titanium Dioxide (Rutile) -There is no requirement of actual use of inputs and quantities for claiming DFIA benefit - As long as the imported goods are covered by the description, value and quantity of DFIA as per SION, DFIA benefits cannot be denied - AT
  Visit to Get Source

  ---

• Gold Smuggling Charges Dropped Due to Uncorroborated Confession; Natural Justice Principles Upheld, No Penalty Imposed.

  Case-Laws - AT : Smuggling - Gold Biscuits - The Department has proceeded solely relying on the purported confession statement of the Appellant without carrying out any further investigation to corroborate the Department’s allegations. - The Department has not brought in any proper corroborative evidence and the proceedings initiated had many flaws resulting in non-following of principles of natural justices - No penalty - AT
  Visit to Get Source

  ---

Indian Laws

• Challenge to Amendments on ED Tenure Extension in CVC Act, DSPE Act, and Rule 56 of Fundamental Rules Validity.

  Case-Laws - SC : Legislative competence - Constitutional Validity of amendment to Section 25 of the CVC Act and to sub-section (1) of Section 4B of the DSPE Act and to clause (d) of Rule 56 of the Fundamental Rules, 1922 - extensions granted to the tenure of ED - it is nobody’s case that Parliament did not have power to enact on the subject on which the aforesaid Amendments have been enacted. As such, the said ground is not available to the petitioners. - SC
  Visit to Get Source

  ---

IBC

• High Court Grants Interim Relief to Petitioners for Aircraft Lease Dispute Under Aircraft Rules, Preventing Irreparable Losses.

  Case-Laws - HC : CIRP - Leased Aircrafts - The notice of default and termination sent by the Petitioners to Respondent/Go Air - The Petitioners have made out a strong prima facie case in view of the provisions of the Aircrafts Rules as discussed herein. The balance of convenience is also in favor of the Petitioners. The Petitioners are suffering irreparable losses as the value of these Aircrafts are diminishing on a daily basis - Interim relief granted - HC
  Visit to Get Source

  ---

Service Tax

• Corporate Staff Sharing Costs Are Taxed Under Manpower Recruitment Services, Regardless of Profit Motive or Reimbursement Claims.

  Case-Laws - AT : Manpower Recruitment and Supply Services - sharing of services of their corporate staff with the group of companies - payment of proportional cost of salaries of these staff - This activity is chargeable to service tax - The volume of activity undertaken or the presence or absence of the profit motive is irrelevant. - There are no merits in treating ‘consideration’ as a ‘reimbursement’ which is not exigible to tax - Demand of service tax confirmed - AT
  Visit to Get Source

  ---

• Refund Granted for Erroneous Service Tax Deposit on Residential Construction; Initial Rejection Overturned by Appeal.

  Case-Laws - AT : Refund of service tax - unjust enrichment - deposit by mistake for construction of individual/independent residential houses - Commissioner (appeals) rejected the application on the ground which was not the part of Show Cause notice - Further, the Commissioner (Appeals) observed that the appellant may have taken the CENVAT credit and utilized the same for output services. The inference is based on conjectures and not on facts. - Refund allowed - AT
  Visit to Get Source

  ---

• Court Rules Trading Ship Space Not a Taxable Service; Overturns Service Tax Demand by Commissioner.

  Case-Laws - AT : Demand of service tax - support services of business or commerce or not - when the appellant merely trades in space on ships, it would not be providing any service and so no service tax can levied upon the appellant. It has, therefore, to be held that the Commissioner was not justified in confirming the demand. - AT
  Visit to Get Source

  ---

Central Excise

• Refund Denied: Software Value Included in Hardware's Assessable Value, No Proof of Duty Not Passed to Customers.

  Case-Laws - AT : Refund claim - unjust enrichment - value of the software is includable in the assessable value of hardware or not - The duty and the value are shown in the face of Invoice - In addition to these, no other record or evidence has been produced by the appellants. To substantiate their claim of not passing on the incidence of duty - The invoice issued under statutory provisions does not indicate that the incidence of duty has not been passed on. - Refund not allowed - AT
  Visit to Get Source

  ---

VAT

• Court Rules Petitioner Entitled to Amnesty Scheme Benefits After Substantial Pre-Payment Before Assessment Order and Scheme Announcement.

  Case-Laws - HC : Amnesty Scheme - The respondents have committed an error while rejecting the application submitted by the petitioner under the amnesty scheme as the petitioner had already paid substantial amount even prior to the order of assessment was passed by the concerned Assessing Officer and prior to announcement of the scheme - the petitioner is entitled to get the benefit of the scheme and remission of penalty and interest. - HC
  Visit to Get Source

  ---

Case Laws:

• GST

• 2023 (7) TMI 533
  Interest on delayed refund of IGST paid on export of the goods along with duty drawback - The refund of the petitioner was withheld for almost six months and after six months, petitioner was put in the category of Risky Exporter without providing any reason. - HELD THAT:- Section 56 of the Central Goods and Services Tax Act provides for the interest on delayed refunds. Section 56 envisages that when any tax order to be refunded under Sub-section 5 of Section 54 to any applicant, if the applicant, is not refunded within 60 days from the date of receipt of the application, under Sub-section 1 of Section 54, interest at such rate, not exceeding six per cent as may be specified in the notification issued by the Government on the recommendations of the Council shall be payable in respect of such refund from the date immediately after the expiry of sixty days from the date of receipt of application till the date of refund of such tax. The provision of section 56 entitles the petitioner to claim interest on the delayed refunds. It is worthwhile to note that pending this petition, respondent authority has released the refund to the petitioner except the refund involved in the Shipping Bill No.8723678 dated 17.02.2021. However, the respondent authority has not granted interest on the delayed refunds, which according to this Court, is against the provisions of Section 56 of Central Goods and Services Tax Act, 2017. Petitioner is entitled to interest on delayed refund. The present petition is disposed of with a direction to the concerned respondent authority to release the refund involved in the Shipping Bill No.8723678 dated 17.02.2021 and grant interest on the delayed refunds as per the provisions of law - Petition disposed off.

  ---

• 2023 (7) TMI 532
  Refund of Input Tax Credit (ITC) - exports effected during the period January, 2021 to September, 2021 - Zero Rated Supplies under Section 54(3)(i) of the Central Goods and Services Tax Act, 2017 - HELD THAT:- The petitioner was not required to make repeated applications for refund after it had prevailed in its appeals before the appellate authority. The appellate proceedings are a continuation of the petitioner s applications for refund and, therefore, the Orders-in-Appeals were required to be implemented - It cannot be accepted that it is open for the respondent to raise any deficiency memo after a tax payer has succeeded in appellate proceedings. Undisputedly, the petitioner had filed its application in the requisite form (GST RFD-01) along with the necessary declarations and undertaking. A tax payer may file a fresh online application to trigger the processing of its refund, however, it is not open for the respondents to raise further deficiency memos regarding the same - it cannot be accepted that the petitioner s refund can be withheld merely on the ground that the respondent proposes to review the Orders-in-Appeal dated 31.01.2023. However, it is clarified that the disbursement of the refund in favour of the petitioner would not preclude the respondents from availing their remedies against the Orders-in-Appeal in accordance with law. The respondent shall forthwith sanction the refund claim as preferred by the petitioner to the extent as accepted by the appellate authority along with applicable interest in accordance with the provisions of the CGST Act - Petition allowed.

  ---

• 2023 (7) TMI 531
  Revocation of cancelled GST registration of petitioner - failure to file the returns for the past six months - SCN sent on petitioner s mail, was not replied - HELD THAT:- It is seen from the records that the government has issued Notification No.03/2023-Central Tax dated 31.03.2023 and has extended the time up to 30.06.2023, but the extension is granted to taxpayers granting time on or before 31.12.2022. Unfortunately, the petitioner s cancellation was on 12.01.2023, had it been prior to 31.12.2022 then the petitioner would have come within the time prescribed under the said notification. But the consideration for extension was pending during that period, hence this Court is of the considered that the petitioner is entitled to the benefit. Moreover, the issue is covered under the judgment of Tvl. Suguna Cut Piece s case [ 2022 (2) TMI 933 - MADRAS HIGH COURT ] where the delay in revoking the cancelled GSTN registration was condoned. This Court is allowing the writ petition and the respondent is directed to restore the petitioner s GST registration number - After restoration the petitioner is directed to file the returns and pay tax and penalty as per law - Petition allowed.

  ---

• 2023 (7) TMI 530
  Jurisdiction of state government in the matters relating to export transaction - rejection of refund claim by Deputy Commissioner of Sales Tax - HELD THAT:- In view of the position in law as laid down in the DHARMENDRA M. JANI AND A.T.E. ENTERPRISES PRIVATE LIMITED (FORMERLY KNOWN AS A.T.E. MARKETING PVT. LTD.) VERSUS THE UNION OF INDIA, CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS, GOODS AND SERVICES TAX COUNCIL PRINCIPAL COMMISSIONER OF GOODS AND SERVICE TAX, MUMBAI STATE OF MAHARASHTRA, THROUGH SECRETARY FINANCE DEPARTMENT, MUMBAI [ 2023 (4) TMI 821 - BOMBAY HIGH COURT] , the CGST/MGST authorities would not have jurisdiction to retain such amount of tax on the export transactions, and retain such amounts which in fact would be required to be transferred to the Central Government - Thus as fairly submitted at the Bar, the amount would now required to be transferred to the Assistant Commissioner of Central Tax having his address at Division VI, Mumbai (East) Commissionerate 10th Floor, Near Lotus Info Centre, Near Parel Station (East), Mumbai 400 012. Let the tax as deposited by the petitioner along with the statutory interest as applicable be transferred by the State authorities to the said Central Authority having jurisdiction under the IGST Act. The order passed by the Deputy Commissioner of Sales Tax rejecting the refund application of the petitioner is required to be set aside. It is accordingly set aside. The refund application of the petitioner is restored and the same be transferred to the Assistant Commissioner (Central Taxes) for appropriate orders to be passed - Let the application be transferred within two weeks from today and the same be decided by the Assistant Commissioner (Central Taxes) within a period of six weeks thereafter. Petition disposed off.

  ---

• 2023 (7) TMI 529
  Jurisdiction of Proper Officer - SCN issued by Sales Tax Officer Class II, AVATO, Ward-67, Zone-6, Delhi (not in the rank of the Assistant Commissioner) - Cancellation of petitioner s GST registration - HELD THAT:- It is the petitioner s case that the records of the petitioner were called by respondent no.2 in connection with the investigation into the affairs of one Mr. Rajneesh Bansal. It is not the case of the petitioner that the investigation was commenced against the petitioner. The petitioner is not precluded from canvassing her contention that the proceedings in terms of the impugned show cause notice are not maintainable, before the concerned officer. The petitioner is not precluded from raising this objection in response to the impugned show cause notice. Needless to state that if any such objection is raised, the concerned officer shall examine the same. Insofar as the cancellation of the GST registration is concerned, the learned counsel does not press the issue before this Court. He reserves the right, if any, to approach the authorities once again in this regard. Petition dismissed.

  ---

• 2023 (7) TMI 528
  Jurisdiction of the Assessing Officer to initiate assessment proceedings under Section 74 of UPGST/CGST/IGST Act - disregard of judicial discipline - HELD THAT:- This Court in [ 2022 (12) TMI 409 - ALLAHABAD HIGH COURT ] had mandated that the issue pertaining to the jurisdiction of the Assessing Officer to initiate assessment proceedings under Section 74 of the Act shall be decided as a preliminary issue, but the said mandate has not been adhered to while passing the impugned order. The Assessing Officer-respondent no 6 ought to have adhered to the mandate of the order [ 2022 (12) TMI 409 - ALLAHABAD HIGH COURT ]. This Court is already seized with the issue regarding jurisdiction of the assessing officer in M/S. NEW RAJSHREE SWEETS VERSUS COMMISSIONER COMMERCIAL TAXES AND 2 OTHERS [ 2023 (3) TMI 1382 - ALLAHABAD HIGH COURT] and the issue involved in this petition can also be adjudicated along with the said case. Matter requires consideration.

  ---

• 2023 (7) TMI 527
  Refund of the excess credit that has accumulated - rate of tax on inputs being higher than the rate of tax on output supplies as per the provisions of Section 54 of the Act - HELD THAT:- The grievance of the learned counsel appearing for the petitioner is that the concerned respondent authority issued Circular No.181/13/2022 GST dated 10th November, 2022, copy of which is placed on record at page 62 of the compilation, whereby, it has been now clarified that the restriction imposed by the Notification dated 18.07.2022 would be applicable in respect of all refund application filed on or after 18.07.2022 and would not be applied to the refund application filed before 18.07.2022. Thus, it is submitted that the said Circular is against the provisions of law contained in Section 54 of the Act, whereby, the period of two years to file an application for refund is given. Learned Senior Advocate thereafter submitted that no retrospective effect can be given by way of the said Circular to the Notification which is issued by the concerned respondent authority. Learned counsel has also submitted with regard to the doctrine of legitimate expectation and placed reliance upon various decisions rendered by this Court as well as the Hon ble Supreme Court. A separate compilation of the said decision is also placed on record for consideration of this Court. The issue involved in this petition requires consideration. Hence, notice for final disposal returnable on 27.07.2023.

  ---

• 2023 (7) TMI 526
  Validity of garnishee notice - challenge on the ground that the appellant has paid the entire tax as demanded and has also preferred an appeal before the appellate authority and before the expiry of the period for filing the appeal, the garnishee notice was issued - HELD THAT:- In terms of Section 107(7) of the CGST Act read with Section 107(6) for preferring an appeal, the aggrieved assessee is required to deposit 10% of the disputed tax. It is not in dispute that the appellant has paid the entire tax, which has been noted in the order dated 19th December, 2022 passed under Section 73(9) of the W.B.G.S.T. Act, 2017, which shows that the appellant/petitioner has paid the tax of Rs.74,69,348.00/-. Considering the facts and circumstances of the case and also the statutory requirement, which mandates payment of only 10% of the disputed tax, it is held that a condition need not be imposed by directing the appellant/petitioner to pay 20% of the interest - appeal allowed.

  ---

• 2023 (7) TMI 525
  Levy of GST - Providing canteen services to employees - recovery of nominal amount from the employees for making payment to the third-party service provider, providing food in canteen as mandated in the factories Act, 1948 - HELD THAT:- Section 46 of Factories Act, 1948 although mandates to provide a canteen for use of workers in a factory, wherein more than two hundred and fifty workers were ordinarily employed, it does not provide for any provision for exemption from levy of any taxes. In fact, Tax in this case is leviable in terms of the provisions of the GST law, on the consideration (on the actuals, at subsidized rates) for supply of the food/beverages; and is not covered by any exemption, at all. Further, the said consideration for supply of food/beverages, although at the subsidized rates, is also do not qualify as the perquisite to extend the benefit of non-levy of GST in terms of the above cited Circular dated: 06.07.2022, as already narrated above. The appellant relied on the advance ruling given in the case of HAZIRA LNG PVT LTD VERSUS C.S.T. -SERVICE TAX - AHMEDABAD [ 2022 (11) TMI 437 - CESTAT AHMEDABAD] wherein it has been ruled that there would be no tax implications in case of mere cost sharing agreements - In this case, the appellants does not enter into an agreement with employees for providing common service both to the appellants and employees by a third party caterer. But. here the third party caterer provides service to the appellant who in turn provides such service within the factory premises to the employees at the reduced subsidized price and thus, there is no question of sharing of cost between the appellant and employees. In the instant case, the Appellant had established the canteen in their premises and has been bearing a part of the cost for providing the food/beverages to their employees and a part of the cost is being collected from employees, as fixed by the Managing Committee of the Appellant. The supply of the food/beverages, although at subsidized rates, by the Appellant/employer to their employees is certainly an activity amounting to supply of service and attracts levy of GST on that part of the consideration being charged for such supply.

  ---

• 2023 (7) TMI 524
  Input Tax Credit - Steel, cement and other consumables - interpretation of the provisions of section 17 (5) (d) of the GST Act - integrated factory building is plant and machinery or not? Whether the overhead crane fixed in the factory premises can be classified as plant and machinery? - HELD THAT:- This crane is falling under HSN 8426 and taxable at 9% CGST+9% SGST in schedule III under Sl.No. 327 of rate notification No. 1/2017 Central fax Rate. Chapter 84 deals with machinery and hence the overhead crane would fall under the category of plant and machinery. As per the Explanation under section 17 of the CGST Act, 2017. the expression Plant machinery means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports. Therefore, the structural support erected in relation to overhead crane alone would cover under the extended meaning of plant and machinery. The integrated factory building per se is not to be categorized as plant and machinery. The overhead crane and its proportionate structural support would be categorized as plant and machinery as per the explanation to Section 17 of the TNGST Act, 2017. Such structural support would not fall under the category of blocked input tax credit. Hence the appellant would be eligible for input tax credit proportionate to the extent of structural support erected in relation to overhead crane alone subject to fulfillment of conditions stipulated in section 17(5)(c) and (d) of the CGST Act, 2017 and explanation thereunder. However, they are not eligible for input tax credit relating to construction of other civil structure like side walls, roof of the Integrated factory building.

  ---

• 2023 (7) TMI 523
  Valuation - purchase of used / second-hand gold jewellery or ornaments - Difference between the selling price and purchase price as stipulated under Rule 32(5) of CGST Rules, 2017 - purchase of used / second-hand gold jewellery or ornaments from persons who are not registered under GST and that at the time of sale of such goods there is no change in the form/nature of such goods - ITC also not be availed on such purchase. HELD THAT:- If the consumer behaviour related to gold purchase/holding in India is examined, one can safely conclude that marginal utility derived from purchasing and holding gold and gold products never diminishes. It either increases or remain same - In India, gold jewellery is transferred from generation to generation as part of family traditions. Possession of old gold jewellery is also a matter of family prestige in many parts of India. If gold jewellery gets older say 50 to 100 years, it becomes vintage jewellery and if it is more than that, say more than 100 years, it becomes antique jewellery. Needless to say that both categories are costlier. It is also worth mentioning that normally, value of gold will not diminish even if it is exchanged among 10 different users in a span of 2 years as a jewellery piece of 22 carats remains 22 carats even after changing hands. Given the daily market price; Content, Carat (purity) and fineness determine the value of gold jewellery and not the duration of use or holding. Since the duration of use does not affect the value of the commodity in question, the concept of depreciation is not applicable in the case of gold and gold jewellery. By the same logic, dealing with exchange of gold cannot be construed as dealing in second hand goods and the rule 32 (5) is not applicable and Section 15 of the CGST Act 2017, holds good. In the case of usual goods, the peak value in its life span will normally be at the point of retail primary sales to end customers. Such goods will suffer tax at all the value addition points till the peak of its value, i.e., up to the retail sales to the end consumer. The intention of Sub rule (5) to Rule 32 of the CGST Rules, 2017 is to reduce the tax burden on such goods, which have already suffered tax on its highest value, when supplied at a reduced price in the secondary market after usage. But this is not the case with goods such as gold and gold ornaments, where the value is determined primarily by the content, purity and fineness of the material contained therein - the term second hand does not hold any meaning when it comes to items such as gold, land, currency etc. In order to qualify for inclusion under the valuation of supply as envisaged under sub-rule (5) of rule 32, it has to be proved that the applicant is dealing in second-hand goods. Unfortunately, gold in any form fails to pass the test of second-hand goods . Thus, the supply made by the applicant fails to comply with all the requirements specified under Rule 32 (5) of the CGST, Rules 2017. Hence cannot avail of the benefit of provisions stated under sub-rule (5) of CGST rules 2017.

  ---

• 2023 (7) TMI 522
  Classification of supply - rate of GST - Supply of service or not - treatment or process of bodybuilding by fabrication and other processes carried out on chassis of motor vehicles owned by others - activity of body building is considered as a supply of service or not and service code - rate of tax on activity of an accident repairing job on the vehicle supplied by the owner for such job if a lump sum price is charged that includes the cost of material and labour. HELD THAT:- As per Para 3 of Schedule II of the CGST Act, 2017 which lists out the activities or transactions to be treated as supply of goods or supply of Services; any treatment or process which is applied to another person s goods is a supply of service. In the instant case, the applicant is building the body of commercial vehicles for carrying goods on the chassis supplied by the customer as per the specifications of the customer. The applicant is collecting the charges for the activity which include the cost of inputs/material used by the applicants and the labour charges for the fabrication of the body. Thus, it is evident that the applicant is fabricating the body on the chassis belonging to the customer - the applicant is fabricating the body on the chassis belonging to another person and hence the activity is squarely covered under Para 3 of Schedule II of the CGST Act, 2017 as a treatment or process (which is applied to another person s goods and accordingly is a supply of services. Classification of the activity and the rate of GST applicable - HELD THAT:- The value of the services in this heading is based on the service fee paid, not the value of the goods manufactured. SAC-99888 under Heading 9988 pertains to Transport equipment manufacturing services and Sub-Heading 998881 pertains to the Motor vehicle and trailer manufacturing services. Therefore, the activity of the applicant as discussed above is appropriately classifiable Under Service Accounting Code 998881. Classification and applicable rate of tax for the activity of accident repairing job on a lump sum price basis including the cost of material and labour - HELD THAT:- As per Heading 998714, the repair and maintenance services may be paid by the owner of the goods being repaired or by a warranty and may include labour, pails, and supplies used in providing repair or maintenance services - This Heading Covers collision repair, accident repair, etc. Therefore, the activity of the applicant as discussed above is appropriately classifiable under Service Accounting Code 998714. Accordingly, the activity is liable to GST at the rate of 18% as per entry at SI. No. 25 (ii)- 9987- Maintenance, repair and installation (except construction) services, other than (i),(ia) and (ib) above and serial number 38 below of Notification No 11/2017 Central Tax (Rate) dated 28/06/ 2017.

  ---

• 2023 (7) TMI 521
  Admissibility of the ITC in respect of the goods purchased from out sourced vendors, when the payment is settled through book adjustment against the debt created on the outward supplies effected to these vendors itself - HELD THAT:- On a plain reading of the provisions namely; Explanation 2 to sub-section (2) and clause (b) of sub-section (3) of Section 12 and Explanation (ii) to sub-section (2) and clause (a) of subsection (3) of Section 13 it is evident that the entry in the books of accounts of the supplier/recipient is recognised as a mode of payment under GST law. Therefore, on a combined reading of the above referred provisions and the definition of consideration in Section 2 (31) of the CGST Act, 2017 it is evident that the settlement of the mutual debts through book adjustment by the applicant is a valid mode of payment of consideration for the receipt of goods and/or services and it satisfies the requirement of the second proviso to sub-section (2) of Section 16 of the CGST Act, 2017. The input tax credit is admissible when consideration is paid through book adjustment, subject to the other conditions and restrictions prescribed in Sections 16, 17 and 18 of the CGST Act, 2017 and the rules made there under.

  ---

• 2023 (7) TMI 520
  Classification of services - rate of tax - taxable value - construction services of the Villas - effective rate of tax as per N/N. 03/2019 dated 29.03.2019 - agreement for construction is entered into with a purchaser before the execution of sale deed for land in favour of the purchaser - agreement for construction with a purchaser is entered into after the execution of sale deed for land in favour of the purchaser - agreement for sale of land and agreement for construction entered into with a purchaser, and existence of supplementary items of works executed by PPD for the purchaser prior to completion of construction of the villa - HELD THAT:- On a plain reading of the entries at Item (i) and (ia) of SI. No. 3 of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, it is evident that the rate of GST prescribed under the entry at Item (i) applies to construction of affordable residential apartments and under the entry at Item (ia) applies to construction of residential apartments other than affordable residential apartments by a promoter in a residential real estate project intended for sale to a buyer except where the entire consideration is received after issuance of completion certificate. From the terms and conditions in the agreements and the documents produced it is seen that the services of construction of villas provided by the applicant squarely fall within the description of services specified in Item (ia) of SI. No. 3 of the Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 03/2019 Central Tax (Rate) dated 29.03.2019 and accordingly the tax rates as prescribed in the said entries shall be applicable to the said services supplied by the applicant. Accordingly, the applicant is liable to pay GST at the rate of 7.5% in respect of the services of construction of residential apartments other than affordable residential apartments as per entry at Item No. (ia) of SI. No. 3 of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 subject to the conditions prescribed under the respective entry. Taxable value of the services of construction of residential villas - HELD THAT:- The amount charged by them from the villa buyers for some structural changes, to add some additional area or undertake interior works etc. carried out before completion of the construction being part of overall construction services and naturally bundled when supplied to the villa buyers should be included in the consideration charged for the construction service and shall form part of the total amount charged for the supply as defined in explanation to Para 2 of the said notification - in terms of the Para 2 of the said notification the taxable value in respect of the service specified at item (i) and (ia) of SI. No. 3 of the said notification is the total amount charged for the supply less the value of land or undivided share of land and the value of land or undivided share of land shall be deemed to be one third of the total amount charged for the supply. As the value of land or undivided share of land is deemed to be one-third of the total amount charged for the supply irrespective of the actual value of land the applicant is eligible to avail deduction of one-third of the total amount charged for the supply in arriving at the taxable value of the supply.

  ---

• 2023 (7) TMI 519
  Exemption from GST - Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution - determination of supplier of service and the recipient of service in the transaction between the Government and the applicant - reverse charge mechanism. Petitioner claims that they are making payment to the Government for using this property and hence the payment should be treated as payment to the Government for using such rights. Therefore, they can claim benefit under Entry No. 3 of Notification No. 12/2017 CT (Rate) dated 28.06.2017. Supplier and recipient of service - HELD THAT:- On analysis of the terms and conditions of the contract with reference to the definition of the terms; consideration, recipient of service and supplier of service; it is evident that the transaction covered by the subject contract between the applicant and the Government in sum and substance confers the right to the applicant to extract the mud and sand lying underneath the reservoir of Mangalam Dam and appropriate the same by way of sale or otherwise during the term of the contract for a lumpsum consideration of Rs. 15 Crores payable in instalments spread over the contract period. Therefore, in the subject transaction the supplier of service is the Irrigation Department of the Government of Kerala and the recipient of service is the applicant. Classification and rate of GST of the service - HELD THAT:- The grant of the right to desilt the reservoir and to extract the sand and mud therein falls within the scope of; licensing services for the right to use minerals including its exploration and evaluation as described in Heading 997337 of the Scheme of Classification of Services under GST - the service is appropriately classifiable under SAC 997337 and attracts GST at the rate of 18% as per entry at SI. No. 17 (viii) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017. Person who is liable to pay the tax; whether the supplier of service under forward charge or the recipient of service under reverse charge? - HELD THAT:- In the instant case the applicant is the recipient of service supplied by the Irrigation Department of the Government of Kerala. As per entry at SI. No. 5 of Notification No. 13/2017 Central Tax (Rate) dated 28.06.2017 the tax in respect of services supplied by the Central Government, State Government, Union territory or local authority to a business entity shall be paid by the business entity located in the taxable territory on reverse charge basis. Therefore, the applicant is liable to pay the GST on reverse charge basis on the consideration of Rs. 15 Crores given to the State Government for grant of the right to desilt the dam and extract the sand and mud lying underneath for appropriation.

  ---

• 2023 (7) TMI 518
  Rate of GST - construction and sale of villas is 1.5% / 7.5% (effective tax rate 1%/5%) without benefit of Input Tax Credit - Whether out of the total value of the villa including land value, 2/3rd of the total value shall be taken for payment of GST at the rate of 1.5% / 7.5% (effective rate of 1% /5% on the total value of villa)? - amount charged by the applicant from villa buyers for some structural changes, to add some additional area or undertake interior works etc carried out before the completion of the construction is also part of gross amount charged for construction and sale of villa - applicability of N/N. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended by N/N. 03/2019 Central Tax (Rate) dated 29.03.2019. HELD THAT:- On a plain reading of the entries at Item (i) and (ia) of SI. No. 3 of the Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017, it is evident that the rate of GST prescribed under the entry at Item (i) applies to construction of affordable residential apartments and under the entry at Item (ia) applies to construction of residential apartments other than affordable residential apartments by a promoter in a residential real estate project intended for sale to a buyer except where the entire consideration is received after issuance of completion certificate. From the definition of the term apartment ; residential apartment real estate project and promoter , it is clear that the residential villas being constructed by the applicant fall within the definition of residential apartment and the projects undertaken by the applicant fall within the definition of real estate project and the applicant fall within the definition of promoter . Further, on a conjoint reading of the provisions of law, the facts as stated in the application; the terms and conditions in the agreements and the documents produced it is seen that the services of construction of villas provided by the applicant squarely fall within the description of services specified in Item (i) and (ia) of SI. No. 3 of the Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 03/2019 Central Tax (Rate) dated 29.03.2019 and accordingly the tax rates as prescribed in the said entries shall be applicable to the said services supplied by the applicant - the applicant is liable to pay GST at the rate of 1.5% in respect of the services of construction of affordable residential apartments as per entry at Item (i) and at the rate of 7.5% in respect of the services of construction of residential apartments other than affordable residential apartments as per entry at Item No. (ia) of SI. No. 3 of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 subject to the conditions prescribed under the respective entries. Taxable value of the services of construction of residential villas rendered - HELD THAT:- The amount charged by them from the villa buyers for some structural changes, to add some additional area or undertake interior works etc. carried out before completion of the construction being part of overall construction services and naturally bundled when supplied to the villa buyers should be included in the consideration charged for the construction service and shall form part of the total amount charged for the supply as defined in explanation to Para 2 of the said notification - As the value of land or undivided share of land is deemed to be one-third of the total amount charged for the supply irrespective of the actual value of land the applicant is eligible to avail deduction of one-third of the total amount charged for the supply in arriving at the taxable value of the supply.

  ---

• 2023 (7) TMI 470
  Jurisdiction of State Authority to levy tax on export of service - petitioner claims that the same fall within the purview of IGST Tax exclusively within the jurisdiction of the Central Authorities - HELD THAT:- Reliance placed in the case of DHARMENDRA M. JANI AND A.T.E. ENTERPRISES PRIVATE LIMITED (FORMERLY KNOWN AS A.T.E. MARKETING PVT. LTD.) VERSUS THE UNION OF INDIA, CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS, GOODS AND SERVICES TAX COUNCIL PRINCIPAL COMMISSIONER OF GOODS AND SERVICE TAX, MUMBAI STATE OF MAHARASHTRA, THROUGH SECRETARY FINANCE DEPARTMENT, MUMBAI [ 2023 (4) TMI 821 - BOMBAY HIGH COURT] where it was held that The provisions of Section 13(8)(b) and Section 8(2) are confined in their operation to the provisions of IGST Act only and the same cannot be made applicable for levy of tax on services under the CGST Act and MGST Act, on such interpretation, the provisions are intra vires the Constitution, the IGST, the CGST and the MGST Acts. Both the Union of India and the State Government are required to file reply affidavits. Let the reply affidavits be filed by the Respondents within 3 weeks from today. A copy of the same be served on the Petitioner s advocate well in advance. The Petitioner is permitted to file rejoinder, if any, to the reply affidavits. List the petitions high on board on 5th July, 2023.

  ---

• Income Tax

• 2023 (7) TMI 517
  Assessment u/s 153C - incriminating documents / material - Satisfaction Note for issue of notice u/s 153C - assessment of completed assessments/unabated assessment - as per HC [ 2022 (9) TMI 1331 - DELHI HIGH COURT] no incriminating material had been brought on record by the AO to sustain the additions on merit - HELD THAT:- There is delay of 148 days. Delay is condoned. As Department submitted that the issues raised in this Special Leave Petition stands covered by the judgment of this Court in PCIT vs. Abhisar Buildwell [ 2023 (4) TMI 1056 - SUPREME COURT] Therefore, appropriate orders may be made in this matter. Special leave petition is dismissed.

  ---

• 2023 (7) TMI 516
  Reopening of assessment u/s 147 - reopening beyond period of 4 years - as pe HC notice u/s 148 issued beyond the period of limitation after the expiry of the relevant AY need to be set aside - HELD THAT:- We are not inclined to interfere with the impugned order and judgment of the High Court. The special leave petition is dismissed.

  ---

• 2023 (7) TMI 515
  Estimation of income on Bogus purchases - scam was unearthed by the Sales Tax Department in respect of bogus parties who provided accommodation entries - ITAT confirmed the order of CIT(A) restricting the addition to 12.5% of the purchases - HELD THAT:- CIT(A) and the ITAT were correct in coming to the conclusion that the purchase cannot be rejected and the additions could be restricted to the extent of profit element, which they determined could be 12.5%. This is because when material has been actually purchased and consumed in executing the contract, the cost price is required to be deducted and taxes cannot be levied on the same. There is nothing to indicate whether the profit element should be more than 12.5%. No substantial question of law arises.

  ---

• 2023 (7) TMI 514
  Bogus purchases - CIT(A) disallowed 7% of the purchases - ITAT deleted the addition - HELD THAT:- ITAT come to a conclusion that there was no material whatsoever before CIT(A) as to why 7% on the total purchase of packing material from 8 parties should be disallowed. Even we find the decision of the CIT(A) rather strange because in paragraph 53 of the order concluded above, he says there is no question of any purchase made by the appellant being termed as bogus. In our view ITAT was correct to delete the addition made by CIT(A). Decided in favour of assessee.

  ---

• 2023 (7) TMI 513
  Disallowance u/s 14A r.w.s. Rule 8D - no exempt income earned as per assessee submission - ITAT deleting the disallowance - HELD THAT:- We admit the Appeal on the question (a) as under: (a)Whether on the facts and circumstances of the case and in law the Hon ble the ITAT was right, in deleting the disallowance under Section 14A r.w.s. Rule 8D when no exempt income was earned by the Assessee? Addition u/s 36(1)(iii) - assessee was unable to prove the commercial expediency as narrated in the factual legal matrix clearly brought out in assessment order by AO - AO concluded that the difference between income generated and interest paid is not allowable and hence, disallowed difference - HELD THAT:- CIT (A) as well as ITAT have accepted that entire interest expenses has to be allowed in toto under section 36(1)(iii) as well as under section 37(1) as being for the purpose of business and the same was undoubtedly and undisputedly taken for the purpose of business. Since these are findings on facts, in our view no substantial question of law arises.

  ---

• 2023 (7) TMI 512
  Reopening of assessment u/s 147 - unexplained properties purchased - HELD THAT:- All the findings are incorrect in as much as in the notice u/s 142 (1) issued petitioner was expressly called upon to submit all the details of all the properties purchased alongwith copies of purchase deed and copy of statement of the bank account from which the payment was made. In its reply petitioner has given details of property purchased including copies of Purchase Deed. The Purchase Deed also contains details of payments made. In the Assessment Order the AO has specifically stated that during the course of assessment proceedings assessee submitted various details as called for. The details filed by assessee are examined and placed on record and the CASS and ITS data has been verified from the details submitted by assessee. Assessment Order also states that the case was selected by CASS for scrutiny in view of large investment in property, among other things. Therefore, AO was certainly satisfied with all the details provided by petitioner. If he was not, in other words, if petitioner had not furnished copy of the statement of bank accounts from which the payment was made as mentioned in the notice certainly the AO would not have passed the Assessment Order the way he had passed. Moreover, in the reply to the notice issued u/s 148A(b), petitioner has given details of the consideration paid for the property and the source of funds. Therefore, for the AO to state in the impugned order dated 31st March 2023 that petitioner did not provide the details or explain the source etc., is an incorrect statement. We hereby quash and set aside the Show Cause Notice issued u/s 148A(b) - Decided in favour of assessee.

  ---

• 2023 (7) TMI 511
  TP adjustment - MAM - methodology to be adopted while benchmarking the international transaction of respondent - TPO was of the view that CUP method was most appropriate method to be applied - HELD THAT:- Since the transaction picked up for comparison by TPO was very negligible, on the basis of small sales made by respondent of similar components, CIT(A) held that there is no merit in applying the CUP method. CIT(A) also observed that the methodology adopted by respondent in applying CPM method had been accepted from AY 2008-09 to 2010-11 by the TPO himself and no adjustment has been made in the hands of respondent. The assessment orders for those assessment years are also on record. CIT(A) came to the conclusion, which was correctly upheld by the ITAT, that there was no merit in the order of TPO in applying the CUP method to benchmark the international transaction of export to AE in the hands of respondent. TP adjustment on receipt of commission from the AE - respondent in TP report had applied the CUP method for benchmarking the international transactions with its AE - Respondent had applied CUP method in all the years starting from 2006-07 to 2010-11. TPO for the assessment year under consideration, i.e., AY 2005-06 applied internal rate of return as the most appropriate method for benchmarking international transactions, but, in the succeeding years starting from AY 2006-07 to 2010-11, TPO had applied CUP method. CIT(A), therefore has rightly rejected the methodology adopted by TPO and ITAT has correctly upheld the findings of CIT(A). No substantial questions of law arise.

  ---

• 2023 (7) TMI 510
  Penalty u/s 271(1)(c) - wrongful claim of lower LTCG - Disallowance u/s 94(7) - Dividend Striping - proof of bonafied mistake - ITAT deleted the penalty - HELD THAT:- Tribunal noted that assessee herein had voluntarily filed the revised return duly disclosing the disallowance of the dividend in terms of Section 94(7) and revised its returned income. It is also admitted that the assessee has upon receipt of the assessment order issued by the AO deposited the enhanced amount of tax and had not challenged the assessment order. He at the first instance, admitted its mistake in computation and filed a revised return. Tribunal noted that an error had occurred due to the wrong posting of the entry by the book-keeping staff of assessee with respect to the relevant dividend entry income to a wrong date. Since the assessee had voluminous transactions, it committed an error while posting the relevant dividend entry, which was covered by one voucher since it was received on the same security. Tribunal has observed that it was a reasonable human error which could have been committed on the part of assessee on the same security, dividends were received at two distinct dates, however, the error crept in since, the book-keeping staff posted both the entries of the dividend to the same date. The Tribunal has accepted that upon a perusal of the record that such an error was possible and therefore has accepted the submission of assessee that this was a bonafide error and there was no intention on its part to evade tax. Thus the view taken by the Tribunal is reasonable. It is a view taken after perusing the records in detail. The Tribunal, after appreciating the evidence has found that the assessee has proven that it was a bonafide mistake and no substantial question of law would arise.

  ---

• 2023 (7) TMI 509
  Penalty u/s 271(1)(c) - assessment order was no longer in existence - CIT(A) s order which was set aside by the Tribunal arose out of the earlier penalty order which in turn was founded on the assessment order - HELD THAT:- Given these circumstances, the impugned order is set aside. Consequently, the order qua penalty proceedings will collapse.

  ---

• 2023 (7) TMI 508
  Reopening of assessment u/s 147 - reassessment proceeding was triggered based on a Tax Evasion Petition (TEP) - HELD THAT:- It is not in dispute that the reassessment proceeding was triggered on account of the TEP. There is no other material available on record, based on which the AO formed an opinion, that there was reason to believe that income chargeable to tax had escaped assessment. This is evident upon a bare perusal of the reasons furnished by the AO for reopening the assessment for the AY in issue, i.e., 2011-12. It is well established that income in each AY is to be assessed independent of the circumstances which obtain in other AYs. The only exception is that where issues are common, the courts have at times adopted the principle of consistency. In this case, that principle surely would not apply. Bald assertions in the TEP that the petitioner had claimed bogus expenses towards salary and other heads, in our view, was not sufficient for commencement of the reassessment proceeding under Section 147 read with Section 148 of the Act. Decided in favour of assessee.

  ---

• 2023 (7) TMI 507
  Addition u/s 68 - unsecured loans - Discharge of onus or not by assessee? - whether no evidences and material to establish the creditworthiness, genuineness and identities of lenders in the transactions? - Tribunal justification upholding the order of the appellate Commissioner in deleting the addition - HELD THAT:- The findings recorded by the appellate Commissioner as well as the Income Tax Tribunal are based on material and proper appreciation thereof. They are the findings of facts not liable to be interfered with. As noted by Tribunal during the remand proceedings, the details such copy PAN, ledger account and confirmation and other details such as bank statement, audited books were made available before the AO. However, the AO without considering and pointing any deficiency in the above primary document held that the assessee failed to prove the identity of the creditor, explain the genuineness of transaction and establish the credit worthiness of the creditor - No substantial question of law.

  ---

• 2023 (7) TMI 506
  Reopening of assessment u/s 147 - escapement of income on account of bank interest and cash deposits in two of its bank accounts - scope of 3rd proviso to Section 12A(2) - Validity of order passed u/subsec (d) of Section 148A being without jurisdiction and against the 3rd proviso to Section 12A(2) of the Act - petitioner uploaded its reply taking a plea that as per 3rd proviso to Section 12A(2) of the Act, there was a bar to take any action u/s 147 for any preceding year, in which the registration was granted - HELD THAT:- As in the present case, once reply filed by the petitioner pursuant to the notice dated 16.03.2022 (Annexure P-3) had been rejected vide order dated 29.03.2022 (Annexure P-5) without examining the 3rd proviso to Section 12A(2), relegating the petitioner to take alternative remedy would not be appropriate. Registration of the petitioner-trust was granted on 30.09.2016 (Annexure P-1), which was applicable from the assessment year 2016-17. As such, said registration was valid for claiming the benefit under Sections 11 and 12 of the Act. Ii\n the present case, as per the ratio of the judgment passed in Karnataka State Students Welfare Fund s case [ 2022 (1) TMI 654 - KARNATAKA HIGH COURT] no proceedings under Section 147 can be initiated for the assessment year 2015-16. Hence, impugned notices and the consequent order passed under Section 148A(d) being contrary to the 3rd proviso to Section 12A(2) of the Act, are set aside.

  ---

• 2023 (7) TMI 505
  Revision u/s 263 by CIT - Failure on the part of AO to make enquires - an order erroneous and prejudicial to the interest of revenue - CIT observed that, unexplained cash credit u/s. 68 and additional depreciation claimed on railway siding not considered by AO which leads to under reporting of income - HELD THAT:- On a perusal of the order of the Pr. CIT, it transpires that the assessee company during the course of the assessment proceedings had neither discharged the onus that was cast upon it as regards proving, viz. (i) identity of the party; (ii) creditworthiness of the party to advance money/security deposit/supply of machinery etc.; and (iii) genuineness of the transaction w.r.t the outstanding unsecured loans in question; nor the A.O had made any enquiry w.r.t the said issue as per the mandate of Section 68 of the Act. In fact, during the course of revision proceedings, it was noticed by the Pr. CIT that the assessee s counsel had fairly admitted that the A.O while framing the assessment had not called for any confirmation letter for the outstanding liabilities under consideration. It was also observed by the Pr. CIT that the A.O while framing the assessment had not made any enquiry to find out whether the railway tracks were laid inside or outside the factory premises, and had accepted the assessee s submission without applying the relevant provisions for allowing depreciation on the same. Thus we concur with the view taken by CIT that the failure of the A.O to carry out necessary verifications on both the aforesaid issues had rendered the assessment order passed u/s. 143(3) as erroneous in so far it was prejudicial to the interest of the revenue u/s. 263 - Decided against assessee.

  ---

• 2023 (7) TMI 504
  Registration granted u/s. 10(23C)(vi) - Cancellation of registration as sub-leased leasehold Nazul land which is referred to as the demised premises for premium and annual rent - whether Assessee society had no right to sub-lease the Nazul land which was provided to it on lease by the Government of Madhya Pradesh? - HELD THAT:- CIT(Exemption), Bhopal had wrongly observed that the assessee society had in violation of law sub-leased the property i.e. Nazul land to M/s. Avinash Builders. In our considered view, as can safely be gathered on a perusal of the aforesaid documents, as the assessee society remaining well within its rights, had sub-leased the property, therefore, the aforesaid observation of the CIT(Exemption) cannot be sustained and is liable to be struck down. As the State Government as per the lease agreement (renewal) had leased the land to the assessee society for Kewal Shikshan Sanstha Hetu ( for educational purpose only), therefore, sub-leasing of the said land by the latter without seeking approval from the State Government to M/s. Avinash Builders, Raipur was clear case of violation of law - The land in question granted on lease to the assessee society by the State Government of Madhya Pradesh only for educational purposes, had thereafter been exploited by the latter as per terms of the lease deed after obtaining the requisite approvals from the government authorities and, the said activities being clearly in conformity with its object clause of running a educational institution i.e. Rajkumar College, a public school at Raipur, thus, could not have been held to have been used for a purpose other than that for which, it was granted on lease to it nor in violation of any law as observed by the CIT(Exemption), Bhopal. We, thus, not being able to concur with the view taken by the CIT(Exemption) that the assessee society had violated any law by using the land in question for a purpose other than education purpose, vacate the same. Assessee society had not accounted for the rental income from sub-lessee in its return of income - Considering the fact that the assessee society had terminated the sub-lease with M/s Avinash Builders vide its legal notice for multi-facet reasons as culled out by us hereinabove; and had filed a suit for getting the demised property vacated, therefore, no rent for the ensuing period could have been received by it. As litigation is going on between the assessee society and the aforesaid sub-lessee therefore, as stated by the ld. AR and, rightly so, no rent would have been received and accounted for by the assessee as its income for the period subsequent thereto. Thus, we are unable to concur with the observation of the CIT(Exemption) that there is failure on the part of the assessee society to account for the lease rent with respect to the property sub-leased by it to M/s. Avinash Builders. Suppression of interest income by the assessee society - As stated by the assessee society and, rightly so, its bonafides can safely be gathered from the fact that the said interest income would have no bearing on its tax liability for the year under consideration. We are of a strong conviction that the bonafide omission of the assessee to account for balance interest income which is clearly in the nature of an inadvertent omission on its part, could not have formed a justifiable basis for drawing of adverse inferences in its case i.e much the less as a reason for withdrawing its registration under Sec. 10(23C)(vi) of the Act. Obtaining of approval by the assessee society by fraud or misrepresentation of facts - On a perusal of the subsequent details filed by the assessee a/w. requisite annexures does neither reveal any such details which were wrongly filed or misrepresented by the assessee before the appropriate authority nor any such fact was brought to our notice in the course of hearing of the appeal by the Ld. DR. On the basis of the aforesaid facts, we are unable to persuade ourselves to subscribe to the allegation of the CIT(Exemption) that the assessee society had obtained the approval u/s. 10(23C)(vi) of the Act vide order passed by the Chief Commissioner of Income-tax on the basis of any fraud or misrepresentation of facts before him. We are unable to persuade ourselves to subscribe to the multi-facet reasons accorded by the CIT(Exemption), Bhopal for withdrawing the registration that was granted to the assessee society u/s. 10(23C)(vi). There has neither been any shift in the facts or bye-laws/regulations or object clause of the assessee society at the stage of granting of registration u/s. 10(23C)(vi) vide order of the CIT(Exemption), Bhopal, therefore, on the said count also, we find substance in the claim of the Ld. AR that there was no justifiable reason for his predecessor to have withdrawn the registration that was earlier granted to the assessee society vide order u/s. 10(23C)(vi) of the Act dated 29.02.2008 on the basis of the impugned order of withdrawal dated 02.12.2019. We are unable to concur with the observations of the CIT(E), Bhopal, on the basis of which, he had vide order passed u/s. 10(23C)(vi) of the Act dated 02.12.2019 withdrawn the registration that was earlier granted to the assessee society - Decided in favour of assessee.

  ---

• 2023 (7) TMI 503
  Disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return - Additions while processing ITR u/s 143(1)(a) at CPC - Rectification of mistake u/s 154 - addition u/s 43B and u/s 2(24)(x) r.w.s 36(1)(va) in respect of Contributions received from employees towards PF/ESI and but not deposited to the relevant funds by the due dates under respective laws - HELD THAT:- The argument of the revenue that, the assessee instead of filing revised audit report rides on wrong bus and has applied the provisions u/s. 154 of the Act for rectification of mistakes, cannot be acceded to and rejected. An intimation u/s. 143(1)(a) of the Act was served upon the assessee on 21st January, 2019 and the assessee has very diligently responded with the reasons specifying that since the payments which are proposed to be disallowed are made within the specified, the same cannot be subjected to any disallowance, however, the AO, who was duty bound to consider such response from assessee, before making an addition on this account, has not considered the submission of the assessee, therefore, the same should have been considered as a mistake apparent from the record. We, thus, do not find any merit in the contention raised by the revenue and are of the view that since a mistake was apparent from the record and the AO, who was mandated by the law to consider the response of the assessee, which was submitted within the prescribed time of 30 days but has not considered the same and crystallized the addition, therefore, the mistake is apparent from record and curable within the provisions of Section 154 of the Act. Department s plea that the assessee should have revised the audit report which was carrying the mismatch with figures in ITR, cannot be considered to be a reason for not granting relief to the assessee otherwise the provision of Section 143(1)(a) of the Act and the provisos therein would become redundant. In such circumstances, we are unable to comprehend the contention of the revenue and, therefore, the same cannot be considered concurred with. Since the issue before the ld. CIT(A) wherein the submission of the assessee were taken into consideration but were not carefully read into. - CIT(A) has not gone through the facts of the case in its entirety and, therefore, has comprehend that the payments were made beyond the due date prescribed under respective statutes, therefore are disallowable. We do not persuade to concur with the finding of the ld. CIT(A). Accordingly, we set aside the order of the ld. CIT(A) and in the interest of justice, considering the merits of the case, we direct the AO to examine the authenticity of the documents submitted by the assessee in support of its contention that the impugned payments were made within the specified time and delete the addition. Thus, this issue is allowed for statistical purposes.

  ---

• 2023 (7) TMI 502
  Additions u/s 68 - Unexplained cash credit in bank account subsequent to sale deed - HELD THAT:- Once the supplementary / rectification deed is accepted by Sub-Registrar the fact that subsequent payment was part of sale consideration also, the matter ends. So far as sale consideration is concerned, once the sale consideration is accepted as a sale consideration by Sub-Registrar local (Revenue) / Sub-Registrar concerned, it cannot be treated illegal by Income Tax Department, when the assessee right from the very beginning is asserting that credit in his bank account is a part of sale consideration on rural agricultural land. As reiterated that agricultural land is also a rural agricultural land and purchaser party has also accepted this fact, in filing confirmation by way of affidavit as well as in supplementary / rectification deed - Therefore,no justification in treating the credit as unexplained credit. Decided in favour of assessee.

  ---

• 2023 (7) TMI 501
  Penalty u/s 271(1)(c) - defective notice - non-strike off of the irrelevant part in the notice issued - HELD THAT:- As in the case of Mr. Mohd. Farhan A. Shaikh [ 2021 (3) TMI 608 - BOMBAY HIGH COURT] while dealing with the issue of non-strike off of the irrelevant part in the notice issued u/s. 271(1)(c) of the Act, held that assessee must be informed of the grounds of the penalty proceedings only through statutory notice and an omnibus notice suffers from the vice of vagueness. Ratio of this full bench decision above squarely applies to the facts of the Assessee s case as the notice u/s. 274 r.w.s. 271(1)(c) of the Act was issued without striking off the irrelevant portion of the limb and failed to intimate the assessee the relevant limb and charge for which the notices were issued. Thus, by following the above ratio, we are of the opinion that, the penalty order passed u/s 271(1)(c) of the Act by the AO and the order of the CIT(A) in confirming the penalty order are erroneous. Decided in favour of assessee.

  ---

• 2023 (7) TMI 500
  Maintainability of appeal before CIT(A) - Refund of excess TDS deducted - withholding of taxes - assessee has deducted tax at source at higher rate of 20% in the absence of PAN of the deductee - Payment made to US based entity which admittedly was in the nature of technical services, was to deducted tax @10% u/s 115A (plus applicable surcharge education cess) - Applicable TDS rate 195 read with section 115A and Section 206AA HELD THAT:- As in a conjoint reading of Section 195 and Section 248, it could be clearly inferred that the term no tax was required to be deducted will mean and include the tax deducted at source in excess of the tax deductible u/s. 195 at the rates in force. The term no tax was required to be deducted in excess of the rate as per DTAA being beneficial to the deductee assessee, then it has to be reckoned that the rates provided in the DTAA are beneficial, then benefit has to be given; and in such a situation the tax can only be deducted at the rate which is beneficial to the deducted and hence, it tantamount to denial of liability of tax or no tax which is in excess. The interpretation of Section 248 as given by the ld. CIT (A) and also as confessed before us by the ld. DR, if it is to be interpreted in such a manner, then it would lead to various anomalous situation. We hold that the deductor can challenge excess deduction u/s. 248 seeking that the rate of tax should be as per DTAA and not as per Section 206AA, if it is found that otherwise income is chargeable to tax in India and then certainly an appeal would be maintainable u/s. 248 seeking relief/refund for excess tax deducted. Thus, in our view, the word no tax was required to be deducted in Section 248 should be interpreted in such a manner so as to include claim of the deductor that no tax was required to be deducted in excess of deductible at rates in force. Section 197 provides that, assessee, here meant recipient deductee of the sum can approach the ld. AO to issue certificate for deduction of taxes at lower rate or for no deduction of tax. This Section 197 provides that the deductee or the recipient can approach to the ld. AO which here in this case deductee has not applied u/s. 197 and deductor has filed remedy of the appeal u/s. 248. Accordingly, we accept the contention of the ld. Counsel that appeal is maintainable and ld. AO is directed to apply rates in force which is the applicable rate of tax at 10% in accordance with law. Accordingly, the appeal of the assessee is allowed.

  ---

• 2023 (7) TMI 499
  Addition u/s 68 - addition on protective basis in hands of assessee - substantive addition made in the hands of person advancing credit to assessee - HELD THAT:- It is settled principle of law the Income Tax Act nowhere provides that parallel assessments can be made in respect of the same income on two different persons. The assessee right from the beginning of the reassessment proceedings submitted that the source of the funds from the creditors and their source (i.e. source on source) is also proved by the assessee. AO made a protective addition as unexplained money in the hand of the assessee. As in the case of M/s. Capaxo Logistics Pvt. Ltd. [ 2022 (4) TMI 736 - ITAT AHMEDABAD] and M/s. Ambe Tradecorp Pvt. Ltd. [ 2022 (2) TMI 1297 - ITAT AHMEDABAD] are on identical additions deleted the same observing identity, creditworthiness and genuineness of the transactions are clearly established by the assessee. AO has not pointed out any deficiency in these documentary evidences submitted by the assessee and also not brought on record any contrary evidences in the reassessment proceedings. The assessment made in the case of Smt. Hansaben Manilal Patel wherein the sale of land has been duly taxed on substantive basis. Though the said order remained unchallenged by her (Smt. Hansaben Manilal Patel allegedly a missing person) by way of appeal or revision. Whereas in the case of Shri Rameshji Thakor that the alleged substantive additions made in his hands were also deleted by Ld. CIT(A) as the source was been clearly proved by the assessee. Thus we do not find any infirmity in the order passed by the Ld. CIT(A) who has deleted the protective addition made in the hands of the assessee herein. Decided in favour of assessee.

  ---

• 2023 (7) TMI 498
  Revision u/s 263 - Addition u/s 40A(2)(b) in respect of remuneration paid by the assessee company to one of its directors - as per CIT remuneration paid to another director was also excessive and the AO should have restricted the remuneration paid to him as done in the case of first director - distinction between lack of inquiry and inadequate inquiry - HELD THAT:- The order can be erroneous if the Assessing Officer fails to apply the law rightly on the facts of the case. As far as adequacy of inquiry is considered, there is no law which provides the extent of inquiries to be made by the AO. It is AO s prerogative to make inquiry to the extent he feels proper. CIT by invoking revisionary powers under section 263 of the Act cannot impose his own understanding of the extent of inquiry. This is not a case where there was an omission on part of the AO to examine this aspect of disallowance under section 40A(2)(b) of the Act at all. The AO had put a specific question before the assessee during the course of assessment and taken his reply on record. Further the assessing Officer had also discussed this aspect as part of assessment order. So, in our view, this is not a case where no enquiry has been made by the assessee officer during the course of assessment proceedings. Principal CIT, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re-visit the entire assessment and determine the income himself at a higher figure. We thus find no error in the order of Ld. AO so as to justify initiation of 263 proceedings by the Ld. Pr. CIT. - Decided in favour of assessee.

  ---

• 2023 (7) TMI 497
  Addition u/s 68 - introduction of capital by partners in assessee-firm - non-submission of creditworthiness and source of investment of partners - HELD THAT:- Considering the investment amount by the partners, the revenue authorities had added back u/s 68 due to the non - satisfactory explanation by the assessee. But the investment of the partners should be examined in the hands of the partners. The addition cannot be accepted in the hands of the firm. We respectfully relied on the order of M. Venkateswara Rao [ 2015 (3) TMI 153 - ANDHRA PRADESH HIGH COURT] and Odedara Construction[ 2014 (2) TMI 130 - GUJARAT HIGH COURT] and in the case ofVaishno Devi Refoils Solvex[ 2018 (7) TMI 651 - SC ORDER] if Assessing Officer was not convinced about creditworthiness of partner who had made capital contribution, inquiry had to be made at end of partner and not against firm. Thus the addition amount is quashed. Accordingly, the grounds of the appeal of assessee are allowed.

  ---

• 2023 (7) TMI 496
  Addition of cash donations as Anonymous u/s 115BBC - onus to proof - whether anonymous donation by specific donors only verified on sample basis? - HELD THAT:- The appellant has dejectedly failed to discharge the onus of rebuttal of the material with which it was confronted by the AO. These uncontroverted facts beyond any iota of smoke would shows that the transaction of the receipt of the donations is abnormal, fictitious and militates against the claim of appellant that the cash donations are genuine. It is settled position of law that the burden of proving the genuineness of transaction of receipt of donation is always on the assessee. This burden can be discharged by it adducing cogent and persuasive evidence. In the absence of any such positive evidences from the appellant assessee, AO was justified applying the test of human probabilities and drawing adverse inference in the light of judgements of CIT Vs Durga Prasad More [ 1968 (8) TMI 17 - SUPREME COURT ], CIT Vs Daulat Ram Rawatmull [ 1972 (9) TMI 9 - SUPREME COURT ], and CIT Vs P Mohanakala [ 2007 (5) TMI 192 - SUPREME COURT ] The plea of the appellant that the clerk in the first instance submitted the incorrect list as the original list was maintained in a language other than english hence certain errors were crept-in which has been rectified before the first appellate proceedings by bringing on record new list of correct donors failed to inspire any confidence to us, thus deserves to be rejected. The very conduct of the appellant made us to believe that the information filed during the original assessment proceedings is not correct or incomplete, thus failure to maintain the identity of the person indicating full name and full address. Thus all cash donation transactions are sham, a make believe story, a device adopted created to sleeve undisclosed income through anonymous donations - Decided against assessee.

  ---

• 2023 (7) TMI 495
  Capital gain on property gifted - Execution of sale deed instead of gift deed wrongly - assessee as Power of Attorney holder transferred part of plot to his daughter-in-law - AO on the basis of this sale deed has taken the full value of consideration u/s 50C - Assessee contention that the sale deed was wrongly executed instead of executing the gift deed - HELD THAT:- We note that in support of the contention that the sale deed was wrongly executed instead of executing the gift deed and that the consideration mentioned in the sale deed was never received by the assessee from his daughter-in-law, assessee filed an affidavit where he declared that sale deed has been wrongly executed, he was having no knowledge of transferring legal title at the time of execution, he executed sale deed instead of gift deed as per the advice of his advocate and that he has not received any sale consideration from daughter-in-law. Assessee vide his letter to the AO specifically explained that if he has any doubt, daughter-in-law can be produced to confirm the fact. However, the AO did not require the assessee to produce Smt. Asha Tambi. Thus the affidavit filed by the assessee is not controverted. Hon ble Supreme Court in case of Mehta Parikh Co. [ 1956 (5) TMI 4 - SUPREME COURT ] has held that the rejection of affidavit filed by the assessee is not justified unless the deponent has either been discredited in cross examination or has failed to produce other supporting evidence when called upon to do so. On the direction of Bench the legal heir of assessee also filed affidavit of Daughter in law where also she affirmed that his father-in-law executed the sale deed instead of gift deed and that she has not paid the amount of Rs. 3 lacs as mentioned in the sale deed. We are of the view that no capital gain can be computed in respect of the sale deed executed in favour of Daughter in law Smt. Asha Tambi as it is only a gift to close relative and not a sale and, therefore, Ground No. 1 is allowed.

  ---

• 2023 (7) TMI 494
  Addition u/s 68 - unexplained cash deposits made into its bank accounts during demonetization period - CIT-A deleted the addition - HELD THAT:- AO did not point out any defects in the books of account, no discrepancies were found in the stocks, sales and purchases. AO s conclusion is that there are huge deposits in the bank account during demonetization period and the assessee could not explain such deposits. The assessee has amply demonstrated with evidences that the cash sales and the cash deposits during FYs 2015-16 and 2016-17 were almost same and there is only a minimal increase in cash deposits during the FY 2016- 17 relevant to the AY 2017-18. CIT(A) has passed a well reasoned order considering all the submissions of the assessee and the averments of the AO. As decided in M/S HIRAPANNA JEWELLERS AND (VICE-VERSA) [ 2021 (5) TMI 447 - ITAT VISAKHAPATNAM] through the trading account and find that there was sufficient stock to effect the sales and we do not find any defect in the stock as well as the sales. Since, the assessee has already admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE again. Thus we hold that the AO has made addition u/s 68 erroneously. The ground raised by the Revenue is rejected.

  ---

• 2023 (7) TMI 493
  Cost of Acquistion of investment in Shares - Capitalization of interest expenses - Borrowing cost - Accounting Standard 16 - AO and CIT(A) disallowed the capitalization - interest on money borrowed for investment in share capital - HELD THAT:- The assessee has neither claimed the impugned amount as expenditure in the statement of income nor there has been any sale of shares where the said cost of acquisition has been claimed as a deduction. Therefore we see merit in the argument of the ld AR that the lower authorities holding against the capitalization of interest for the years under consideration is not warranted. As per the Accounting Standard 16, the borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset should be capitalised as part of the cost of that asset. It is accordingly submitted by assessee has followed the Accounting Standard while preparing the financial statements and the same cannot questioned without rejecting the books of accounts. Lower authorities have no reason to hold against the assessee following certain accounting standard, unless there is an impact to the amount offered to tax by the assessee during the years under consideration. When in the years under consideration there is no taxable event that is adversely affected by the capitalization of interest by the assessee in the books of accounts, the CIT(A) / AO cannot hold that the interest capitalized cannot be part of the cost of acquisition. The impugned capitalization is merely an accounting treatment and does not have any impact on the income offered to tax during the years under consideration. We will limit our adjudication only to the extent of holding that it is not warranted on the part of the lower authorities to decide against the capitalization of interest to be part of cost of acquisition since there is no taxable event happened during the years under consideration that is adversely impacted by such treatment. We, accordingly, allow the appeal leaving open the right of the Revenue to examine the issue of whether the interest paid to be part of cost of acquisition or not, in the year in which a taxable event occurs involving the cost of acquisition, i.e. the year in which the assessee sells the investment and the capital gain is computed.

  ---

• 2023 (7) TMI 492
  Reopening of assessment u/s 147 - information received from Investigation Wing - On-money payment in cash - HELD THAT:- As there was a categorical information found during the course of search proceedings that payment of On-money was made by cash by various persons and this information was based on incriminating material in the form of pen drive found from the search in Hiranandani group; and that pen drive also contained the details of the assessee wherein during the F.Y. 2006-07, it was shown that assessee had paid cash for purchase of certain flats from Crescendo Associates. Once there is tangible material like this, then prima facie any prudent mind will entertain reasons to believe that this amount of On-money which is shown by the assessee for the purchase of flats in the return of income amounts to escapement of assessment when same has not been declared in the return of income. Therefore, to this extent, it cannot be held that reasons recorded are vague or there is no application of mind by the ld. AO. Jurisdiction should have been acquired u/s. 153C - At a threshold such a plea cannot be entertained for the reason that here the search has taken place and the clause previous six assessment years start from A.Y. 2008-09 and this assessment year 2007-08 falls beyond the period of six years and as mentioned in Section 153A. Moreover, the amendment brought by way of fourth proviso in Section 153A extending the abatement till 10 years, has come w.e.f. 01/04/2017 which is applicable on searches conducted after 01/04/2017. Therefore, the ld. AO could not have acquired the jurisdiction u/s. 153C. Thus, this plea taken by the ld. Counsel is rejected. Addition u/s 69B - If any entry by a third party of cash received has been recorded then presumption is it his unaccounted money and burden is upon that person to explain that this money has come from the other person and has to substantiate that. It is then the burden shifts upon the other person, i.e., assessee here to prove that he has not given any money. Thus, uncorroborated information cannot lead to addition in the hands of the assessee, specifically when nothing has been brought on record as to what was the fate of that information or material found and what inference in the case of the searched person has been made; and whether that person has accepted as his own undisclosed income or as stated that all these on-money have come from respective persons specifying the details. Unless something is brought on record or AO conducts inquiry that the said person in whose possession it was found has given the details or has confirmed or AO founds some other information or material, addition cannot be made simply relying on uncorroborated data or entry in third party books. Thus, on merits, we do not find any justification for making an addition u/s. 69B for alleged payment of On-money in cash without any material evidence brought on record by the ld. AO during the course of assessment proceedings. Accordingly, on merits additions are deleted. Appeal of the assessee is partly allowed.

  ---

• 2023 (7) TMI 491
  Revision u/s 263 - As per CIT assessee had made incorrect claim of depreciation on Goodwill arising on amalgamation and incorrect claim of premium on redemption of debentures - HELD THAT:- We find that the expression Goodwill arising on amalgamation has been duly mentioned in the scheme of arrangement itself which has been approved by the Hon ble Bombay High Court. It is grossly incorrect on the part of the ld. PCIT to state that Goodwill was not mentioned in the scheme of arrangement. All these details were indeed filed before the ld. AO by the assessee and the ld. AO having taken due cognizance of the same and the accounting entries passed by the assessee company pursuant to the order of the Hon ble Bombay High Court approving the merger, had accepted the claim of depreciation on Goodwill of the assessee. Hence, it cannot be said that relevant enquiries were not carried out by the ld. AO with regard to this issue on depreciation of Goodwill. Goodwill in the instant case had arose on account of excess of takeover of liabilities over assets from the amalgamating company and it is part of consideration paid. Hence, the assessee would be entitled for claiming depreciation on Goodwill in view of the decision in the case of CIT vs. Smifs Securities Ltd., reported in[ 2012 (8) TMI 713 - SUPREME COURT] Hence, even on merits, assessee is entitled for depreciation on Goodwill. AO after taking due cognizance of all these documents and case laws had indeed taken a possible view in the matter, which in our considered opinion, is also the correct view in the eyes of law. Hence, the ld. PCIT could not invoke his revision jurisdiction to substitute his erroneous view on the matter in the place of view already taken by the ld. AO. Allowability of deduction of premium on redemption of debentures - It is pertinent to note that the claim of the assessee on accrual basis with regard to the premium on redemption of debentures equally over the period of debentures is strictly in accordance with the ratio laid down in the case of Madras Industrial Investment Corporation Ltd [ 1997 (4) TMI 5 - SUPREME COURT] Hence, it cannot be said that there was an inadvertent claim made by the assessee in A.Y.2013-14 on accrual basis. When the action of the assessee is in accordance with the decision of the Hon ble Supreme Court, the ld. AO accepting the said claim of the assessee by duly following the decision of the Hon ble Supreme Court , cannot be termed as erroneous order and it cannot be stated that the ld. AO had passed an order without application of mind warranting revision u/s. 263 of the Act by the ld. PCIT. In fact, the ld. AO had taken a correct view by allowing claim of the assessee on accrual basis in the A.Y.2013-14 as the said claim is in consonance with the decision of the Hon ble Supreme Court [Supra] PCIT was unjustified in invoking the revision jurisdiction u/s. 263 of the Act in respect of this issue of allowability of premium payable on redemption of debentures. Assessee appeal allowed.

  ---

• Customs

• 2023 (7) TMI 490
  Classification of export goods - Flexible Intermediate Bulk Containers - to be classified under Tariff Heading 39232990 or not - it was observed that for central Excise purpose the respondent had declared HS code of the subject goods under Chapter 39 and for the Customs purpose they declared HS Code under Chapter 63 - HELD THAT:- The decision in the matter of MESSERS CTM TECHNICAL TEXTILES LTD VERSUS UNION OF INDIA [ 2020 (12) TMI 1100 - GUJARAT HIGH COURT] Hon ble Gujarat High Court, dealt with the issue and distinguished the matter from RAJ PACK WELL LTD. VERSUS UNION OF INDIA [ 1989 (9) TMI 120 - MADHYA PRADESH HIGH COURT] as item was made from HDPE Strips/Taps and not from the HDPE fabric - the Hon ble Gujarat High Court found that item will be textile fabric if woven out of any material and same was not an issue before the Court in Raj Pack Well Ltd Vs. UOI case. The Hon ble Court accordingly held that woven fabric will be textile, irrespective of the method of weaving through any technique or material used in weaving, which may also be cotton, silk, rayon, nylon or of other description or made out of any other material. When such material is woven into fabric, what comes into existence is textile. As such, while in the matter of Raj Pack Well Ltd Vs. UOI the input material for HDPE sacks was derived from HDPE strips/tapes/sacks - In the present matter, it is a factum of same being woven which, inter alia qualifies to make it textile - like in the matter of M/s CTM Technical Textiles Ltd Vs. UOI the matter was remitted back to have a relook into the CBEC Circular No. 8/92 dated 24.09.1992 and CBEC and Trade Notice No. 78/94 dated 09.05.1994. While doing so the appellate authority shall consider the parameters laid down by the Hon ble Gujarat High Court in the aforesaid decision and also the relevant section notes and Chapter Notes relating to Chapter 39 as well as Section XI of schedule 1 of the Customs Tariff Act, 1975 as also the Chapter Notes relating to Chapter 54, 59, 60 and 63 to arrive at its decision, it shall also properly identify the product under dispute and whether the same is made from strips of up to 15mm or more. It is found that the EDI System indicates that both Flexible Intermediate Bulk Containers un-coated, as well as without mention of coating were imported during the relevant time, differential treatment may be required to be considered, if goods are different. Further while considering party s classification relating to Central Excise Tariff, the existence of analogous provision under the Customs Act shall also be considered. The EDI System indicates that both Flexible Intermediate Bulk Containers un-coated, as well as without mention of coating were imported during the relevant time, differential treatment may be required to be considered, if goods are different. Further while considering party s classification relating to Central Excise Tariff, the existence of analogous provision under the Customs Act shall also be considered. The observation relating to textile of Hon ble High Court of Gujarat in general, wherever relevant Chapter Notes and section notes are not available shall be duly followed. The matter is accordingly remanded for reconsideration - Appeal is allowed by way of remand.

  ---

• 2023 (7) TMI 489
  Denial of Exemption from payment of Basic Customs Duty - import of Titanium Dioxide (Rutile) - denial on the strength of Transferable DFIA License issued against Export of Glass Bottles by M/s. Piramal Glass Limited - eligibility to claim benefit of N/N. 98 of 2009 - HELD THAT:- The appellant has imported Titanium Dioxide (Rutile) which is not in dispute. The DFIA produced by the appellant are endorsed with transferability by the RA which establishes that the Export obligation has been discharged by the Exporter M/s. Piramal Glass Limited and the license has been made freely transferable by licensing authorities - As per the list of import goods permitted for duty free import, inter alia shows the input item Rutile is mentioned under the description of Glass Formers. It is not in dispute that Rutile refers to Titanium Dioxide as we observe from the technical references produced by the appellant. The ITC (HS) Code 32061900 mentioned in the DFIA against Rutile is fully covered by the import goods of Titanium Dioxide. In the present case, DFIA is issued post discharge of export obligation and endorsed with transferability. The Hon ble Bombay High Court in the case of SHAH NANJI NAGSI EXPORTS PVT. LTD. VERSUS UNION OF INDIA, MINISTRY OF COMMERCE INDUSTRY, DIRECTORATE GENERAL OF FOREIGN TRADE AND JOINT DIRECTOR GENERAL OF FOREIGN TRADE [ 2019 (4) TMI 146 - BOMBAY HIGH COURT] has already held that under post transferability of DFIA, there is no actual user condition exists in the DFIA License, which is further concurred by the Hon ble Allahabad High Court in the case of SACHIN PANDEY VERSUS U.O.I. THRU. SECY. MINISTRY OF COMMERCE INDUSTRIES AND ORS. [ 2019 (10) TMI 1057 - ALLAHABAD HIGH COURT] . Keeping in with the judicial decorum and discipline, the ruling rendered by the higher judicial forums are bound to be followed. There is no requirement of actual use of inputs and quantities for claiming DFIA benefit as held by this Tribunal in identical cases. It is agreed upon that as long as the imported goods are covered by the description, value and quantity of DFIA as per SION, DFIA benefits cannot be denied. The actual use of Titanium Dioxide Rutile in the resultant product is not necessary for claiming DFIA benefit so long as Rutile is mentioned in the SION and in the DFIA. The appellant is entitled to claim DFIA benefit under Custom Notification No. 98 of 2009 for their import of Titanium Dioxide (Rutile) as a glass former against the Export of Glass bottles under DFIA Scheme. The lower authorities are directed to issue a certificate as per Para 2.13.1 of Hand Book for the purpose of revalidation, if such a request is filed by the appellant - Appeal allowed.

  ---

• 2023 (7) TMI 488
  Valuation of imported goods - non-woven fabrics of seven different dimensions - rejection of declared value - redetermination of value - enhancement of value on the basis of difference in quantities between the import documents presented by the appellant and the documents obtained through the embassy of exporting country - defence of appellant not considered - violation of principles of natural justice - HELD THAT:- The learned Commissioner (Appeals) has contended that the appellant have not participated in the investigation and he has not considered the grounds of appeal in the appeal and he stated not to elaborate over and above the findings given in order-in-original - it appears that whatever defence was taken by the appellant, has been ignored and not considered properly by both the authorities below. The appellant can be given one opportunity to present their case with all the details and evidences to rebut the charges of the Revenue - matter remanded to the Adjudicating Authority for passing a fresh order after observing the principles of natural justice - appeal allowed by way of remand.

  ---

• 2023 (7) TMI 487
  Re-classification of imported goods - winches - requirement of compulsory registration with BIS as per IS:15885(Part 2/Section 13): 2012 or not - Confiscation - penalty - HELD THAT:- Since, the Tribunal in the first round of litigation has remanded the matter for a limited purpose of ascertaining the applicability of the Act and Rules framed by the BIS, which should only confine ourselves for discussing the issue as to whether the registration and other formalities are required to be complied with by the appellant in respect of the disputed goods imported by him. Since, the case of the appellant is governed under the un-amended Act of 1986 read with the Rules of 1987 and the order issued there under on 07.09.2012, the restriction of registration etc. brought into force later by amended Act w.e.f. 12.10.2017 cannot be imposed in respect of the goods imported by the appellant prior to such enactments took place in the statute. In a similar case, the co-ordinate bench in Chennai in the case of S.P. Associates and others [ 2021 (9) TMI 770 - CESTAT CHENNAI ] has held that Compulsory Registration Order (CRO), 2012 was issued under BIS Act, 1986 and BIS Rules, 1987 does not provide any regulation for the imported goods, as it has gone beyond the Act and Rules in imposing a restriction on imports. Thus, it was held that the restrictions imposed therein are not applicable to the goods imported from outside the country. In the said order, the Tribunal has also set aside the order of the lower authority in confiscating the goods and for imposition of penalty on the appellant. There are no merits in the impugned order, insofar as it has upheld the confiscation and imposition of penalty by the original authority - appeal allowed.

  ---

• 2023 (7) TMI 486
  Smuggling - Gold Biscuits - Ceilling fan motor of Pooja Brand which has no commercial value - veracity of the Appellant s claims that goods were procured legally - proper corroborative evidence not produced by Revenue - violation of principles of natural justice - HELD THAT:- There is no dispute that the Appellant was intercepted at Imphal Airport and three gold biscuits were recovered from him. The proceedings initiated by the Department resulted in the Show Cause Notice being issued to the Appellant as well as to Chhotelal Choudhury. The Department has heavily relied on the so called confessional statement of the Appellant. The only corroborative evidence cited is the Test Report by Assam Hallmarking Centre, Guwhati. The copy of such Test Report, is not made available anywhere in the entire proceedings to the Appellant - it is seen from the OIO that admittedly a letter of follow up investigation was sent to Jurisdictional Commissioner, Jaipur requesting them to conduct follow up investigation on the Appellant as well as on Chhotelal Choudhury. The OIO records at Para 17 that no reply was received from the Jaipur Commissionerate. Thus, it is clear that no follow-up investigation was taken up either against the Appellant or against the other noticee, Chhotelal Choudhury. Therefore, it is seen that the Department has proceeded solely relying on the purported confession statement of the Appellant without carrying out any further investigation to corroborate the Department s allegations. Reliance placed in the case of SHRI DALEEP KUMAR VERMA PROPRIETOR OF M/S. SHREEJI TRADERS MANUFACTURE, SHRI ROHIT KUMAR SURI AND SHRI KARAN SEHDEV PROPRIETOR OF M/S. K.S. TRADERS ENTERPRISES VERSUS COMMISSIONER OF CUSTOMS (PREVENTIVE) , SHILLONG [ 2023 (5) TMI 348 - CESTAT KOLKATA] where it was held that It is incorrect to rely only on the statements of the co-accused without any corroboration, to prove the smuggled nature of the gold. It is a settled law that the statement of the co-accused cannot be relied without any independent corroboration. - Even in the present case as can be observed from the factual matrix, the Department has not brought in any proper corroborative evidence and the proceedings initiated had many flaws resulting in non-following of principles of natural justices. Appeal allowed.

  ---

• Insolvency & Bankruptcy

• 2023 (7) TMI 485
  CIRP - Leased Aircrafts - The notice of default and termination sent by the Petitioners to Respondent/Go Air - Failure to deregister their Aircraft(s) in contravention of Sub-Rule (7) of Rule 30 of the Aircraft Rules, 1937 - seeking also to facilitate the export and physical possession of these Aircrafts. HELD THAT:- The provisions of the Aircraft Act, 1934 and the Aircraft Rules inter-alia provide that no person shall use and operate an Aircraft unless it is in accordance with the Aircraft Rules - Rule 5 of the Aircraft Rules provides for the registration etc. of an Aircraft and states that unless an Aircraft has been registered and it bears its nationality and registration marks on the Aircraft, it shall not be flown. Once an event of default has occurred and the Petitioners have terminated the Lease Agreement(s) and commenced the process of de-registration of the Aircraft, such Aircraft cannot be flown. The purport of Rule 30 (7) of the Aircraft Rules has been dealt with by a Coordinate Bench of this Court in the AWAS 39423 IRELAND LTD., WILMINGTON TRUST SP SERVICES (DUBLIN) LIMITED VERSUS DIRECTORATE GENERAL OF CIVIL AVIATION ANR. [ 2015 (3) TMI 1427 - DELHI HIGH COURT] wherein after analysis of the provisions of the Aircraft Rules, this Court held that the Respondent/DGCA has to proceed in accordance with Rule 30 (7) of the Aircraft Rules and the Court cannot interfere even on grounds of equity; keeping in mind, the protection of private business transaction law in India, international conventions such as Cape Town Convention must be followed; the disputes qua validity of the termination of the lease are not relevant for the purposes of deregistration and the contention that public interest will be impinged if the deregistration is granted is not a valid ground for refusal. The argument which is raised by the Respondents qua adjudication of the disputes before the NCLT and that this Court under its inherent powers in Article 226 of the Constitution of India, 1950, should not interfere with the CIRP process, cannot be sustained. The Petitioners before the Court seek a writ of mandamus against the Respondent/DGCA for breaching its duty as prescribed in the Aircraft Act and are well within their rights to do so. The scope and ambit of the powers of this High Court under Article 226 has been the subject matter of a catena of judgments. The provisions qua registration/deregistration of an Aircraft are inter-alia subject matter of the Aircraft Act and Aircraft Rules framed thereunder and the Petitioners have approached this Court alleging on a failure of the Respondent/DGCA to comply with these provisions and are well within their rights to do so - The NCLT and the NCLAT are statutory bodies constituted under the provisions of Sections 408 and 410 respectively of the Companies Act, 2013 and have the powers to adjudicate upon matters which relate to the IBC - prima facie, the IRP is not required to take control of the same under the provisions of the IBC. The Petitioners have made out a strong prima facie case in view of the provisions of the Aircrafts Rules as discussed herein. The balance of convenience is also in favor of the Petitioners. The Petitioners are suffering irreparable losses as the value of these Aircrafts are diminishing on a daily basis - There can also be no denial of the fact that the Aircrafts of the Petitioners are extremely valuable and highly sophisticated equipment and require regular maintenance for their preservation. The Petitioners, their employees, agents, officers and/or representatives shall be permitted by the Respondent/DGCA and the appropriate Airport Authorities to access the Airport(s) where the 30 Aircrafts are parked [details of the Aircraft(s) is reproduced in the table in paragraph 3.2 herein] inter alia to inspect their respective Aircrafts, within the next 3 days - Application disposed off.

  ---

• 2023 (7) TMI 484
  Application for initiation of CIRP - barred by time limitation or not - abatement of proceedings of sick units - exclusion of period during reference under Section 15 r/w Section 16 of SICA - entries in the balance sheets tantamount to acknowledgments of debt for purpose of extending the limitation or not - reliability on letter of of UTL/ Uniworth Group as an admission of acknowledgment of alleged dues - HELD THAT:- the Adjudicating Authority has discussed applicability of Section 14(1) of the Limitation Act, 1963, according to which the Financial Creditor had to prove that reference to BIFR by the Corporate Debtor was a wrong forum. The Adjudicating Authority held that BIFR was a correct forum and therefore, Section 14(1) and 14(2) of the Limitation Act, 1963 are not satisfied which would entitle the Appellant herein, to exclude the period of limitation. The Adjudicating Authority also referred to Judgment of Jignesh Shah [ 2019 (9) TMI 1121 - SUPREME COURT ] wherein it was held that a suit for recovery based upon a cause of action that is within limitation cannot in any manner impact the separate and independent remedy and the time can be extended in the manner only as provided in the Limitation Act. The Adjudicating Authority held that the time started in the present case from 20.11.2007 and time taken before the BIFR and DRT could not stop the time to run in this case - it is noted from Section 14 (1) of the Limitation Act, 1963 that in computing the period of limitation for any suit during which the plaintiff having prosecuting him in the court in good faith with due diligence against the defendant (the Respondent herein/ Corporate Debtor) shall be excluded. Whether filing a Petition by the Corporate Debtor before BIFR and subsequently order of AAIFR would be considered as appropriate forum or not and its subsequent impact on Limitation period? - HELD THAT:- It was the Corporate Debtor and not the Appellant herein, who moved the petition before the BIFR in 2004. There is no dispute that the Code came into existence only in 2016, hence the only forum available for the aggrieved party was BIFR initially and AAIFR as Appellant forum later. The Corporate Debtor moved the petition in 2004 and the same was dismissed by AAIFR vide order dated 22.05.2013 - it is already noted that AAIFR in its order categorically mentioned that the appeal No. 176/11 filed by the Corporate Debtor along with all proceedings relating to the reference of the Corporate Debtor pending before the BIFR stand abated. It is pertinent to note that in terms of Section 22 (5) of SICA, in computing the period of limitation for the enforcement of any right, privilege, obligation or liability, the period during which it or the remedy for the enforcement therefore remains suspended under the Section shall be excluded. By virtue of Section 22 of the SICA, sick industrial units get protection with respect to suspension of those legal proceedings. It is therefore, clear that the period of petition before BIFR and AAIFR, once abated by the competent Judicial Forum (AAIFR in present case) such period ought to have been excluded by the Adjudicating Authority. Based on this analysis the period up to the order by AAIFR dated 22.05.2013 should be excluded from counting the relevant period under Limitation Act, 1963. Whether the mere entry in the Balance Sheet of the amount of the outstanding debt should be taken as acknowledgment or only debt without any stigma or adverse note denying the liability should be taken as acknowledgment? - HELD THAT:- Mere entry in the Balance Sheet cannot be taken as unqualified acknowledgment of the debt. However, it may also not be correct to take every note or caveat regarding entries made in the Balance Sheet as ground to denying acknowledgement of debt in order not to extend the limitation period from such acknowledgment period. It is therefore desirable that while looking such entries of debt amounting to acknowledgment, one has to consider the overall scenario which may be evident from Director s Report, Auditor s Report, notes to the accounts etc. - It may also be relevant to consider the entire series of events starting from such loans/ debts to the filing of application under section 7 of the Code, to gauge the true intent of such entries and caveats, if any, which impact the intended acknowledgements or genuine denial of liability on part of the Corporate Debtor. While doing this examination, it may be worthwhile to look into the overall eco system of such transactions which may help in understanding the impact on limitation period based on such acknowledgements. From the entries in the Balance Sheet of 2016-17 and Director s Report it is clear that the debt indeed finds place in the Balance Sheet with admission as a Corporate Debtor that they are in process of negotiation with the term lenders for rescheduling/ restructuring. This establishes that the loan/ debt has been taken and acknowledged by the Corporate Debtor - On the face of these facts and recording by the management, it cannot be straight away considered as clear unconditional acknowledgement of debt. Therefore, this Appellate Tribunal would like to go into further records connected with the same debt i.e., pre 2016-17 Balance Sheet and post 2016-17 Balance Sheet with a view to understand whether such dispute has been recorded by the management from day one or can be construed as single/ few/ stray/ isolated caveats. On a quick perusal of perusal of various Balance Sheets from 2006-07 to Balance Sheets of 2013-14, this Appellate Tribunal do not find any apparent denial of debts by the Corporate Debtor - this Appellate Tribunal has to consider that there were acknowledgements of due in the Balance Sheets and the acknowledgement letter of the Corporate Debtor which would extend the limitation period, in terms of Section 18 of Limitation Act, 1963. The Adjudicating Authority erred in rejecting the application filed under Section 7 of the Code by the Appellant on the ground of limitation - case is remanded back to the Adjudicating Authority for decision on the merit of the application in accordance with the law - Appeal allowed.

  ---

• Service Tax

• 2023 (7) TMI 483
  Classification of Service - Commercial or Industrial Construction Service - indivisible Composite Works Contract - appellants have carried out Construction works under a Contract with M/s SIDCUL (State Industrial Development Corporation Uttrakhand Limited) - Extended period of Limitation - HELD THAT:- It is clear that the Contracts entered into by the appellant are not vivisectible between labour and material. Therefore, the case of the appellants is squarely covered by the judgment in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT] . The appellants have entered into composite contract with M/s SIDCUL and therefore are works contracts classifiable under Section 65 (105) (zzzza). Therefore, the same are chargeable to service tax from 01.06.2007. Demand for the period January 2005 to 01.06.2007 requires to be set aside. For the period after 01.06.2007, the demand being raised and confirmed under Commercial or Industrial Construction Service cannot also be sustained as the demand was not raised under Works Contract Service. Consequentially, the entire demand goes. The entire demand is not sustainable, other submissions of the appellant on the issue of work being in the nature of public utilities and hence not chargeable to service tax; limitation and imposition of penalties are not relevant. Appeal allowed.

  ---

• 2023 (7) TMI 482
  Manpower Recruitment and Supply Services - supply of skilled manpower - sharing of services of their corporate staff with the Sanmar group of companies - whether payment of proportional cost of salaries of these staff borne by the respective companies to the respondent can be stated to be a consideration as per Explanation (a) to Section 67 of the FA 1994 or has to be treated as reimbursement and not taxable in the light of the Hon ble High Court of Delhi s judgment in the case of Intercontinental Consultant [ 2012 (12) TMI 150 - DELHI HIGH COURT] - SCN hit by limitation of time or not. Exigiblity of the activity of sharing services of their corporate staff with group companies under the definition of manpower recruitment or supply agent - HELD THAT:- It is seen from the statute as it stood during the major part of the impugned period, which was from, April 2008 to January 2011, that there were two important changes made to the definition of Manpower recruitment or supply agency , altering its earlier scope. These changes signify the legislative intent to broaden the scope of the definition and to bring in an inclusive definition which is very broad from that of a narrower and more specific one. After these changes in the section, there can be no further ambiguity that the respondent action in deploying staff to its group companies was covered by it. It is hence concluded that the respondent sharing services of their corporate staff with the Sanmar group of companies is covered by the definition of manpower recruitment or supply agency as defined in Section 65(105)(k) of FA, 1994 read with section 65(68) ibid. Whether the payment of proportional cost of salaries of the staff borne by the respective companies to the respondent can be stated to be a consideration ? - HELD THAT:- A plain reading of Section 67 indicates that service tax is leviable only on the amount received as a consideration for the services provided or to be provided which would form part of taxable value for the purpose of service tax during the relevant time - The term consideration as defined in the section includes any amount that is payable for the taxable services provided or to be provided which is broad enough to include payments labelled as reimbursement under its fold. Once a nexus between the provision of service and payment is evident and it is determined that service has been provided in terms of the definition of the impugned service and payments made toward it are received from time to time, then the payments labelled as reimbursement come under the definition of consideration . The respondent does not deny this nexus but states that they have produced a Chartered Accountant s certificate before the adjudicating authority wherein it has been certified that what is received from the group company during the relevant period is only towards the reimbursement of actual expenses and there was no mark-up. Hence there is no consideration received so as to attract service tax. Attention invited to the Hon ble High Court of Delhi s judgment in the case of Intercontinental Consultant and Technocrats Pt Ltd [ 2012 (12) TMI 150 - DELHI HIGH COURT] which struck down Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 that attempted to tax reimbursement, on the ground that it is in conflict with Section 67 provides for inclusion of expenses reimbursed. Revenues appeal was dismissed by the Hon ble Supreme Court in Union of India vs Intercontinental Consultant and Technocrats Pvt Ltd [ 2018 (3) TMI 357 - SUPREME COURT] . In Desh Bandhu Gupta and Ors v. Delhi Stock Exchange [ 1979 (2) TMI 175 - SUPREME COURT] the Apex Court held that this principle can be invoked, though the same will not always be decisive on the question of construction. But the contemporaneous construction placed by administrative or executive officers charged with executing the statute, although not controlling, is nevertheless entitled to considerable weight as highly persuasive. To this effect the circular makes it clear that the motive for providing such manpower is of no consequence. The requirement for taxability is that the person should be engaged in an activity that is covered under Section 65(105)(k) ibid. The volume of activity undertaken or the presence or absence of the profit motive is irrelevant. There are no merits in treating consideration as a reimbursement which is not exigible to tax - the impugned order has erred in its conclusion and the respondent does not have a case on merits. Whether the show cause notice is hit by the limitation of time? - HELD THAT:- The extended period in terms of proviso to Section 73 (1) can be invoked only when there is fraud, collusion, wilful misstatement, suppression of facts, contravention of any of the provisions of this Chapter or of the Rules made there under with intent to evade payment of service tax. The Show Cause Notice is time barred, as none of the ingredients that are required for invoking the extended period of 5 years are present. It has been held by courts that appellate bodies should be mindful of the first-hand knowledge of the original authority and the position that he holds to assess the facts and the credibility of circumstances from his own observations. Even if a superior appellate body feels that another view is possible, that is no ground for substitution of the original authorities view with one s own by exercising its appellate jurisdiction. The exception would be if the impugned order is demonstrably found as not being rational or reasonable or is suffering from procedural impropriety which is not the case here - the SCN has been issued correctly under the extended period of time. Ahe appeal succeeds both on merits and on the show cause notice not being hit by the limitation of time.

  ---

• 2023 (7) TMI 481
  Refund of service tax - deposit by mistake for construction of individual/independent residential houses - refund rejected for the reason that service tax was payable to prior 01.07.2012 and had not been exempted w.e.f. 01.07.2012 and that they were also hit by unjust enrichment - HELD THAT:- A Division Bench of the Tribunal in AS SIKARWAR VERSUS COMMISSIONER OF CENTRAL EXCISE, INDORE [ 2012 (11) TMI 1000 - CESTAT, NEW DELHI ] also observed that service tax can be demanded only if the building concerned has more than 12 residential units in the building and such levy will not apply in cases where one compound has many buildings, each having not more than 12 residential units. It is true that w.e.f. 01.07.2012 construction of complex is a declared service, but the Exemption Notification exempts services by way of construction, erection, commissioning or installation of original works pertaining to a single residential unit otherwise than as a part of a residential complex have been exempted - the Commissioner (Appeals) was not justified in holding that the appellant would not be entitled to the benefit of the Exemption Notification. Principles of unjust enrichment - HELD THAT:- The Commissioner (Appeals) was also not justified in holding that the refund was hit by the principles of unjust enrichment. As per the work orders, service tax was to be borne by the appellant and the Commissioner (Appeals) has also found, as a fact, that the contract awarded by the Housing Board to the appellant mentions that service tax shall be borne by the contractor - The Allahabad High Court in COMMISSIONER OF CUSTOMS CENTRAL EXCISE SERVICE TAX VERSUS M/S. INDIAN FARMERS FERTILIZERS COOPERATIVE LTD. [ 2014 (7) TMI 891 - ALLAHABAD HIGH COURT ] held that a refund can be claimed by a person who has borne the incidence of tax. Even in accordance with the Exemption Notification dated 20.06.2012, 50% of the tax to be deposited by the Housing Board under the reverse charge mechanism was deducted by the Housing Board from the amount payable to the appellant. The Commissioner (Appeals) was, therefore, not justified in rejecting the refund claim of the appellant on the ground of unjust enrichment. The Commissioner (Appeals) also observed that the CENVAT credit for works contract services was admissible to the service receiver and, therefore, the Board may have taken the CENVAT credit and utilized the same for output services. It is for this reason also that refund was found to be not admissible - this was not a ground taken in the show cause notice and secondly, the Commissioner (Appeals) observed that the appellant may have taken the CENVAT credit and utilized the same for output services. The inference is based on conjectures and not on facts. The Commissioner (Appeals) could not have denied the refund on this account. Appeal allowed.

  ---

• 2023 (7) TMI 480
  Levy of Service Tax - support services of business or commerce - difference between the amount paid by the appellant to the Shipping Lines/Airlines and the amount recovered by the appellant from the customers (exporter/importers) called the mark-up for services provided by the appellant to the customers - negative list services or not - HELD THAT:- In MARINETRANS INDIA PVT. LTD. VERSUS CST, HYDERABAD - ST [ 2019 (4) TMI 534 - CESTAT HYDERABAD] , the Division Bench held after considering the Circular dated 12.08.2016 issued by the Central Board of Excise and Customs that buying and selling space on ships does not amount to rendering a service and any profit or income earned through such transactions would not be leviable to service tax. It follows from the aforesaid decision of the Tribunal that when the appellant merely trades in space on ships, it would not be providing any service and so no service tax can levied upon the appellant. It has, therefore, to be held that the Commissioner was not justified in confirming the demand. The impugned order passed by the Commissioner, therefore, cannot be sustained and is set aside - The appeal is, accordingly, allowed.

  ---

• Central Excise

• 2023 (7) TMI 479
  Invocation of extended period of limitation - High Court [ 2023 (1) TMI 638 - CESTAT NEW DELHI] set aside the demand holding that, the suppression of facts should be deliberate and in taxation laws it can have only one meaning, namely that the correct information was not disclosed deliberately to escape payment of duty HELD THAT:- This Court is not inclined to interfere with the impugned order of the High Court. Appeal dismissed.

  ---

• 2023 (7) TMI 478
  Demand of differential duty - reliance on statement of employee - significant , statement - Classification of goods manufactured and cleared by appellant - presence of fertilizing element - Tribunal has remanded back the matter for fresh adjudication - HELD THAT:- Apex Court refused to interfere. - However, the Adjudicating Authority is not to be influenced by any observation of the Tribunal regarding classification of the product while considering the matter afresh. Appeal disposed off.

  ---

• 2023 (7) TMI 477
  Classification of goods - plastic Tape strips - Woven Fabrics Woven Sacks - FIBC (flexible intermediate bulk carriers) - HDPE/PP/LDPE sacks - Bags and warp knit fabrics - CESTAT held that there are no hesitation in holding that the products manufactured by the Noticee deserve to be classified under Chapter Heading 54, 63 and 60. HELD THAT:- No case for interference is made out. The Civil Appeal is dismissed.

  ---

• 2023 (7) TMI 476
  Refund claim - value of the software is includable in the assessable value of hardware or not - denial on the sole ground that the Chartered Accountant s Certificate produced by the appellants - whether the appellants claim for refund of duty paid is hit by the bar of unjust enrichment? - HELD THAT:- On going through the contracts/purchase orders, it is seen that the same are for a value which is inclusive of Excise duty, Sales Tax, Fright/Insurance/ Packing/Forwarding, Documentation, Training charges, Octroi and any other charges; this indicates that the consideration paid by MTNL/BSNL is inclusive of taxes payable; in the schedule the value of software, for each of the hardware items, is indicted per unit and the total price thereof. However, in respect of the purchase order dated 12/02/2001 indicates under bill of material that the Excise Duty and Sales Tax payable for software, as at Row no. 1.3b and 1.5b, to be 0%. However, there is no indication whatsoever to show that such duty paid by the appellants was not reimbursed by their customers. The duty and the value are shown under Invoice no. 340 dated 12/12/2001. In addition to these, no other record or evidence has been produced by the appellants. To substantiate their claim of not passing on the incidence of duty under the circumstances, it is found that there is considerable force in the argument of the Revenue that the invoice issued under statutory provisions does not indicate that the incidence of duty has not been passed on. CESTAT, New Delhi in the case of INTERACH BUILDING PRODUCTS (P) LTD. VERSUS COMMR. OF C. EX., GHAZIABAD [ 2005 (1) TMI 208 - CESTAT, NEW DELHI] held that When they were paying the duty under protest, it is difficult to accept that they did not charge duty from their customers. They in fact indicated the duty separately in their invoices while clearing the goods with an intention to make it known to their customers/buyers, the duty involved on the cleared goods and requiring them to pay the same. There are no merit in the appeal filed by the appellants. In the result, the appeal is dismissed.

  ---

• 2023 (7) TMI 475
  Levy of Excise Duty - sugar syrup - captive consumption/intermediate goods - marketable goods or not - It appeared to the department that the sugar being marketable and having shelf-life due to adding of citric acid is excisable and that appellant is liable to pay duty on such intermediate products - HELD THAT:- The appellant has argued that it is not a marketable product. The department has not furnished any evidence to show that sugar syrup manufactured by appellant is a marketable product. The issue has been settled by the Tribunal in the case of M/S RISHI BAKERS PVT. LTD., SHRI PRAKASH CHAND TALREJA, DIRECTOR, M/S RAMAKRISHNA BAKERS PVT. LTD., SHRI RAJIV TALREJA, DIRECTOR, M/S SWATI BISCUIT MANUFACTURING CO., SHRI OM PRAKASH SHYAMDASANI, PARTNER VERSUS CCE ST, KANPUR [ 2015 (4) TMI 893 - CESTAT NEW DELHI] where it was held that Neither there is any evidence to prove that the goods, in question, are classifiable under 17029090 nor there is any evidence to prove that the goods, in question, in form in which they come into existence in the appellant s factories, are marketable. The department has not put forward any evidence to establish that the Sugar Syrup is the marketable product. The demand therefore cannot sustain and requires to be set aside - Appeal allowed.

  ---

• 2023 (7) TMI 474
  CENVAT Credit - provision for obsolence of inventory/stores for the period 2009-10 to 2011-12 made, but no reversal of Cenvat Credit availed on such inventory/stores during the said period in accordance with Rule 3(5B) of CCR - HELD THAT:- The provision of Rule 3(5B) covers the situation where the value of the inputs or capital goods is written off fully or partially before being put to use. Therefore when the value of capital goods, on which Cenvat credit has been taken, is written off fully or partially before being put to use then only Cenvat credit is required to be reversed. The words partially written off have been incorporated w.e.f. 1.3.2011 and before that date, unless it is complete written off, rule 3(5B) ibid had no application. The entire case rests on the fact whether the inputs which have been written off, are available in the factory and have been used subsequently in the manufacturing operations as claimed by the appellant - Admittedly in the instant matter Rule 3(5B) ibid itself provides for reversal when the capital goods, on which Cenvat credit has been taken, are not put to use and the total amount related to those goods is written off fully or partially. The Chartered Accountant s certificate is not corroborated by any documentary evidence except the inventory obsolesce account and/or SAP system on the basis of the which, the chartered accountant has certified that the items for which the provision for obsolesce of inventory made in FY 2011-12 has been written back in the subsequent years 2012-13 or 2013-14 or the period subsequent to 2015-2017 as covered by another periodical show-cause notice. Time and again it has been held that the Chartered Accountant s certificate is not primary document. The SAP entry, as per the learned counsel, itself shows the intention to use such disputed items in manufacturing process subsequently but as per the Tribunal s order dated 19.12.2017 the appellant was required to show, to the adjudicating authority, from the records that the obsolete stock was used and written back into the records on being sold on discharge of payment of duty. The appellant are under obligation to produce documentary evidence before the adjudicating authority. Learned counsel for the appellant tried to show some chart being copy of documents showing item wise working of the provision as was existing during the periods in issue, but it is deemed proper to leave it to the lower authority who is the appropriate authority to see whether this or the inventory obsolesce account are sufficient evidence/proof. Therefore, in the interest of justice, for the purpose of producing documentary evidence before the lower authority, another opportunity granted to the appellant and remanding the matter to the first appellate authority to decide the appeal afresh after following the principle of natural justice. The impugned orders, to the extent of their challenge herein, are set aside and the appeals to that extent are remanded to the learned Commissioner (Appeal) for a fresh decision after giving sufficient opportunity to the appellants for placing on record the documentary evidence in support of their claim - Appeal allowed by way of remand.

  ---

• 2023 (7) TMI 473
  Clandestine manufacture and removal - There was not manufacturing facility at the premises - noticee charged with Central Excise duty solely on the basis of certain declarations/ representations made to its customers and without it being shown that the said noticee is a manufacturer - penalty - HELD THAT:- The show cause notice dated 24.12.2010, which was the first show cause notice in the matter, had been issued by primarily relying on the representations to various power supply corporations by the appellant firm that she was the manufacturer of the goods supplied by her. After referring to the statements given during the course of investigations by the appellant firm s authorized representative, the said show cause notice had relied on the stipulations and conditions of the tender documents/ contracts - The appellant firm had also clarified that the factory at the Belilious Road premises lacked the infrastructure to manufacture any transmission line accessory or hardware equipment and that there was no testing facility inside the said premises. Surprisingly, in the adjudication order dated 29.02.2012, it had been held that upon investigation by the revenue authorities, manufacturing facility had been found at the Belilious Road premises, which had also been admitted by the noticee no. 2 in his statement dated 21.05.2010 and that no contrary evidence could be adduced by the noticees. Such findings had clearly been rendered in disregard of the inventory dated 08.02.2010 drawn up by the Central Excise officers, which established the point of lack of manufacturing facilities. The appellant firm s defence was further supported by the Chartered Engineer s Certificate filed in the subsequent stages. The enquiry and investigations leading up to issuance of the show cause notices dated 24.12.2010 and 24.03.2011, though giving rise to suspicion against the appellant firm, were insufficient to justify the confirmation of demands. Penalty - Notice demanding duty for the period 2005 to 2009-10 was issued on 24.12.2010 - HELD THAT:- Since they have not suppressed any information from the department, Notice cannot be issued by invoking extended period - It is observed that the Appellant has not taken any Central Excise Registration on the ground that the activities undertaken by them did not amount to manufacture. The investigation concluded that the activities amounts to manufacture and demanded duty by invoking extended period - the question of invoking extended period for demanding duty does not arise since the activities undertaken by the Appellant does not amount to manufacture - the question of alleging suppression and invoking extended period does not arise. Accordingly, penalty also not imposable on the Appellant as well as its Authorized Representative Shri Aayush Rungta. Appeal allowed.

  ---

• CST, VAT & Sales Tax

• 2023 (7) TMI 472
  Amnesty Scheme - Substantial amount paid prior to announcement of the amnesty scheme and even prior to assessment order passed by the Assessing Officer (change to Vera Samadhan Yojana - 2019) - HELD THAT:- It would emerge from the record that at the time of spot inspection and assessment at the place of the petitioner, the petitioner deposited an amount of Rs. 48,75,000/- on 01.07.2015 towards the amount of tax, however while passing assessment order, the concerned Assessing Officer had not taken into consideration the said amount and thereby held that the petitioner is liable to pay total amount of Rs. 77,77,575/- (including tax of Rs. 38,03,216/- + penalty and interest). Thus prima facie from the record, it is clear that the concerned Assessing Officer has not taken into consideration the amount of tax of Rs. 48,75,000/- paid by the petitioner. The petitioner, therefore, filed first appeal before the appellate authority. In the memo of appeal, the petitioner has specifically taken contention in Paragraph No. 9 that while passing an order of assessment on 29.06.2015, the concerned officer has not taken into consideration the amount of tax of Rs. 48,75,000/- paid by the petitioner and, therefore, he has wrongly calculated the amount of interest and penalty, which is not permissible - It is further reflected from the record that separate application for stay was also filed by the petitioner before the appellate authority and the appellate authority has considered the amount of Rs. 48,75,000/- paid by way of tax by the petitioner to the concerned respondent authority and, therefore, the appellant authority has granted stay on 25.05.2017 in favour of the petitioner against the recovery. It is also pertinent to note that against the aforesaid order passed by this Court, the State preferred SLP in STATE OF GUJARAT AND ANR. VERSUS SAFAL DEVELOPERS AND ANR. [ 2016 (10) TMI 1383 - SC ORDER] before the Hon ble Supreme Court and the Hon ble Supreme Court has dismissed the SLP preferred by the State and thereby the Hon ble Supreme Court has not interfered with the order passed by this Court in the aforesaid case. The respondents have committed an error while rejecting the application submitted by the petitioner under the amnesty scheme as the petitioner had already paid an amount of Rs. 48,75,000/- even prior to the order of assessment was passed by the concerned Assessing Officer and prior to announcement of the scheme - the petitioner is entitled to get the benefit of the scheme and remission of penalty and interest. The impugned communication dated 11.05.2022 at Annexure-A as well as the attachment order dated 20.06.2022 at Annexure-K are hereby quashed and set aside. The respondent no. 3 herein is hereby directed to grant benefit of the amnesty scheme to the petitioner - Petition allowed.

  ---

• Indian Laws

• 2023 (7) TMI 471
  Constitutional Validity of amendment to Section 25 of the CVC Act by the Central Vigilance Commission (Amendment) Act, 2021 and to sub-section (1) of Section 4B of the DSPE Act by the Delhi Special Police Establishment (Amendment) Act, 2021 and the amendment in clause (d) of Rule 56 of the Fundamental Rules, 1922 by the Fundamental (Amendment) Rules, 2021 - extensions granted to the tenure of the respondent No.2 as Director of Enforcement for a period of one year are legal and valid or not. HELD THAT:- In view of clause (d) of Section 25 of the CVC Act, as it existed prior to the amendment, it was provided that a Director of Enforcement shall continue to hold office for a period of not less than two years from the date on which he assumes office - Similarly, in view of Section 4B of the DSPE Act, the Director of CBI was required to continue to hold office for a period of not less than two years from the date on which he assumes office. It also provided that the Director shall not be transferred except with the previous consent of the Committee referred to in subsection (1) of Section 4A. What has been provided by the Amendments to the CVC Act and the DSPE Act is that the period for which such Director of Enforcement or the Director of CBI holds office on his initial appointment may, in public interest, on the recommendation of the Committee, which under the statutory scheme was required to recommend the appointment of such Director, for the reasons to be recorded in writing, be extended up to one year at a time. The second proviso provides that no such extension shall be granted after the completion of a period of five years in total including the period mentioned in the initial appointment. The role of the judiciary is to ensure that the two organs of the State i.e. the Legislature and the Executive function within the constitutional limits. Judicial review is a powerful weapon to restrain unconstitutional exercise of power by the legislature and executive. The role of this Court is limited to examine as to whether the Legislature or the Executive has acted within the powers and functions assigned under the Constitution. However, while doing so, the court must remain within its self-imposed limits. In ASHOK KUMAR THAKUR VERSUS UNION OF INDIA ORS [ 2008 (4) TMI 775 - SUPREME COURT] , this Court has held that the statute enacted by Parliament or a State Legislature cannot be declared unconstitutional lightly. To do so, the Court must be able to hold beyond any iota of doubt that the violation of the constitutional provisions was so glaring that the legislative provision under challenge cannot stand. It has been held that unless there is flagrant violation of the constitutional provisions, the law made by Parliament or a State Legislature cannot be declared bad. It has been the consistent view of this Court that legislative enactment can be struck down only on two grounds. Firstly, that the appropriate legislature does not have the competence to make the law; and secondly, that it takes away or abridges any of the fundamental rights enumerated in Part III of the Constitution or any other constitutional provisions. It has been held that no enactment can be struck down by just saying that it is arbitrary or unreasonable. Some or the other constitutional infirmity has to be found before invalidating an Act. It has been held that Parliament and the legislatures, composed as they are of the representatives of the people, are supposed to know and be aware of the needs of the people and what is good and bad for them. The court cannot sit in judgment over their wisdom. It could thus be seen that the challenge to the legislative Act would be sustainable only if it is established that the legislature concerned had no legislative competence to enact on the subject it has enacted. The other ground on which the validity can be challenged is that such an enactment is in contravention of any of the fundamental rights stipulated in Part III of the Constitution or any other provision of the Constitution. Another ground as could be culled out from the recent judgments of this Court is that the validity of the legislative act can be challenged on the ground of manifest arbitrariness - In the present case, it is nobody s case that Parliament did not have power to enact on the subject on which the aforesaid Amendments have been enacted. As such, the said ground is not available to the petitioners. Violation of fundamental rights stipulated in Part III of the Constitution or any other provision of the Constitution or not - HELD THAT:- The Committee which recommends appointment of the Director of Enforcement consists of the Central Vigilance Commissioner as well as the Vigilance Commissioner. It is to be noted that this Court in the case of VINEET NARAIN ORS. VERSUS UNION OF INDIA [ 1997 (12) TMI 615 - SUPREME COURT] directed a Selection Committee for appointment to the post of Director of Enforcement headed by the Central Vigilance Commissioner, and including the Home Secretary, Secretary (Personnel) and Revenue Secretary. However, Section 25 of the CVC Act provides for a Committee, which, apart from aforesaid three Members also includes the Vigilance Commissioners - It could thus be seen that the constitution of the Committee for appointment of Director of Enforcement is wider than what is ordered by this Court in the case of Vineet Narain and consisting of Central Vigilance Commissioner as well as Vigilance Commissioners. It is, thus, clear that it is not at the sweet-will of the Government that the extensions can be granted to the incumbents in the office of the Director of CBI/Director of Enforcement. It is only on the basis of the recommendations of the Committees which are constituted to recommend their appointment and that too when it is found in public interest and when the reasons are recorded in writing, such an extension can be granted by the Government - the arguments that the impugned Amendments grant arbitrary power to the Government to extend the tenure of the Director of ED/CBI and has the effect of wiping out the insulation of these offices from extraneous pressures, cannot be accepted. Whether the impugned orders dated 17th November, 2021 and 17th November 2022, which grant extension for a period of one year each, are valid in law or not? - HELD THAT:- This Court, in fact, observed that the Government has a power to appoint a person as Director of Enforcement for a period of more than two years. This Court found that Section 25 of the CVC Act cannot be said to be inconsistent with Section 21 of the General Clauses Act. It is not, as if, that this Court has held that the Government had no power to make an appointment beyond the period of two years. By the impugned Amendments, the position is clarified, the challenge to which, we have found to be unsustainable - the impugned orders dated 17th November 2021 and 17th November 2022 granting extensions to the tenure of the respondent No.2- Sanjay Kumar Mishra for a period of one year each are held to be illegal. The writ petitions are partly allowed to that extent. Petition disposed off.

  ---