TMI Tax Updates - e-Newsletter
August 11, 2023
Case Laws in this Newsletter:
GST
Income Tax
Benami Property
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Recovery of dues from the partners of the partnership firms - Service of the other - the petitioners have filed the appeals only after the orders of recovery have been passed though being aware and being manually served with the orders - therefore merely because the orders were subsequently uploaded will not render or save their appeals from the same having been time barred especially when recovery proceedings have already been done and orders to debit freeze accounts have been made - HC
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Income Tax:
Validity of Reopening of assessment u/s 147 - Valid approval u/s 151 or not? - If only PCIT had read the report carefully, he would have never come to the conclusion that there is any material before him to treat it as a fit case to issue notice u/s 148 or pass order u/s 148A(d) - The safeguards provided in Sections 148 and 151 were lightly treated by CIT and PCIT - Both of them appear to have taken the duty imposed on them under these provisions as of little importance. - Notice quashed - HC
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Income Tax:
Condoning the delay in filing the refund application - Power of CIT to ascertain merit in the claim while considering the application for condonation of delay u/s 119 - The Income Tax authority which is empowered to condone the delay in filing the application for refund is to ensure itself that the claim of the assessee is genuine and bonafide. - Petition dismissed - HC
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Income Tax:
Unexplained jewellery - The arguments raised on behalf of the Revenue on the basis of reference to Section 110 of the Evidence Act, which provides that where a person is found in possession of anything the burden of proving that he is not the owner is on the person who affirms that he is not the owner, is not applicable to the facts as in the case in hand with regard to the claim of assessee that the jewellery was family jewellery and a part of which has been disclosed as unaccounted income by the husband, justifies and explains her claim. - AT
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Income Tax:
Addition u/s. 69B - penny stock - mere suspicion that the assessee has invested in alleged penny stock scrip cannot be made basis of addition u/s. 69B of the Act. In the absence of any material evidences to corroborate the information received from DDIT that M/s. Vas Infrastructure Ltd. is a penny stock, we find no justification in upholding the addition made by the A.O - AT
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Income Tax:
Assessment of trust - healthcare / medical services - surplus out of Pharmacy store - charitable activity u/s 2(15) - the income accrued from Pharmacy store is incidental to the dominant object of running Hospital by the Assessee, hence, the action of the AO is not justified in treating the Pharmacy store of the Assessee as separate business entity and the profits therein as taxable income. - AT
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Income Tax:
Addition u/s 69A - cash seized from the residence of the assessee - the availability of cash should not have been doubted as unexplained. It is also pertinent to mention here that when the search took place on the date of Diwali at the residence of the assessee, it is unbelievable that the assessee cannot have a single rupee since the lower authorities have not even given credit of a single rupee. - AT
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Income Tax:
Determination of value of royalty through a Valuation Report of an expert - In case, AO was not satisfied or convinced with the Valuation Report of the expert valuer, proper course for him would have been to seek opinion of a second valuer on the Valuation Report furnished by the assessee. Instead of doing that, the AO has taken it upon himself to undertake the exercise on valuation of the royalty. This, in our view, is totally erroneous and against settled legal principles. - AT
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Customs:
Classification of roasted areca nut / betel nut (whole/cut/split) - Roasted betel/areca nut having been specifically classified under CTH 2008 19 20, the attempt to classify under CTH 08 02 80 would fall foul of the settled rule of construction that specific entry would prevail over general entry. - The finding of the Advance Rulings Authority stands affirmed - HC
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Indian Laws:
Condonation of delay in filing the response to notice - Dishonour of Cheque - There was no prayer for condonation of delay in present complaint. But foundation is there. Complainant has pleaded why notice was sent by U.P.C. During evidence, he has also produced the envelopes which were unclaimed. This Court feels that the litigant should not suffer for want of necessary prayers for condonation of delay. - HC
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Indian Laws:
Dishonour of Cheque - insufficiency of funds - The Session Judge totally overlooked the fact that Sec 139 N.I Act clearly includes a presumption that there exists a legally enforceable debt or liability. However the presumption is rebuttable by the accused. There is no such requirement of the complainant to discharge his initial burden of proof as held by the Session Judge. - HC
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IBC:
Rights of promoters - Failure to fulfill the obligation of construction of flats - the Promoters cannot derive any benefit out of the order of the NCLAT which is a common order in which they were one of the appellants and it is the flat buyers who are really the interested parties who have agreed to settle in the aforesaid terms - any claims or rights of the Promoters which they may seek from the NCLAT order impugned is closed. - SC
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IBC:
CIRP - Demand of VAT - Validity of impugned assessment orders, assessment notices and demand notice - As per the position of law declared in the case of Ghanshyam Mishra, in case of all such debts owed to the Central Government, any State Government or any local authority including tax authority, once a resolution plan is approved all such claims etc which were not a part of the resolution process shall stand extinguished. - Assessment orders and Demand quashed - HC
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IBC:
Admission of application for CIRP - Period of limitation - An admission, is the best peace of evidence, which can be used against the Maker, and this can be taken advantage of, by a Party, which places reliance, so as to bind, the said Maker. - An admission, is not a self serving statement, but it is a self harming one. - It cannot be forgotten that the Corporate Debtor, had acknowledged the Debt, by offering One Time Settlement Proposal - Application was rightly admitted by the NCLT - AT
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IBC:
CIRP - Legality of admitting Section 7 Application - Existence of Financial Debt - Scope of Article of association - Delegation of power to Directors / Borrowing Powers of Directors. - If the Articles, have a provision which ‘prohibited the Directors’, from ‘delegating their power’, to ‘Borrow Monies’, does not prevent them from ‘empowering one of the Directors’, to execute a ‘Mortgage Deed’. - AT
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Service Tax:
Levy of Service tax - declared services or not - penal interest and bouncing charges - The impugned order holding that penal interest and bouncing charges received by the appellants as “consideration” for “tolerating an act”, and are leviable to service tax under section 66E(e) of the Finance Act, 1994, cannot be sustained. - AT
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Central Excise:
Classification of service - photography service or not - the activity undertaken by the appellant for preparation of Election Photo Identity Card, does not qualify under “Photography Service”. - AT
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VAT:
Default in payment of Tax by the Company - Charge levied on personal properties of Directors (for default of company) - the attachment of the properties is beyond the reach of the taxation authorities in light of being the personal properties of the Director and the fact that they have been sold by a registered sale deed prior to the exercise of undertaking any proceedings of attachment or creation of a charge, the only option open, if the authorities were of the opinion that the sale was with a view to defraud the government, is to file a civil suit - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2023 (8) TMI 524
Recovery of dues from the partners of the partnership firms - Service of the other - Inability to file appeal - Rejection of refund claim twice in two separate claim for the same period and matter - absence of uploading of the Orders-In-Original (but communicated manually) - Refund of Unutilized Input Tax Credit - Section 107 of the Central Goods and Services Tax Act, 2017 (CGST) and Rule 108 of the Central Goods and Services Tax Rules, 2017 and related provisions. Were the petitioners prevented from filing their appeals through the electronic mode merely because the orders were not uploaded, when it is undisputed that the petitioners otherwise were communicated the orders and had received the same manually? HELD THAT:- Reading Section 107 indicates that any person aggrieved by any decision or order passed under this Act may appeal to the Appellate Authority as may be prescribed within three months from the date on which the said decision or order is communicated to the person. The Appellate authority has power if sufficient cause is shown that the appellant was prevented from filing an appeal within three months then it can allow a further period of three months - Rule 108 provides that the appeal has to be filed in the form either electronically or otherwise as may be notified. That no other mode is notified and the only mode is an electronic mode is accepted. (the old rule, before amendment shall apply in present case). Section 169 talks about service of notice in certain circumstances. Reading the Section indicates that any decision or order shall be served by giving or tendering it directly or by a messenger including a courier to the addressee of the taxable person. Section 37C also provides that any decision shall be served by tendering the same to the person to whom it is intended to be so served. Heavy reliance is placed by the learned counsel for the petitioners on the judgement of this Court in the case of Gujarat Petronet [ 2020 (9) TMI 427 - GUJARAT HIGH COURT] . Reading the judgement in its entirety would indicate that the petitioner therein could not file an appeal due to technical glitches on the portal - Reading the judgement indicates that firstly the order was not uploaded and that there were technical glitches so also appeal could not be filed. The order was served manually. The only question that the Court decided is whether the limitation would begin to run from the date of service of the manual copy of the order or the uploaded one. The court therefore was only considering the question of counting of limitation in filing the Appeal - Here too, the order was served manually and the appeal was filed manually and therefore the Court observed that the only mode available is of filing the appeal electronically which can be availed of only when order is uploaded. The judgement cannot be read to mean that no appeal can be filed at all unless the order is uploaded. The purpose of the judgements are only to consider the question of limitation. The Bombay High Court recently had an occasion to consider this issue in the case of Meritas Hotel [ 2021 (12) TMI 376 - BOMBAY HIGH COURT] . The point for consideration was whether in the facts of the case the period of limitation for the purpose of filing the appeal under Section 107 of the Act would commence from the date of service upon the petitioner of the scanned copy or from the date of uploading - In para 12 of the judgement, it has been held that Rule 108 no doubt prescribes that the appeal has to be filed electronically, but it nowhere prescribes that the same is to be filed only after the impugned order is uploaded on the GSTN Portal. The date of communication of the order by email was taken as the date of communication of the order for the purposes of limitation. The Bombay High Court held that the decision in Gujarat Petronet was rendered in a different situation. The authorities therein could not upload the order due to the technical glitches. The Bombay High Court held that once the assessment order had become final as the petitioner had only applied for a copy of the order after the recovery proceedings were initiated, he had lost his statutory right to appeal. In the present case, in both the petitions namely in Special Civil Applications No. 4876 and 5731 of 2023 , the petitioners have filed the appeals only after the orders of recovery have been passed though being aware and being manually served with the orders dated 31.3.2021 and 29.4.2021 and therefore merely because the orders were subsequently uploaded will not render or save their appeals from the same having been time barred especially when recovery proceedings have already been done and orders to debit freeze accounts have been made in exercise of powers under Section 79 of the CGST Act and not as submitted by the learned advocate for the petitioner, under Section 83 of the Act. Section 79(1)(c) of the CGST Act empowers the department to directly debit the amount lying in the bank accounts. As far the case of the partners in these petitions to contend that they are now not liable, Section 90 of the CGST Act provides that the firm and each of the partners of the firm shall be jointly and severally liable for any dues. The section has been a part of the reproduction of the reply in this part of the judgement and hence is not so reproduced. Petition dismissed.
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2023 (8) TMI 523
Confiscation of vehicle - evasion of tax - it is alleged that the petitioner had connived with the transporter to avoid tax - HELD THAT:- The connivance by the petitioner, who is the registered owner of the subject vehicle with the transporter in tax evasion could be a jurisdictional question for imposition of a tax liability either under Section 129 or 130 of the CGST/KGST Act. There must be complete adjudication on such question in a manner that would pass muster in law before other questions are examined. As such, this Court is of the considered opinion that the fifth respondent must reexamine the afore question with due opportunity to the petitioner to respond to the material that the fifth respondent may rely upon against the petitioner. This Court must observe that the fifth respondent, while deciding the question of connivance, may also take note of deliberate attempt, if any, to withhold the information. The petition stands disposed of observing that the impugned confiscation order dated 17.04.2021 [Annexure-D] will be subject to the outcome of the further enquiry by the fifth respondent the Assistant Commissioner of Commercial Taxes, Enforcement as hereby permitted on the question of the petitioner s connivance in tax evasion in the use of the subject vehicle during the relevant time - petitioner to avail due opportunity shall, without further notice, appear before the fifth respondent on 13.03.2023.
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Income Tax
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2023 (8) TMI 522
Reopening of assessment u/s 147 - mandation of disposal of objection against reopening - reason to believe - HELD THAT:- If the order deciding the objections is perused, the same does not state that the facts mentioned by the petitioner were incorrect. In fact, no reasons whatsoever have been assigned and it is reiterated that the petitioner failed to declare any profit/ loss in the income tax return and hence the amount was treated as profit on the sale of shares. As stated above, despite specific objection that the said amount had been debited in the bank account of the petitioner and it pertained to the losses sustained in commodity trading having been shown in the accounts for the Financial Year 2011-12, Assessment Year 2012-13, it becomes clear that the objections have been decided without due application of mind. As held by the Hon ble Supreme Court in GKN Driveshafts (India) Ltd [ 2002 (11) TMI 7 - SUPREME COURT] the objections as raised have to be disposed of by a speaking order that could indicate due application of mind. As stated above, there are no reasons whatsoever assigned for turning down the objections and the facts stated in the notice dated 24/3/2020 are reiterated. It is seen that alongwith the objections dated 13/9/2021 copy of the account statement for the Financial Year 2011-12 was also attached. Same has not even been referred to while disposing of the objections on 17/9/2021. In M/s. Shodiman Investments Pvt. Ltd [ 2018 (4) TMI 1287 - BOMBAY HIGH COURT] it is held that application of mind has to be indicated while forming reasons to believe that income chargeable to tax has escaped assessment. It is also to be noted that by issuing subsequent notice, the ITO has sought further information from the petitioner which information does not form the basis of the reasons assigned for re-opening the proceedings. The notice dated 24/3/2020 issued u/s 148 seeking reopening of the assessment is based on incorrect facts. The objections raised by the petitioner pointing out the relevant facts including the proper Assessment Year to which the said transaction pertained being Assessment Year 2012-13 coupled with the fact that the amount of Rs. 9,90,314/- that was stated to be the amount being profit from the sale of shares having been explained to be the amount of loss, the objections having been decided without any speaking order and not dealing with the undisputed factual aspects leads to the conclusion that the re-opening of the assessment is without there being any reason to believe that the income has escaped assessment. In these facts, the notice dated 24/3/2020 suffers from fundamental factual errors. Decided in favour of assessee.
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2023 (8) TMI 521
Condonation of delay of 2139 days in filing the Appeal against the order of ITAT - as explained petitioner came to know that the Tribunal erred in dismissing the appeal [ 2016 (10) TMI 1264 - ITAT CHENNAI] as being repetitive, only on receipt of the order of Income Tax Appellate Tribunal [ 2022 (9) TMI 286 - ITAT CHENNAI] , involving the same issue for other years - HELD THAT:- We find that the inordinate delay in filing the present Tax Case Appeal is neither due to paucity of time in view of the financial crisis and the proceedings under the IBC nor due to lack of knowledge of the error in dismissal of the appeal as being repetitive, but due to negligence. Secondly and importantly, we find that the reasons adduced are preposterous and lack bonafide inasmuch as the submission of the petitioner that it came to know that the dismissal of [ 2016 (10) TMI 1264 - ITAT CHENNAI] as repetitive, is incorrect and untrue for the reasons setout at paragraphs 5 to 7 of the affidavit filed in support of the Miscellaneous Petition, filed before the ITAT to reopen assessment would clearly reveal that the petitioner realised the error and after taking steps to redress the error/grievance by filing a miscellaneous petition before the Tribunal to restore, did not pursue it any further on its rejection. Having found that the reasons adduced are untrue and lacking bonafide we do not intend to exercise our discretion to condone the delay for it is trite law that while examining whether there was sufficient cause for the delay, the Courts would consider if the petitioner had been diligent and acted bonafide. We find that there is an inordinate delay of 2139 days and the reasons adduced are not convincing rather show that the petitioner was negligent, lethargic and casual in availing the remedy of appeal. More importantly, we are not convinced with the bonafide of the petitioner who had raised grounds which apart from being untrue, are mutually destructive and thus unacceptable. Yet another reason which would prompt us to observe that the miscellaneous petition lacks bonafide, apart from the fact that the reasons set out in the affidavit do not convince us, is that the present miscellaneous petition is apparently filed with a view to take advantage of the order of the Tribunal made pursuant to the order of this Court in the case of M/s.Marg Ltd. V. CIT [ 2020 (10) TMI 102 - MADRAS HIGH COURT] resulting in the claim of the petitioner under Section 14A of the IT Act, being accepted in terms of the above decision of this Court. Having succeeded for the other assessment years, the petitioner is now attempting to resurrect the appeal after almost 5 years, which we would think, does not deserve any consideration. We find that the petitioner was not vigilant rather negligent and there is lack of bonafide even in explaining the delay. Petitioner had failed to demonstrate that there was sufficient cause for the delay of 2139 days in filing the Tax Case Appeal.
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2023 (8) TMI 520
Assessment u/s 153A - disallowance u/s 40(a)(ia) - non deduction of TDS on sub-contractors payments - Whether incriminating material found in the course of search? - HELD THAT:- The assessee had not kept his income undisclosed for the assessment year 2011-12. The statements of the subcontractors belonging to the Naga tribe were recorded and their statements have not been contradicted or controverted by the Assessing Officer. It was also not controverted that since the work was done by the Naga sub-contractors, therefore there was no requirement of deduction of tax at source, as their income is exempted u/s 10(26) of the I.T. Act. The subcontractors, through their statements both oral and written, have affirmed that the work was done by them for the assessee through M/s Meitei with the understanding to pay 2% commission from the payment of the assessee. Through concurrent decisions by CIT(A) as well as by the ITAT, it was held that no incriminating material was found in the course of search. It was also held that the assessment framed u/s 143(1) of the Act for the assessment year 2011-12, which was unabated/concluded assessment, deserves to be undisturbed in the absence of any incriminating material found in the course of search. As decided in Abhisar Buildwell P. Ltd. [ 2023 (4) TMI 1056 - SUPREME COURT ] no addition can be made in respect of the completed assessments in absence of any incriminating material. in the facts of the present case where inference drawn from the Ledger/Books of Accounts found during the search is similar to the case of CIT v. Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT ] is thus answered in the affirmative. It is also held that the ITAT, Guwahati Bench was justified in deleting the disallowance u/s 40(a)(ia) of the I.T. Act, by holding that the proceeding u/s 143(1) is an assessment which is concluded and unabated and it cannot be disturbed as the Ledger/Books of Accounts and the statements recorded, during the search do not constitute incriminating material. Decided in favour of assessee.
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2023 (8) TMI 519
Validity of Reopening of assessment u/s 147 - Valid approval u/s 151 or not? - as argued notice issued u/s 148 was wholly without jurisdiction as it does not meet the pre-requisite conditions stipulated under the amended scheme of reassessment - also approval granted u/s 151 by the specified authority reflects non application of mind - HELD THAT:- Having considered the approval u/s 151 we are satisfied that there is no valid sanction. There is no evidence that PCIT has even granted any valid sanction. If respondents say there was a sanction by respondent No. 2, then it is an obvious case of utter non-application of mind because he would otherwise have not granted sanction if he had only read and applied his mind to what is stated in box 9, i.e., the time limit for current proceedings covered under is stated to be u/s 149(1)(b), or he would have sent it back to respondent no. 1 refusing to grant approval. It also goes to say that even respondent no. 1, who has sought approval, has not applied his mind. We are of the opinion that if only respondent No. 2 had read the report carefully, he would have never come to the conclusion that there is any material before him to treat it as a fit case to issue notice under Section 148 of the Act or pass order u/s 148A(d) - The safeguards provided in Sections 148 and 151 were lightly treated by respondent nos. 1 and respondent No. 2. Both of them appear to have taken the duty imposed on them under these provisions as of little importance. On this ground alone, the order passed u/s 148A(d) and notice issued u/s 148 of the Act have to be quashed and set aside. Decided in favour of assessee.
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2023 (8) TMI 518
Stay of demand - contention of the petitioner is that he has submitted four replies on different dates thereby proper explanation was submitted, but the respondent was not satisfied and issued the assessment order - respondents claim that the sellers from whom the purchase made were not filed their income tax returns and hence the respondents claim it as doubtful transaction - HELD THAT:- This Court has given its anxious consideration. Even though, prima facie this Court is of the considered opinion that the petitioner is not liable to submit any evidence to prove the seller s return and other particulars of the seller, this Court is not inclined to pass order on merits, when the statutory appeal is pending. Question remains is whether the petitioner is liable to pay 25% of the demand. Since prima facie this Court is of the opinion the petitioner is not liable, consequently the petitioner is not liable to pay the 25% demand, more so when the statutory appeal is pending before the appellate authority. However, it is made clear that only for the limited extent to decide the payment of 25% demand, this Court is of the considered opinion that the petitioner is not liable to submit seller s stock register. The appellate authority shall consider the issue on its own merits, uninfluenced by the observation of this order. This Court is inclined to grant stay of the demand notice alone. It is made clear that it will not affect the rights of the petitioner as well as the department to consider the issue on own merits. The appeal shall be considered within a period of six months from the date of receipt of a copy of the order.
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2023 (8) TMI 517
Condoning the delay in filing the refund application - application filed by the petitioner u/s 119(2)(b) of the IT Act has been rejected by CIT(A) - petitioner submits that the Commissioner of Income Tax instead of considering the application of the petitioner for condonation of delay on merit has considered the whole case on merit, and rejected the claim without condoning the delay - HELD THAT:- Circular No. 9/2015 dated 09.06.2015 prescribes the conditions for condonation of delay in processing the claim for refund by an assessee. The powers of acceptance or rejection of the applications within the monetary limits, had been delegated to the Principal Chief Commissioner of Income Tax - The aforesaid circular further provides that a belated application for supplementary claim of refund can be admitted for condonation provided other conditions as referred to above, are to be fulfilled. It is not in dispute that the circular issued by the CBDT are binding on the Income Tax authorities. Paragraph 5 of circular No. 9/2015 mentioned above specifically provides that the authority is required to show that the income/loss declared and/or refund claimed is correct and genuine and also that the case is of genuine hardship on merits. Therefore, the Income Tax authority which is empowered to condone the delay in filing the application for refund is to ensure itself that the claim of the assessee is genuine and bonafide. Therefore, find not much substance in the submission of petitioner that the commissioner was not required to enter into the merit of the claim of the petitioner and he should have confined himself to the genuine hardship of the petitioner while considering the application for condoning the delay in filing the application. Even otherwise when the circular itself provides that the claim of the assessee has to be considered and the authority is required to reach to the satisfaction as to the genuineness of the claim, then only the question of condoning the delay in filing the refund application arises. Therefore, no substance in this writ petition, which is hereby rejected.
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2023 (8) TMI 516
Deemed dividend u/s 2(22)(e) - loan and advances obtained from company - CIT(A) allowed assessee's appeal holding that assessee shareholder had given loan to the company and it cannot be taxed as deemed dividend - ITAT confirmed deletion of addition - HELD THAT:- It is not in dispute that the CIT(A) has recorded that assessee had advanced Rs.13.62 Lakhs to the company. It is also not in dispute that AO has noticed that assessee had withdrawn Rs.8.52 Crores. Thus, neither the order passed by the AO nor the CIT(A) nor the ITAT clearly show as to how much amount was advanced by the assessee and how much was repaid towards loan. In the absence of specific finding regarding repayment of loan, the amount drawn by assessee will have to be treated as dividend under Section 2(22)(e) of the Act. Thus we are of the opinion that assessee's claim that he had given loan to the company and received corresponding payment by the company towards repayment of loan has to be correctly determined. The ITAT is the last fact finding authority. We deem it appropriate to remand the matter to ITAT for re-consideration - Appeal of revenue allowed for statistical purposes.
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2023 (8) TMI 515
Unexplained jewellery - search and seizure operation concluded - AO observed that the assessee is income tax payee and return income is below taxable limit. She admitted issues not wealth Tax for assessee. The sources of jewellery was informed from savings and gifts - HELD THAT:- As jewellery which was seized in the hands of assessee was found to be part of the jewellery surrendered by father-in-law of the assessee. In the case of Shri Hitesh Mittal [ 2022 (2) TMI 435 - ITAT DELHI] another Coordinate Bench has taken note of the order in the case of Pallavi Mittal [ 2021 (9) TMI 1335 - ITAT DELHI] and has again concluded that balance seized jewelleryin the hands of Hitesh Mittal, son of Shri S.C. Mittal stood accounted being part and parcel of jewellery surrendered by Shri S.C. Mittal. Learned DR could not bring on record anything to show that these factual findings were disputed, hence, this Bench is inclined to follow the same. The arguments raised on behalf of the Revenue on the basis of reference to Section 110 of the Evidence Act, which provides that where a person is found in possession of anything the burden of proving that he is not the owner is on the person who affirms that he is not the owner, is not applicable to the facts as in the case in hand with regard to the claim of assessee that the jewellery was family jewellery and a part of which has been disclosed as unaccounted income by the father in law, justifies and explains her claim. Accordingly, the addition made in the hands of assessee cannot be sustained. Appeal of assessee is allowed.
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2023 (8) TMI 514
Disallowance of bad debts - credit for the TDS denied to assessee against the purchases made from supplier party to whom late payment of purchase cost paid - Since this amount was not reimbursed by the supplier party, the assessee wrote off this amount in its account as bad debt, Alternatively, the assessee claimed this amount as a business expenditure since payment was made to the supplier party as interest on the late payment of purchase cost - HELD THAT:- As amount cannot be claimed as a bad debt, as rightly been held by the AO, since the amount in question was not taken into account in computing the income of the assessee in any previous year as required u/s 36(2) of the Act. Nor this amount is in the nature of revenue receipt in any earlier year. Rather the amount in question is excess payment made by the assessee. Further, as rightly been held by the CIT(A), this amount cannot also be claimed as business expenditure since the liability of the assessee to make payment of interest on late payment of purchase cost was only limited to Rs. 2,90,070. The assessee being the payer was required to deduct tax as per law. Thus any excess payment made by the assessee over the amount net of TDS cannot be said to be an expenditure incurred wholly and exclusively for the purpose of the business under section 37(1) - Decided against assessee. Disallowance of LC Discounting Charges paid by the assessee - HELD THAT:- In the present case, it cannot be doubted that the interest of the supplier was sufficiently protected as the assessee had opened the letter of credit account and it is only because the supplier insisted on early payment the invoices were discounted by the assessee s bank. Thus any liability to pay the interest cost is only of the supplier. However, the assessee has claimed that the interest cost has been borne by it towards purchases and therefore it is a business expenditure. No documentation has been brought on record to show that it was the assessee s liability to bear the LC Discounting Charges in case the supplier insists on early payment. Therefore, in the interest of justice, we deem it appropriate to grant one more opportunity to the assessee to submit necessary evidence/documentation to support its claim that it was assessee s liability to bear the LC Discounting Charges in case of early payment to the supplier. Accordingly, we restore this issue to the file of the AO for de novo adjudication. Ground raised by the assessee are allowed for statistical purpose.
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2023 (8) TMI 513
Disallowance of expenses @ 10% under five heads of expenses - Business or personal use expenses - addition on the grounds that some of vouchers were produced and most of the vouchers being self- made verification of possibilities of personal use - HELD THAT:- Assessee has not filed any document to prove the genuineness of the expenditure claimed other than the ledger accounts. It is observed from the ledger accounts of the car expenses that most of the expenses are in cash. In these facts and circumstances of the case, since assessee failed to produce the documentary evidence to substantiate the claim of expenditure. We agree with the disallowance made by the Assessing Officer. The onus was on assessee and assessee has failed to substantiate. Accordingly, ground no. 1 of the assessee is dismissed. Addition as notional income for non-charging of interest - assessee has given loan to its sister concern and no interest has been charged - AO added notional interest @ 12% - HELD THAT:- There is no provision in the Income Tax Act to add such notional interest therefore, we direct the Assessing Officer to delete the said addition. Accordingly, ground no. 2 of the assessee is allowed.
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2023 (8) TMI 512
Addition u/s 68 - receipt of share capital unexplained - HELD THAT:- AO considered all the replies, submissions and documents produced by the assessee, but the said explanations documents and reply by the assessee was not sufficient to prove the burden of the assessee caused in Section 68 of the Act, therefore, made the addition. CIT(A) has also made proper analyzation of the documents produced by the assessee and found that the assessee has failed to establish the identity and creditworthiness of shares applications and genuineness of the transaction. In our opinion, the assessee has to prove the identity and creditworthiness of the creditor and genuineness of the transaction in compliance with Section 68 - assessee company by self proclaiming itself as shell company cannot shirk and avoid its legal obligation to prove the identity and creditworthiness of the so called share applicants and genuineness of the transaction as mentioned by various Courts in respect of application of provisions of Section 68. No error or infirmity in the order of the A.O. and also the order of the CIT(A) and find no merit in the grounds of appeal of the assessee.
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2023 (8) TMI 511
Unexplained jewellery - search and seizure operation concluded - claim of assessee was that the assessee is a member of enlarged close knit family, who is also assessed with Centre Circle, Karnal and there are two ladies in the family and the jewellery is interchanged between all the members as and when required - AO observed that the assessee is income tax payee and return income is below taxable limit. HELD THAT:- As husband of the assessee, staying under the same roof with the assessee ha disclosed an amount equal to the unaccounted jewellery seized or belonging to his family. In the group case of Pallavi Mittal [ 2021 (9) TMI 1335 - ITAT DELHI] considered the similar details filed by father-in-law of assessee [Pallavi Mittal] and observed that the very purpose of centralization of the cases of family members is to have a comprehensive understanding and determination of undisclosed income. Accordingly, in that case the undisclosed income accounted by the father-in-law was taken into account for the jewellery allegedly found in the locker of Pallavi Mittal. The seized component of the assessee has been duly accounted by her husband. Revenue authorities have given the benefit to the assessee of the Circular No. 1916 dated 11.05.1994 at the time of search by not seizing the entire jewellery worth Rs. 5,18,310/- in the hands of Shri Sat Narain Mittal and Rs. 29,44,036/- in the hands of assessee Urmil Mittal. The assessee is a married woman and not assessed to wealth-tax returns. Her claim of being into possession of family jewellery could not have been completely discarded. The benefit given could not have been withdrawn without evidence to contrary. The arguments raised on behalf of the Revenue on the basis of reference to Section 110 of the Evidence Act, which provides that where a person is found in possession of anything the burden of proving that he is not the owner is on the person who affirms that he is not the owner, is not applicable to the facts as in the case in hand with regard to the claim of assessee that the jewellery was family jewellery and a part of which has been disclosed as unaccounted income by the husband, justifies and explains her claim. Appeal of the assessee is allowed.
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2023 (8) TMI 510
Unexplained cash credit u/s 68 - non discharge of onus to prove by assessee - HELD THAT:- As during the assessment proceeding, AO required the assessee to file necessary details to discharge initial onus caused u/s 68 with regard to cash transactions of unsecured loans and regarding shared applications money the assessee has not discharge the initial onus u/s 68 of the Act either before the A.O. or before the CIT(A). Thus, in the absence of any documentary evidence to establish identity of cash creditor, creditworthiness and proof of genuineness of the transaction, A.O. rightly made the addition which has been confirmed by the CIT(A). In so far as, loan from Kanta Rani Gulati is concerned also the assessee has not furnished any details to explain the nature and source of the credit before the A.O. or before the CIT(A). Appeal of the assessee dismissed.
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2023 (8) TMI 509
Disallowance as expenses under the head Rent - assessee submitted that the assessee was undertaking his contract work at very far and remote area at where one prominent person had provided the premises to the assessee with the undertaking that the amount for rent is to be paid who will settle or pay the rent to the actual owner - HELD THAT:- Though the assessee has claimed to have made payment by way of cheque to Sh. Vijay Sharma as rent, the said Sh. Vijay Sharma has specifically denied before the AO of receipt of any such rent from the assessee. It is also noted that the AO has not provided an opportunity of cross examining the said Sh. Vijay Sharma. Therefore, we restore the issue to the file of the AO with a direction to provide an opportunity of cross examining Sh. Vijay Sharma to the Assessee and decide the matter afresh, accordingly, Ground No. 1 is partly allowed for statistical purpose. Disallowance as outstanding amount payable - Assessee submitted that the A.O made addition towards the assessee income by not accepting the liability appearing in the balance sheet in respect of outstanding payment to be made to various vendors related with the purchases - HELD THAT:- The assessee himself shown the name of Sh. Vijay Sharma in the balance sheet stating outstanding amount payable to various vendor, but the said Sh. Vijay Sharma has denied about outstanding amount payable to various vendors appearing in the balance sheet. The assessee has filed an affidavit of Sh. Vijay Sharma before us wherein the said Sh. Vijay Sharma has made certain averments supporting the claim of the assessee. Considering the fact that the said Sh. Vijay Sharma has filed an affidavit supporting the claim of the assessee, we deem it fit to restore the matter to the file of the A.O. for de-novo consideration and the assessee is directed to establish the claim before the A.O. Ground No. 2 of the assessee is partly allowed for statistical purpose. Unexplained loan - assessee submitted that the said amount are not related to the year under consideration and are the old outstanding amount carried forward from the previous years, which is reflected in the balance sheet as liability payable to three persons - HELD THAT:- Considering the fact that the aforesaid amount does not related to the year under consideration and are the old balance and also the assessee has paid the aforesaid amount to the creditors in the subsequent years through cheques, we find no reason to sustain the addition made u/s 68 of the Act. Disallowance of expenses under various heads - HELD THAT:- It is found from the record the A.O. while disallowing the expenses from various heads of expenses, has not given specific finding, even the CIT(A) while restricting the addition made by the A.O. has only considered the past history of the Appellant and not referred to any of the documents produced by the Assessee. CIT(A) has not given any specific finding in respect of expenses claimed by the assessee and the assessee pleaded that the entire expenses should have been allowed by the CIT(A). We deem it fit to restore the issue of disallowance of expenses which was sustained by the CIT(A) to the file of A.O. to pass speaking order by considering the past history of the assessee and also the documents produced by the assessee. Ground of the assessee is partly allowed for statistical purpose.
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2023 (8) TMI 508
Validity of rectification order passed u/s 154 - incorrect carry forward and set off of losses for the AY 2007-08 and 2008-09 against the income for the year under consideration - mistake apparent from the record or not? - scope of debatable issue - AO vide order passed u/s 154 treated the interest income received by the assessee as income from other sources and set off the brought forward losses against the business income after reducing the aforesaid interest income. HELD THAT:- AO passed the rectification order u/s 154 by re-characterising the interest income and treating the same as income from other sources instead of income from the business as claimed by the assessee. CIT(A) also rejected the submission of the assessee on the basis that the assessee has not submitted any evidence to prove that the interest receipts do have a business nexus. During the hearing, submissions filed by the assessee before the AO during the rectification proceedings, wherein it was submitted that the interest income is earned from the business activity of the assessee firm. Thus, from the above, it is evident that the AO and learned CIT(A) disagreed with the submissions of the assessee in the rectification proceedings and seeks to examine the issue regarding characterisation of the interest income. Accordingly, issue of whether the interest income is income from other sources is a debatable issue and cannot be said to be covered under the ambit of the expression mistake apparent from the record . Hon'ble Supreme Court in T.S. Balram, ITO v/s Volkart Brothers [ 1971 (8) TMI 3 - SUPREME COURT ]held that for initiating proceedings under section 154 of the Act, the mistake apparent from record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions. In view of the above, as is evident from the facts available on record, the issue of interest income on which rectification under section 154 of the Act was done by the AO in the present case is open to divergent views, and the same requires long drawn process of examination - rectification order passed u/s 154 of the Act on this issue clearly falls beyond the ambit of the expression mistake apparent from the record . Decided in favour of assessee.
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2023 (8) TMI 507
Addition u/s 68 r.w.s 115BBE - unexplained cash credit made - HELD THAT:- DR could not controvert the contentions of the assessee that the purchases have been accepted. The assessee s accounts are duly audited and book results have not been disturbed. Therefore, merely because the sales have been made in cash ought not to have been the basis for making the addition. Moreover, the business of the assessee was exempted in respect of pecuniary limit despite of deposit of demonetize currency. It is not the case where the AO found any discrepancy related to stocks. If the sales were matched with purchases, in our view, no addition was called for. Therefore, we direct the AO to delete the impugned addition - Decided in favour of assessee.
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2023 (8) TMI 506
Penalty u/s 271(1)(c) - Enhancement order u/s 252(2) of CIT - Action of the lower authorities for making additions on the ground other than recorded reasons - HELD THAT:- Admittedly in quantum proceedings the addition, which was the basis for imposing impugned penalty u/s 271(1)(c) of the Act, has since been deleted by the Coordinate Bench of this Tribunal vide its order [ 2023 (6) TMI 668 - ITAT DELHI] . Therefore, since the very basis for levy of penalty has gone, the impugned penalty levied u/s 271(1)(c) of the Act cannot survive and stands deleted accordingly - Appeal of the assessee is allowed.
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2023 (8) TMI 505
Addition u/s. 69B - shares traded by the assessee alleged to be a penny stock - addition made by the A.O. on the ground that the assessee has not made any offline purchases and there was no LTCG and only a short rotational transaction resulting in short term capital gain (STCG for short) and short term capital loss (STCL for short) and that too a nominal loss - HELD THAT:- Assessee has furnished all the supporting documentary evidences to substantiate the genuinity of the said transaction. It is also evident that the assessee has not only invested in the scrip of M/s. Vas Infrastructure Ltd. but has also made investment of huge sum in other scrips as well. The fact that the assessee has not made any off line purchases and has not claimed LTCG but has merely incurred a nominal loss in our view, cannot be a case of doubtful investment in penny stock. AO has also not made any enquiry as to the payments made by the assessee to the recognized broker nor has the A.O. brought on record any material evidence to show that it was a mere bogus transaction except for the information received from DDIT (Investigation) that M/s. Vas Infrastructure Ltd. was a penny stock. Even otherwise, if it is assumed that M/s. Vas Infrastructure Ltd. was a penny stock, we find no reason to hold the assessee liable for having invested in the said share in the absence of any corroborative evidence. We are also conscious of the fact that mere suspicion that the assessee has invested in alleged penny stock scrip cannot be made basis of addition u/s. 69B of the Act. In the absence of any material evidences to corroborate the information received from DDIT that M/s. Vas Infrastructure Ltd. is a penny stock, we find no justification in upholding the addition made by the A.O - Decided against revenue.
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2023 (8) TMI 504
Disallowance of port charges claimed as deduction u/s. 80IA - assessee had claimed 100% deduction u/s. 80IA as being profit derived from port related business out of which the impugned amount was towards port rental charges collected by the assessee which according to the A.O. was for providing parking and other ancillary support services which does not directly relate to the business activity of the assessee - HELD THA:- There is no iota of doubt that the assessee is carrying on the business of developing or operating and maintaining of infrastructure facility for the purpose of storage, loading and unloading etc. It is also pertinent to note that the CBDT Circular No. 10/2005 dated 16.2.2005 has defined Port as infrastructural facility for the purpose of section 10(23G) and 80IA of the Act which includes structure at the ports for storage, loading and unloading, etc. subject to fulfillment of certain conditions which were duly complied with by the assessee. The port rental charges nevertheless pertain to the storage, loading and unloading activities which comes under the preview of the eligibility to claim deduction u/s. 80IA. We would also like to place our reliance on the decision of M/s. ABG Heavy Industries Ltd [ 2010 (2) TMI 108 - BOMBAY HIGH COURT] wherein it was held that in case of deduction claimed u/s. 80IA, the intention of the legislature was to promote growth and development of infrastructure which has to be construed liberally. In the present case in hand, the assessee itself has developed port at Alibaug and was directly engaged in the business of infrastructure development. We find no justification in denying the claim of the assessee and, hence, we find no reason to deviate from the finding of the ld. CIT(A). Decided against revenue.
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2023 (8) TMI 503
Sale of capital asset - transfer of capital asset and compensation received on account of delay in construction by the builder of property - short term capital gain or long term capital loss - appellant had acquired the capital asset in the shape of right in an office space in 2007 - assessee is a non-resident Indian - HELD THAT:- In the instant case, admittedly, the allotment letter was issued back in the year 2007 and substantial payment had been made before the year 2018 when final payment was made. Therefore, we find merit into the contention that the AO erred in treating the surplus to be short term capital gain without giving benefit of indexation. We therefore, direct the AO to re-compute gain, if any after giving benefit of indexation as provided under law and decide the issue in the light of judgement of PCIT vs Vembhu Vidyanathan [ 2019 (1) TMI 1361 - BOMBAY HIGH COURT ] The ground raised by the assessee is allowed for statistical purpose. Nature of receipt - Compensation received by the assessee from the builder - capital receipt or Revenue receipts - HELD THAT:- As relying on Aaran R. Infrastructure Ltd [ 2018 (5) TMI 261 - DELHI HIGH COURT ] we are of the considered view that the lower authorities were not justified in treating the amount as revenue receipts, the same deserves to be deleted. The ground raised by the assessee is thus, allowed.
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2023 (8) TMI 502
Revision u/s 263 - Addition u/s 68 - HELD THAT:- The first thing that comes up from the finding of learned Pr. CIT is that when notices u/s 263 of the Act was issued there was no observation of questioning the assessment order on the basis of non-examination of the issue of suspicious transactions relating to short term capital loss/ long term capital gain on shares by the AO. The issue required to be explained by assessee was restricted to the non-examination of the difference in the number and value of shares shown to be purchased and sold as per ITS data. However, during the revisionary proceedings being satisfied of these factual queries without calling upon the assessee to explain further about his opinion of lack of inquiry on whole of the issue and without giving any specific findings by way of any further inquiry at his own end, learned Pr. CIT gave a direction for a discreet inquiry. The Bench is of the considered view that such an order of conducting a discreet inquiry cannot be part of exercise of revisional jurisdiction. CIT was expected to cite specific error in the inquiry conducted by the learned AO to conclude that there was lack of inquiry on the issue at the stage of scrutiny assessment. The assessee has given a detailed reply to the aforesaid questionnaire and the paper book filed on behalf of the assessee brings forth that copy of reconciliation of shares, copy of D-Mat account, copy of ledger account of laws from shares, contract note of job / enter day trading, copy of order u/s 143(3) of the CCL International Ltd. for corresponding A.Y. 2014-15 were before Ld. AO who must examined the same. Rather, the Bench is of considered opinion that when the scrutiny assessment was for the reason suspicious transaction relating to short term capital loss / long term capital gain on shares (inputs from Investigation Wing) then if the aforesaid documents and evidence were before Ld. AO in response to the aforesaid questionnaire and he had not made any adverse remark upon the same and Ld. PCIT was also satisfied with regard to the discrepancy which was made foundation for issuance of notice u/s 263, then the impugned assessment order could not have been considered erroneous and prejudicial, to be followed by the direction of discreet inquiry. N.P. rate of 8% applied by the A.O. on purchase and sale of cloth - The assessee had filed details of party wise sale / purchase along with confirmations and ITR of all the parties available. The copy of the stock register, copy of bank statement and bank pass book of assessee and the comparative financials for A.Y. 2013-14 to 2016-17 were made available however, not a word what discussed by Ld. PCIT. The Bench is of considered opinion while exercising Revisional Jurisdiction, Ld. PCIT was expected to go on to the merits of the submissions and also make form some independent opinion however the same is lacking. Thus, the findings of learned Pr. CIT that there was lack of inquiry on the two issues, is not sustainable. Even otherwise what comes up admittedly from the records is the fact that assessment order was passed on 30.12.2016. Assessee had preferred an appeal against same u/s 250 and the same was filed before Ld. CIT(A) on 28.01.2017. The same was dismissed on 02.02.2018. However, the notice u/s 263 was issued on 28.06.2018, that is after the dismissal of the appeal by CIT(A). The impugned order u/s 263 was passed on 30.03.2019. The issues examined by Ld. CIT(A) pertains to both the facts. Ld. CIT(A) in order dated 02.02.2018 had taken note of the fact, the scrutiny assessment was made on the specific issue of suspicious transaction relating to short term capital loss/ long term capital gain on shares (inputs from Investigation division) and had upheld the order of ld. AO of the addition made only with regard to bogus sales and purchase. Both the issues were examined by the Ld. CIT(A) and thus the explanation (c) to Section 263(1) of the Act comes into effect which provides that where the assessment order in regard to which revisional powers are being exercised has been subject matter of any appeal then the powers of revision only extend to such matters as had not been considered and decided in the appeal. In the case in hand, there is no doubt the Ld. CIT(A) has taken into consideration both the issues and sustained the order of Ld. AO qua one. Thus exercise of jurisdiction u/s 263 was not called for being beyond the powers .Appeal of assessee is allowed.
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2023 (8) TMI 501
Addition u/s 68 - cash sales made to two parties - as argued assessee was not given effective opportunity to explain and provide the necessary confirmation from the parties - HELD THAT:- AO has noted the cash deposited by the assessee. However, the AO has not given any finding regarding the purchases in the assessment order the AO noted that on inquiry it was found that these firms are closed. The explanation of the assessee is that it had made cash sales to these two parties. AO should have given finding in respect of purchases made by the assessee for the items which were claimed to have been sold to these entities. Further, it is contention of the assessee that those parties might have claimed set off of the TCS in their respective returns of income. Hence, the impugned order is set aside. The assessment is restored to the file of AO to verify the correctness of the claim of the assessee that it had made sales in cash to these parties and what is the status of their assessment by the AO. Ground raised is this appeal is allowed for statistical purposes.
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2023 (8) TMI 500
Assessment of trust - surplus out of Pharmacy store should be treated as Business Income u/s 11(4A) - charitable activity u/s 2(15) - as per assessee Pharmacy store is not incidental to the attainment of the objects of the Assessee trust - HELD THAT:- In CBDT Circular No. 11/2008 dated 19.12.2008 (Point No. 2.1) as relied upon by the Ld. Commissioner, it has been clarified that the proviso to section 2(15) of the Act will not apply to medical relief etc. and where the purpose of a trust or institution is relief of the poor, education or medical relief, it will constitute charitable purpose even if it incidentally involves the carrying on of commercial activities. Medicines are one of the most common healthcare interventions and play a significant role in patients' health management. Pharmaceuticals are an integral part of patient care. Admittedly the Assessee is running a Hospital and also having in-house patient s facilities, therefore, the medicines are essentials for the treatment of in-house patients especially. Assessee may be on commercial basis but in fact, directly-indirectly providing medical relief by selling medicines to the in-house patients and outpatients and outsiders as well and therefore protected by CBDT Circular (supra) as well. It is also not the case here that the Assessee has established Chemist/Pharmacy store exclusively for outpatients/outsiders and has utilized surplus from the operation of a chemist shop, for other objects than the prescribed objects. Hence on the aforesaid analyazations, we don t have any hesitation to hold that running of the chemist shop is not only essential but also incidental or ancillary to the dominant object and purpose to run a hospital and thus the Assessee has complied with first condition of section 11(4A) of the Act. As per second condition of section 11(4A) of the Act, as to whether the Assessee is maintaining separate books of account in respect of such business/chemist shop? - We observe that the Ld. Commissioner has given categorical findings that the Assessee is maintaining separate books of accounts and financial statements for pharmacy store, hence the Assessee also complied with 2nd condition of section 11(4A) of the Act. Thus we are in concurrence with the conclusion of the ld. Commissioner that the Assessee-trust has complied with the twin conditions, as set out in section 11(4A), therefore, the income accrued from Pharmacy store is incidental to the dominant object of running Hospital by the Assessee, hence, the action of the AO is not justified in treating the Pharmacy store of the Assessee as separate business entity and the profits therein as taxable income. Decided against revenue.
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2023 (8) TMI 499
Income taxable in India - Fees for Technical Services ( FTS ) and/or royalty - receipt from customers in India for rendering design services - India Singapore DTAA - HELD THAT:- Considering all the material details and documents involving party-wise agreements sample emails reflecting the delivery of services, duration of project party-wise on sample basis etc. for evaluating the true nature of services rendered by the assessee and held that these services would not partake the character of FTS in terms of Article 12(4) of India- Singapore DTAA. The findings of the Ld. CIT(A) remain uncontroverted by the Revenue. We therefore, find no reason to interfere with the order of the Ld. CIT(A). As following the decision of Forum Homes (P.) Ltd. [ 2021 (10) TMI 356 - ITAT MUMBAI] we are of the considered view that the payments received by the assessee in view of architectural design services rendered to its clients in India are not chargeable to tax as FTS in terms of Article 12(4) of the India-Singapore DTAA. Accordingly, we uphold the order of the Ld. CIT(A) on the impugned issue and dismiss ground No. 1 and 2 raised by the Revenue. Whether payments made to the assessee could also be not characterised as royalty under India-Singapore - DTAA? - CIT(A) has considered this issue in an exhausted manner and after considering the facts of the assessee s case in the light of the decisions in the case of Gera Developments P. Ltd. [ 2016 (8) TMI 1009 - ITAT PUNE] and Devi Ashmore India Ltd. [ 1990 (12) TMI 51 - CALCUTTA HIGH COURT] held that payments made to the assessee in consideration of architectural design services could not be classified as royalty under Article 12(3) of India- Singapore DTAA. Hence, we do not find any reason to interfere with the findings of the Ld. CIT(A) and accordingly dismiss ground No. 3 of the Revenue.
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2023 (8) TMI 498
Characterization of receipt - Capital contribution received - treated by the AO as being revenue in nature - CIT(A) rejected the assessee s contention of capital contribution as being not taxable on account of being received as advance, on the ground that no evidence in this regard was filed by the assessee - HELD THAT:- ITAT for Asst. Year 2009-10 has emphatically reiterated that the proposition laid down for taxing capital contribution received by the assessee in Asst. Year 2001-02 is to be followed, and the capital contribution are to be subjected to tax in 5 years on deferred basis. There remains no scope, therefore, for following any other method for taxing capital contribution received by the assessee. In view of the same, therefore, we hold that capital contributions are to be subjected to tax as per the decision of the ITAT in the case of the assessee for Asst. Year 2001-02 taxing entire capital contribution received on deferred basis in 5 years. In sum and substance, 15th of capital contribution received during the year is to be subjected to tax in the impugned year, and all capital contributions received in preceding years which are to be subjected to tax on deferred basis in the impugned year are also to be included in the income of the assessee. The issue is, therefore, restored to the AO to re-work the amount of capital contribution to be brought to tax in accordance with the order of the ITAT in the case of the assessee for Asst. Year 2001-02. Ground No.2 and 3, therefore, are allowed for statistical purpose. Addition of capital contribution which the assessee has pleaded consistently is only in the nature of advance and therefore cannot be subjected to tax in the impugned year - Additional evidences filed in the case of all the parties from whom the purported advances were received, the assessee has sought to demonstrate and substantiate its pleading that the amount received from them was only in the nature of advances by way of capital contribution, which was refunded to them on account of approval of GPCB not being obtained in their cases. These evidences, undoubtedly being generated post the order passed by the ld.CIT(A), therefore, could not be filed before him, and at the same time, undoubtedly, they do substantiate the assessee s plea that the amount received from these parties was not full and final payment of these parties towards capital contribution, but was only portion of the capital contribution to be made by them given by way of advance towards membership of the assessee-company subjected to approval by GPCB. Since these evidences throw light and bring out the nature of the purported amount, they are relevant for adjudicating the controversy before us, whether the impugned amounts were in the nature of advance for capital contribution or not. The additional evidences, therefore, are admitted for adjudication, and the issue is restored back to the AO to verify the additional evidences - AO is directed to adjudicate the issue in accordance with law. Appeal of the assessee is allowed for statistical purposes.
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2023 (8) TMI 497
Penalty u/s 271(1)(c) - penalty levied which comes to 298% of the tax sought to be evaded - assessee could not prove that the stock did not pertain to him and that the assessee could not produce any material evidence in this regard - as submitted that such penalty should be reduced to 100% of tax sought to be evaded - HELD THAT:- It is an admitted fact that the AO made addition being the value of excess stock of gold on the ground that the assessee could not substantiate with evidence that the stock available with him did not pertain to him. Accordingly, AO brought to tax an amount which was upheld by the CIT (A) in the quantum appeal and the AO thereafter initiated penalty proceedings u/s 271(1)(c) and levied penalty. Considering the totality of the facts of the case, we are of the considered opinion that levy of penalty of 100% of the tax sought to be evaded will meet the ends of justice, we, therefore, modify the order of the CIT (A) and direct the AO to restrict the penalty u/s 271(1)(c) at 100% of the tax sought to be evaded. Decided partly in favour of assessee.
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2023 (8) TMI 496
Addition u/s 69A - assessee could not explain the source of cash seized from the residence of the assessee - HELD THAT:- Availability of cash in our opinion, cannot be doubted. Even if the assessee has not filed the cash book, however, the circumstantial evidence cannot be simply brushed aside especially when the assessee is having taxable income We are of the considered opinion that the availability of cash should not have been doubted as unexplained. It is also pertinent to mention here that when the search took place on the date of Diwali at the residence of the assessee, it is unbelievable that the assessee cannot have a single rupee since the lower authorities have not even given credit of a single rupee. In this view of the matter, we set aside the order of the CIT (A) and direct the AO to delete the addition. Decided in favour of assessee.
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2023 (8) TMI 495
Disallowance of expenses in respect of its earning from the activity of chit - HELD THAT:- It is elementary that when expenditure is claimed, the assessee has to support the same with material/evidence that such an expenditure it incurred; and show that the expenditure has been incurred wholly and exclusively for the purpose of business. Having failed to produce any material/evidences to support the claim of expenditure, the action of the Ld.CIT(A) to confirm the action of the AO cannot be faulted. Even though, assessee s stand on this issue at the inception itself was that finance business was its primary business and it showed as miscellaneous income foreman commission from chits, wherein it reflected only the net income [i.e, after deducting overhead expenses which included default money, salary, etc]. According to the Ld.AR, the cash book was seized during the search, from which, it could be discerned that the expenditure claimed was incurred by the assessee for running of chits. Be that as it may, however, before us assessee has neither kept the copy of the cash book found/seized during the search in the form of Paper Book nor the assessee filed any materials/evidences to substantiate the expenditure claimed by the assessee other than the oral assertion as noted supra. In the absence of any relevant evidence or material to support the expenditure claimed by the assessee, the impugned action of the Ld.CIT(A)/AO cannot be held to be perverse and therefore, upheld. Unexplained cash found during search - AO on this issue noted that no books of accounts are maintained by the firm - HELD THAT:- We are of the view that the assessee s assertion that he had some loan received in his hands from 01.04.2017 to date of search, cannot be brushed aside, which fact need to be examined/verified. Since this fact has not been looked into by the AO/the Ld.CIT(A), the assessee has pleaded to restore this issue back to the file of the AO. Having taken note of the sworn statement of assessee about amount of loans returned back to it as well as AO s findings recorded we set aside the impugned order of the Ld.CIT(A) and restore the matter back to the file of the AO for re-examination/verification - Decided in favour of assessee for statistical purposes.
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2023 (8) TMI 494
Income taxable in India - part attribution of compensation received towards royalty [from Satyam] in terms of section 9(1)(vi) of the Income-tax Act, 1961 - assessee is a non-resident corporate entity incorporated under the laws of British Virgin Island (BVI) engaged in the business of providing and enabling electronic payment services via mobile and fixed line telecom and other telecom services network - AAR held that this right to use the licence/patent is a valuable right acquired by Satyam and further referring to the settlement agreement, right in perpetuity over the licence/patent given to Satyam was a right acquired by the assessee over the software/literary work, it cannot be said that the recitals on the settlement agreement that the assignment of right is without consideration can only be viewed as an attempt to avoid payment of tax HELD THAT:- Admittedly, the aforesaid ruling of AAR has attained finality and in terms of section 245S(1), it is binding, both on the assessee and the Revenue. Being conscious of the aforesaid factual and legal position, the assessee filed its return of income for the impugned assessment year offering a part of the compensation received as royalty income. Even, in the revised return of income, the assessee again offered royalty income at a substantially reduced figure. Neither in course of assessment proceedings, nor before learned Commissioner (Appeals), the assessee took a stand that no part of the compensation received is taxable as royalty. Thus, the aforesaid conduct of the assessee clearly indicates that according to its own understanding of the ruling of AAR, a part of compensation received is taxable as royalty under the Act. Keeping the aforesaid facts in view, we hold that at this stage, the assessee, through the additional grounds, cannot rake up the issue again that no part of the compensation can be treated as royalty under section 9(1)(vi) of the Act Addition made on account of royalty over and above the amount offered by the assessee in the revised return of income - While the assessee has supported the value of royalty through a Valuation Report of an expert, having domain knowledge on the subject, the AO has determined the value of royalty on purely ad-hoc/estimation basis not backed by proper reasoning. In any case of the matter, neither the AO, nor learned first appellate authority is competent to assume the role of an expert valuer. In case, AO was not satisfied or convinced with the Valuation Report of the expert valuer, proper course for him would have been to seek opinion of a second valuer on the Valuation Report furnished by the assessee. Instead of doing that, the AO has taken it upon himself to undertake the exercise on valuation of the royalty. This, in our view, is totally erroneous and against settled legal principles. AO cannot reject the Valuation Report done by an expert in the field, when he has no such expertise. The decisions relied upon by learned counsel appearing for the assessee clearly support this view. It is evident, after rejecting the Valuation Report of the expert on flimsy grounds, the Assessing Officer eventually has proceeded to value the royalty on purely estimate basis without bringing on record any cogent material to support such estimate. There is no valid reason, why he estimated the reproduction cost to twice the amount determined by the expert valuer. The data relied upon by the AO to estimate the value of royalty at 8% per annum on the reproduction cost is not based on any authentically sourced information. These facts are well brought out in assessee s rebuttal to Assessing Officer s observations. As regards the submissions of learned Departmental Representative that in the original return the assessee has attributed 25% of the compensation towards royalty, we must observe, the assessee has subsequently explained that at the time of original return of income, the assessee did not have the benefit of the Valuation Report of the expert, which was available to him subsequently. Hence, filing of revised return of income was necessitated. In absence of contrary material brought on record by the Revenue to finalize the aforesaid claim of the assessee, we are inclined to accept assessee s contention. Thus, in the ultimate analysis, we hold that since, the AO has rejected the Valuation Report of the expert on flimsy grounds and has proceeded to make the addition by determining the value of royalty on purely estimate basis, without being backed by any supporting evidence, we are inclined to reject such valuation of the AO. Accordingly, we delete the addition made by the Assessing Officer on account of royalty. Royalty income offered by the assessee in the revised return of income should be accepted. Grounds are allowed.
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Benami Property
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2023 (8) TMI 493
Benami Transactions - real/absolute owner - rights of bona fide purchaser of the property for valuable consideration - whether the plaintiff is the absolute owner of the suit property in consequence that the defendant, her men and agents are to be restrained from in any way interfering with the plaintiff's peaceful possession and enjoyment of the suit property? - Trial Court arrived at a conclusion that the property was purchased by the plaintiff in the name of his wife / 1st defendant and it was purchased for her benefits - HELD THAT:- The suit was instituted for declaration and permanent injunction. Though the plaintiff was in possession of the Suit property the Trial Court found that the plaintiff purchased the property for the benefit of the 1st defendant, who is none other than his wife and from out of their relationship two sons were born and at a later point of time there was a dispute between the plaintiff and the 1st defendant and subsequently, the 1st defendant lived separately. Admittedly, the suit property was purchased in the name of the 1st defendant and the sale deed was marked as Ex.A1 and Patta was marked as Ex.A2, which also stand in the name of the 1st defendant. The transaction and execution of sale deed in favour of the 1st defendant has not been hit by the provision of the Benami Transactions (Prohibition) Act, since the plaintiff is the husband of the 1st defendant. This being the facts and circumstances considered by the Trial Court, this Court do not find any infirmity or perversity in respect of the judgment and decree passed [ 2017 (1) TMI 1814 - DISTRICT COURT, CHENGALPET] Accordingly, the judgement and decree passed by the District Court, Kancheepuram District at Chengalpet stands confirmed and consequently, the Appeal Suit is dismissed. No costs.
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Customs
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2023 (8) TMI 492
Challenge to the rulings of the Customs Authority for Advance Rulings - classification of roasted areca nut / betel nut (whole/cut/split) - merit classification under Customs Tariff Heading (CTH), 2008, more particularly, sub heading 2008 19 20 of the First Schedule to the Customs Tariff Act, 1975, or not?. HELD THAT:- A perusal of the relevant entries under CTH 08, 20 and 21 would show that while CTH 08 is meant to cover areca nut whole, split, grounded including dried nuts subject to the process of drying which is by way of additional preservation or stabilization by moderate heat treatment, sulphuring, the addition of sorbic acid or potassium sorbate, Chapter 20 covers roasted nuts. Apparently, legislature has for the purpose of classification treated drying and roasting as processes which are distinct / different and importantly, relevant in determining whether the nuts would fall under CTH 0802 or under 2008. It may be useful to rely on the decision of the Hon ble Supreme Court in case of STERLING FOODS VERSUS STATE OF KARNATAKA AND ANOTHER [ 1986 (7) TMI 109 - SUPREME COURT ] wherein, while dealing with the question, whether prawns, shrimps and lobsters locally purchased for export after subject to the process of cutting their heads and tails, peeling, deveining, cleaning, freezing and exporting was eligible to claim the benefit as a sale in the course of export under sub section (3) to Section 5. It was found that the benefit ought to be extended as prawns / lobsters even after being subject to the above processes do not lose their identity, but commercially remain the same. Importantly, an argument was advanced on the basis of the entries in the Schedule to the Karnataka Act and the amendments made thereto particularly in relation to classification of Shrimps, Prawns and Lobsters to suggest that enumeration of Items in different entries in the Tariff Schedule is by itself indicative of the fact that they are commercially different. However, the said contention was rejected by the Hon'ble Supreme Court in Sterling Foods v. State of Karnataka. From a reading of the above judgment, it is clear that the Hon ble Supreme Court had held that the legislature while classifying shrimps, prawns and lobsters and treating it differently / separately from frozen shrimps, prawns lobsters by placing it under different entries, has unconcerned as to whether the two products are commercially same. This is, in view of the fact that legislature was competent to classify the products separately/differently even though they are commercially one and the same. Thus, the question of examining whether arecanut/betel nut and roasted areca nut are commercially the same or otherwise, is an enquiry which is alien in determining the classification which ought to be made on the basis of the Tariff entries. CTH 2008 19 20 is a special entry covering nuts subject to the process of roasting, when contrasted with CTH 08 02 90 which covers dried nuts. Having come to the conclusion that the classification of areca nut is made on the basis of the process which it is subject to with a distinction between dried and roasted nut being maintained, CTH 2008 19 20 which covers roasted nuts including areca nut is a specific entry when contrasted with the entries/ items covering nuts under CTH 08. It is well established that when a general law / entry and a special law/ entry dealing with same aspect are in question, the rule adopted and applied is one of harmonious construction, whereby the general law to the extent dealt with by the special law, would yield to the Special Law/Entry. This principle finds its origins in the Latin maxim of generaliaspecialibus non derogant i.e. general law yields to special law should they operate in the same field on same subject. CTH 20 08 is a specific entry insofar as it covers roasted nuts and would thus prevail over CTH 08, in view of the above settled rule that specific entry would prevail over general. This is yet another reason that the conclusion of the Advance Rulings Authority does not warrant interference. Relevance of the judgment in S T Enterprises [ 2021 (3) TMI 27 - CESTAT CHENNAI ] - HELD THAT:- Having found that roasted areca / betel nuts ought to be classified under CTH 20, let us examine the order of the Tribunal in the case of ST Enterprises on which reliance was placed by the appellant to see, if it would have any relevance / bearing on the issue. Reliance was sought to be placed by the learned counsel for the Revenue on the decision of the Tribunal in the case of S.T.Enterprises which on being carried in Civil Appeals, which came to be dismissed, to submit that the goods imported viz., roasted areca nut/ betel nut continues to remain betel nut and thus classifiable under CTH 08 - It is found that reliance on the above decision to determine the classification of roasted betel / areca nut under the Customs Tariff Act is wholly misplaced. Relevance of judgment in the case of C rane Betel Nut Powder Works - HELD THAT:- In Crane Betel Nut powder's case, there importantly, the question was whether the process of boiling and drying would constitute manufacture. However, in the instant case, the question is not as to whether the activity of roasting of betel nut would constitute manufacture, but whether in view of a separate entry for roasted betel nut, it is permissible to continue to classify the roasted betel nut under CTH 08 02 80 which covers fresh or dried areca nuts - it is found that when there is a specific entry for roasted nut and HSN Explanatory notes specifically include roasted betel nuts under Chapter 20, the same cannot be classified under Chapter 8. The question as to whether the process of roasting would constitute manufacture and whether a new product would emerge as a result of the above process are questions that are alien, while determining the classification in terms of the Customs Tariff Headings. In view of the same, the reliance on the judgment of the Hon ble Supreme Court in the said case is misplaced and irrelevant. It is thus concluded that: (a) Roasting is a process treated to be distinct from the process of boiling and drying, in fixing the classification in respect of betel/areca nut under CTH. (b) Roasted betel/areca nut having been specifically classified under CTH 2008 19 20, the attempt to classify under CTH 08 02 80 would fall foul of the settled rule of construction that specific entry would prevail over general entry. (c) HSN explanatory notes is normally a safe guide in determining classification under CTH. Roasted areca / betel nut having been mentioned in CTH 2008 19 20 under HSN, the impugned Ruling is in consonance with HSN classification. (d) When there is a specific entry covering a product/commodity, the test of common parlance is irrelevant in determining classification. The finding of the Advance Rulings Authority stands affirmed - Appeal dismissed.
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2023 (8) TMI 491
Condonation of delay in filing the appeals - condonation of period undergone before the Revisionary Authority under a bona fide belief and the Appellant had acted diligently in pursuing such remedy - HELD THAT:- The impugned order passed by the CESTAT was passed in the absence of the appellant as seen from the appearance as noted in the impugned order. It is also required to be noted that assailing the order in appeal passed by the Commissioner of Customs (16 March, 2016), the appellant being under a bona fide belief, had approached the revisional authority, by filing a revision application on 09 May, 2016 which came to be rejected after a period of almost more than 4 years i.e. on 14 December, 2020. In assailing the orders passed by the Commissioner (Appeals), the appellant was not sleeping over his rights. The revisional authority was however of the opinion that the revision proceedings as filed by the appellant were not maintainable, as the appropriate remedy for the appellant was to file an appeal before the CESTAT. In this view of the matter, the revisional authority disposed of the revisional proceedings, permitting the appellant to avail of the remedy of an appeal before the CESTAT. When a litigant like the appellant bona fide adopts a remedy which is not appropriate remedy, Section 14 of the Limitation Act would certainly come to the aid of such litigant - The object and purpose of Section 14 of the Limitation Act is that the litigant ought not to suffer by a delay is caused in bona fide and in good faith pursuing the proceedings against orders which adversely affect the litigant before a wrong forum. This is a fit case where the appellant having pursued the revisional proceedings and that too bona fide and in good faith, as it is not a case of the revenue that there was any other intention on the part of the appellant in pursuing the revision proceedings the delay in filing the appeal ought to have been condoned by the CESTAT. Thus, these factual circumstances being quite apparent, as also the clear position of applicability of Section 14 of the Limitation Act, to the facts of the case was completely overlooked by the CESTAT, in adjudicating the interim application filed by the appellant, in dismissing the appellant s interim applications. The questions answered in favour of the appellant and against the Revenue.
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Corporate Laws
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2023 (8) TMI 490
Enhancement of authorized share capital by resolution - Validity of Annual General Meeting held on 05.10.2017 - validity of Form DIR-12 in respect of appointment of 3rd and 4th respondents - compliance with Section 61(1) of the Companies Act, 2013 or not. HELD THAT:- A perusal of the material on record shows that the Petitioner had sent an e-mail dated 26.09.2017 objecting to the AGM held on 28.09.2017 and on 03.10.2017 the Petitioner/Appellant received a Notice that the AGM would be held on 05.10.2017. Another notice was also received on 07.10.2017 calling for a Board Meeting on 14.10.2017 only to add more number of Members. It is contended that the 2nd respondent has filed INC-22 with the Registrar of the Companies, authorizing the shifting of the office from its registered office which is based on the meeting said to be conducted on 05.10.2017, against which act the Petitioner/Appellant had lodged a Complaint with the Police. On 13.10.2017, the Petitioner received an e-mail informing that due to the administrative reasons, the meeting was postponed to 18.10.2017. It is seen from the record that the Company Petition was filed on 25.10.2017 - It is seen from the record that the Company Petition was filed on 25.10.2017. It is the case of the Petitioner/Appellant that the 2nd Respondent had digitally signed and filed the DIR-12 on 04.11.2017 showing that the 3rd and 4th Respondents were appointed as Directors in the AGM held on 05.10.2017. Enhancement of the Authorized Share Capital on 31.03.2016 - HELD THAT:- It is seen from the record that the extract of the Resolution Anx.R6 in which the Petitioner and the 2nd Respondent had signed, establishes the enhancement of the Authorized Share Capital. The Financial Statements of the Assessment Year of 2015-16, 2016-17 showing the enhanced share capital further substantiates that the enhanced share capital was accepted by the Petitioner as the Anx-4 document shows that these Financial Statements have been duly signed by the Petitioner, the 2nd Respondent and the Auditor of the Company. Therefore, this Tribunal agrees with the finding of the NCLT that the enhancement of the Share Capital of the 1st Respondent Company, vide a Company Resolution dated 31.03.2016, is valid. A perusal of the material on record shows that there is some strained relationship between the two Directors viz. the Petitioner and the 2nd Respondent. A notice dated 07.09.2017 was issued to the Petitioner adhering with the statutory compliances of convening the AGM before 30.09.2017 and the Petitioner/Appellant is informed that the said AGM is scheduled to be held on 28.09.2017 - A Board Meeting was once again called on 14.10.2017 for approving the Financial Statements and the Directors and Auditor s report. Once again the Appellant did not attend the Board Meeting held on 14.10.2017. The record shows that the Petitioner owns 10% shares and the Minority Shareholder and had not attended the Board Meetings held on 28.09.2017, 05.10.2017 and also on 14.10.2017, despite service of notice, and therefore, now belatedly cannot raise the contention that the induction of the 3rd and 4th Respondents as Directors, is invalid, filing of the financial statements is non-est and that the very meetings have to be declared as illegal. There are no legality or infirmity in the well-reasoned order of the NCLT, Kochi Bench and therefore this Appeal is dismissed.
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2023 (8) TMI 489
Oppression and Mismanagement - rejection of rectification application - non-speaking order - non-disclosure of fact regarding dismissal of the earlier appeal in the present appeal - Section 241-242 of the Companies Act, 2013 - HELD THAT:- Against the rejection of the appeal the appellant instead of preferring an appeal preferred to file a rectification application before the NCLT. It appears that the appellant was persuaded with some of the observations recorded by this Tribunal in its order [ 2022 (11) TMI 759 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI ] as if we permitted him to file rectification petition. However, this Tribunal was not inclined to interfere with the order since it was a consent order. In the said order i.e. order dated 11.11.2022 this Tribunal noticed that if an authorisation is given to a counsel and on authorisation such submission is made by the counsel, the integrity of the counsel may not be questioned that too without apprising the concerned Court. Such submission was not permissible to be raised before Appellate Court. It is evident that Ms Malika Joshi, learned counsel who had given consent before the Tribunal had not signed this communication - the submission of the learned counsel for the Respondent agreed upon that in the aforesaid communication it has not even been indicated as if the signatory of the said praecipe has received any instructions or information from Ms Malika Joshi, learned counsel for the appellant. If the appellant was of the view that without any authorisation such consent was given by his counsel then in that event he would have taken immediate steps for filing a rectification application, instead of preferring an appeal before this Tribunal. Admittedly the rectification application was filed for rectification of order dated 30.09.2022 against which the appellant had preferred appeal and the same was rejected by this Tribunal in [ 2022 (11) TMI 759 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI ]. Non-disclosure of the fact regarding dismissal of the earlier appeal in the present appeal is itself enough to draw inference that appellant before this Tribunal has not come with clean hands and on this score also the appeal is required to be rejected - appeal dismissed.
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Insolvency & Bankruptcy
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2023 (8) TMI 488
Rights of promoters - Promoters having failed in their initial duty to construct the flats or meet the obligation of the appellant still want to oppose the settlement as they claim that the appellant who made the financial contribution actually fall in the category of related party . HELD THAT:- The Promoters agreed to the terms of the agreement for the investment of the appellant and entered into an exit agreement where they could not comply with the financial obligations. The dispute arose despite that in arbitration in which an award has been passed against the promoters. Almost 150 crores plus have been awarded to the appellant, out of which the appellant, according to the successful resolution plan, would get about 90 crores less the 11 crores being sacrificed for the flat buyers and objections under Section 34 of the Arbitration Act, 1996 have not moved at all, ostensibly on account of settlement talks. The statutory scheme makes it clear that the erstwhile Board of Directors are not members of the Committee of Creditors, but they do have a right to participate in the meetings held by the Committee of Creditors and have a right to discuss all resolution plans. The plan would now have to be placed before the NCLT, where the Board Members would be represented. Thus, the Promoters cannot derive any benefit out of the order of the NCLAT which is a common order in which they were one of the appellants and it is the flat buyers who are really the interested parties who have agreed to settle in the aforesaid terms - any claims or rights of the Promoters which they may seek from the NCLAT order impugned is closed. Appeal allowed.
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2023 (8) TMI 487
Validity of impugned assessment orders, assessment notices and demand notice - resolution plan is in place - case of petitioner is that in terms of the Resolution Plan, the claims of all the creditors including statutory operational creditors would stand extinguished and discharged upon the payment of the resolution plan - HELD THAT:- It is apparent that the issue is decided by the Supreme Court in the case of GHANASHYAM MISHRA AND SONS PRIVATE LIMITED THROUGH THE AUTHORIZED SIGNATORY VERSUS EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED THROUGH THE DIRECTOR ORS. [ 2021 (4) TMI 613 - SUPREME COURT ] . The Supreme Court in the aforesaid case held that based on the provisions of the IBC, the Resolution Plan would be binding on all stakeholders after getting its seal of approval and therefore no surprise claims should be flung on the successful resolution applicant as the dominant purpose is to start with with a fresh slate. The operational creditors or the other stakeholders squarely cover the Central Government, any State Government or any local authorities, including tax authorities. As per the position of law declared in the case of Ghanshyam Mishra, in case of all such debts owed to the Central Government, any State Government or any local authority including tax authority, once a resolution plan is approved all such claims etc which were not a part of the resolution process shall stand extinguished. The impugned assessment orders, assessment notices and demand notices dated 14.2.2019, 16.2.2019, 20.07.2020, 18.07.2020 and orders dated 22.1.2021 are quashed and set aside - petition allowed.
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2023 (8) TMI 486
Initiation of CIRP - Financial Debt - Period of limitation - Assignment of debt in favour of the Petitioner - documentary evidence furnished with application show that a debt is due and payable and has not been paid by the corporate debtor or not - Applicability of Section 10A of IBC - HELD THAT:- In the instant case, it is an admitted fact and also recorded in the Impugned Order that as per the Settlement Agreement entered into between the Corporate Debtor and the Lenders, the third instalment of the payment was due and payable on 31.03.2020. The Hon ble Apex Court in RAMESH KYMAL VERSUS M/S SIEMENS GAMESA RENEWABLE POWER PVT LTD. [ 2021 (2) TMI 394 - SUPREME COURT ] concluded that the embargo in Section 10-A must receive a purposive construction which will advance the contention of the Learned Senior Counsel for Respondent No.2 that though the date of default is on 31.03.2020, Section 10-A will not be applicable is unsustainable in the light of the observations made by the Hon ble Apex Court in the aforenoted Judgment. In the instant case, admittedly, the date of default is 31.03.2020 and the ratio of the Hon ble Apex Court in Ramesh Kymal versus M/s. Siemens Gamesa Renewable Power Pvt. Ltd. regarding Section 10-A of the Code the object of which was sought to be achieved by enacting the Provision, is squarely applicable to the facts of this case. The Impugned Order is set aside and consequently the admission of the Section 7 Petition is also set aside Appeal allowed.
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2023 (8) TMI 485
Threshold amount limit for filing application u/s 9 of IBC - Section 10A of IBC - Appellant/Corporate Debtor did not appear before the Adjudicating Authority inspite of several opportunities and inspite of specific notice - HELD THAT:- When the Corporate Debtor inspite of ample opportunities does not appear and file any defence, such Corporate Debtor cannot be allowed to raise factual issues and question the findings recorded by the Adjudicating Authority. It is clear that the Corporate Debtor sent an e-mail that he wants to settle the matter and on that ground the matter was adjourned. The Adjudicating Authority called the Corporate Debtor to appear and issued notice, which was duly served. The counsel for the Corporate Debtor appeared and even then he did not file any reply - such Corporate Debtor cannot be allowed to now raise factual issue and contend that the claim was less than Rs.1 Crore. On such conduct of the Corporate Debtor this Appellate Tribunal is not inclined to grant any indulgence or consider any submission on the facts - appeal dismissed.
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2023 (8) TMI 484
Recovery of electricity dues - Resolution plan already approved (Appellant did not file any claim in the Insolvency Resolution Process of the Corporate Debtor) - HELD THAT:- The submission of the Appellant that there was no proper publication of the announcement made by the Resolution Professional has been dealt by the Adjudicating Authority. The Adjudicating Authority has noted the provisions of Regulation and has returned a finding that on the above submission of the Appellant plan approval cannot be held to be vitiated. It is also to be noted that against the plan approval order, Appellant filed an Appeal which was withdrawn by the Appellant themselves. No contention by the Appellant challenging the plan approval can be considered. The Adjudicating Authority while approving the Plan having already issued directions that Electricity Distribution Companies shall not raise any demand with reference to the past dues, there are no error in the direction issued by the Adjudicating Authority by the Impugned Order directing the Appellant to consider the service connection application of the Applicant in accordance with the Code/Regulation without insisting on making any payment of arrears prior to date of plan approval. No grounds have been made out to interfere with the Impugned Order passed by the Adjudicating Authority. Appeal dismissed.
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2023 (8) TMI 483
Threshold amount limit for application filed u/s 9 of IBC - relevant date for examining the threshold is the date when the application was filed or not - HELD THAT:- There is no dispute between the parties regarding the relevant dates i.e. the date of issue of Demand Notice i.e. 31.01.2020 and the date on which the application was filed i.e. 04.08.2020. The application u/s 9 has been filed on 04.08.2020 which is undisputed fact. The similar issue came for consideration in [ 2022 (9) TMI 954 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] where Demand Notice was issued on 05.03.2020 and section 8 application was filed subsequently on 18.01.2021. Arguments was addressed that since the Operational Creditor has served the Demand Notice, the application filed on 18.01.2021 was maintainable on the threshold of Rs. One lakh. The application of the Appellant having been filed on 04.08.2020 i.e. subsequent to 24.03.2020 should fulfil the threshold of Rs. One crore and the Adjudicating Authority did not commit any error in rejecting Section 9 application. There are no merit in this appeal - appeal dismissed.
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2023 (8) TMI 482
Maintainability of application filed u/s 7 of IBC - barred by time limitation or not - Appellant, contends that the Adjudicating Authority/ Tribunal, had failed to appreciate that the Claim of the 1st Respondent / Petitioner / Financial Creditor, was hopelessly barred by Limitation - HELD THAT:- Dealing with the aspect of Reply Notice, dated 19.06.2019, issued on behalf of the Corporate Debtor (for the Legal Notice, dated 10.06.2019), issued by the 1st Respondent / Bank / Financial Creditor, the Paragraph 2 of the said Reply, makes a reference to the Financial Turmoil, faced by the Corporate Debtor, in the recent past, resulting to Non payment of Loan Amount, and the discussion both had with O.T.S. Proposal, for Fourteen Cr., which was under due consideration, etc. - an admission, is the best peace of evidence, which can be used against the Maker, and this can be taken advantage of, by a Party, which places reliance, so as to bind, the said Maker. This Tribunal, to point out an admission, is not a self serving statement, but it is a self harming one. An Admission, is Confession or Voluntary Acknowledgement, made by a Party or Someone, identified with him, in legal interest, of the existence of certain facts, which are in issue or relevant to an issue, in the case, as per decision - It cannot be forgotten that the Corporate Debtor, had acknowledged the Debt, by offering One Time Settlement Proposal for Rs.14 Crore, through a Letter dated 03.03.2018. Also that the OTS Letters (sent by the Corporate Debtor ), 13.07.2021, 03.08.2021, 31.12.2021, 04.01.2022 and 13.01.2022, were rejected by the 1st Respondent / Bank / Financial Creditor, as not Financially viable. An Unconditional Acknowledgment, is held to imply, a promise, to pay as per decision of the Hon ble Supreme Court of India, in Hiralal Ors. Badkulal, [ 1953 (3) TMI 36 - SUPREME COURT] . An Acknowledgement, extends the Limitation Period. No wonder, an Acknowledgement, contained in the Balance Sheet of the Company, begins a fresh commencing point of Limitation - Undoubtedly, if any documents is executed, during the subsistence of Limitation, thereby the Dues, are / were acknowledged, the Limitation, will be revived, afresh, from the Date of Acknowledgement. In the instant case, the Default, committed by the Corporate Debtor, in respect of the Financial Debt, is more than Threshold Limit of Rs. 1 Crore (vide Section 4 of the Code, after amendment) - In the present case, as on date, for the Loan Facilities, provided by the 1st Respondent / Bank, to the Corporate Debtor, a Sum of Rs.239,51,53,055.83/-, being the Due Default Amount, committed by the Corporate Debtor. If there is any Financial Debt and Default, in repayment of the same, by the Corporate Debtor, then, an Adjudicating Authority/ Tribunal, by exercising its Discretion, after subjectively satisfying, itself that a Default, was committed by the Corporate Debtor, then, the Section 7 Application, filed by the Financial Creditor, can be admitted, under the I B Code, 2016. In the instant case on hand, the Adjudicating Authority / Tribunal, on the available materials on record, came to an ultimate conclusion that the Corporate Debtor, had committed Default, in respect of the Debt, to be paid by it, to and in favour of the 1st Respondent / Bank. Indeed, the Section 7 Application, was admitted, by the Adjudicating Authority / Tribunal through its impugned order, dated 06.05.2022, and appointed, an Interim Resolution Professional and declared Moratorium, etc., which is free from any Legal Infirmities. Appeal dismissed.
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2023 (8) TMI 481
CIRP - Legality of admitting Section 7 Application - Existence of Financial Debt - Time Value of Money - no Privity of Contract between the Corporate Debtor and the 1st Respondent / Financial Creditor / Petitioner. - Nature of loan / money borrowed from bank to pay / settle the dues of another bank. - Scope of Article of association - Delegation of power to Directors / Borrowing Powers of Directors. Aggrieved person being Shareholder and Suspended Director - the Corporate Debtor, is a family business of the Appellant. HELD THAT:- There is no embargo in Law, for a Director of a Company, to infuse the Funds, into the Company, with a view to rescue a Company from Financial Distress / Crisis, and the monies advanced clearly come within the umbrage of Section 5(8) of the Code. - It cannot be gainsaid that a Financial Debt , is to be understood to include Interest Free Loans, given to a Company / Entity , for its Business purpose / Operations , as the case may be. It is brought to the fore on behalf of the 1st Respondent / Financial Creditor / Petitioner , that a Sum of Rs.3,97,85,000/-, was advanced to the Corporate Debtor , by the 1st Respondent / Financial Creditor / Petitioner , and the same was used by the Corporate Debtor , to repay the Loans , taken by the Corporate Debtor / Company , from the State Bank of India (earlier State Bank of Hyderabad), under the One Time Settlement Scheme , provided by the Bank , to save the Corporate Debtor , from distress . In reality, the State Bank of India / Lender , had issued a No Due Certificate , dated 30.01.2021. Suffice it for this Tribunal , to point out that a Sum of Rs.3,97,85,000/- advanced to the Corporate Debtor , by the 1st Respondent / Financial Creditor / Petitioner , was through numerous Bank Transactions and all these, would unerringly prove the Existence of a Financial Debt of an Amount of Rs.1 Crore , Due and Payable , by the Corporate Debtor , to the 1st Respondent / Financial Creditor / Petitioner . If the Articles, have a provision which prohibited the Directors , from delegating their power , to Borrow Monies , does not prevent them from empowering one of the Directors , to execute a Mortgage Deed . - It is not necessary that while specifying the Borrowing Powers of a Company , the Articles , should state the manner, in which, the Borrowing , is made. Notice of Default - HELD THAT:- The question of whether, there is a Debt and Default , can be looked into, only, if the Corporate Debtor , disputes the Debt or takes a stand that there is no Default , although, there is Debt . - An Adjudicating Authority , this Tribunal , pertinently points out is to see the Records of Information Utility or other evidence , produced by a Financial Creditor , to satisfy itself, that a Default , has occurred. The other factors, such as, the Existence of a Dispute or Discrepancy , are not Germane , as long as, it has not been Disputed , that the same Debt , is Due and is Payable , to the Financial Creditor , and the Corporate Debtor , has Defaulted . This Tribunal, taking note of the contentions, advanced on respective sides, considering the surrounding facts and circumstances of the instant case, in a holistic manner, comes to an irresistible and inescapable conclusion that the aspect of Debt and Default, committed by the Corporate Debtor, were established by the 1st Respondent / Financial Creditor / Petitioner, to the subjective satisfaction of this Tribunal. Appeal dismissed.
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2023 (8) TMI 480
Approval of Resolution Plan (at second round) - it is alleged that the payments to the Operational Creditors have decreased in the revised payments proposal - HELD THAT:- The direction of this Tribunal in M/S. RANA SARIA POLY PACK PVT. LTD. VERSUS UNIWORLD SUGARS PVT. LTD., NCIRCLE EXIM LLP AND SIMBHAOLI SUGARS LIMITED VERSUS PRAMOD KUMAR SHARMA, RESOLUTION PROFESSIONAL OF UNIWORLD SUGARS PRIVATE LIMITED (USPL) , COMMITTEE OF CREDITORS OF UNIWORLD SUGARS PRIVATE LIMITED (USPL) , IDBI BANK LTD. THROUGH ITS AUTHORIZED REPRESENTATIVE, ORIENTAL BANK OF COMMERCE, THROUGH ITS AUTHORIZED REPRESENTATIVE, UNION BANK OF INDIA, M/S. NCIRCLE EXIM LLP [ 2022 (5) TMI 460 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI] indicate that the Resolution Plan was set aside only to the extent it relates to allocation of payment to stakeholders and creditors and directed that revision of payments and subsequent approval of the revised resolution plan was to be completed within a period of two months. Subsequent to order of this Tribunal, the revised proposal for distribution was placed before the Committee of Creditors which came to be approved on 11.05.2022. The revised plan which has been approved indicate that payments to workmen and employees has been increased as well as payment to Financial Creditors. There is little decrease in payment to Operational Creditors, earlier Rs.1.69 Crores were allocated which is now at Rs.1.57 Crores (which has been actually paid). It is now well settled that distribution to the creditors in accordance with provisions of Section 30(2) is in the discretion of the Committee of Creditors and with regard to distribution the scope of judicial review by the Adjudicating Authority and this Tribunal is very little. From the facts brought on the record it does appear that liquidation value of the Operational Creditors is nil. When payment of Rs.1.57 Crore has been proposed in the plan, it cannot be said that there is violation of any provisions of law especially Section 30(2) of the Code. The present is a case where the Corporate Debtor is not being liquidated rather resolution plan has been approved as per the Insolvency and Bankruptcy Board of India. (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - there is no applicability of Regulation 29 while approving the resolution plan - such submission of the Appellant cannot be appreciated. There is no infirmity in the impugned order of the Adjudicating Authority approving the Resolution Plan. There is no merit in the Appeal. Appeal is dismissed.
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PMLA
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2023 (8) TMI 479
Rejection of Bail - appellant remanded to District Jail - appellant not accused in individual capacity - HELD THAT:- Having regard to the fact that the appellant Sachin Bhati is not an accused in his individual capacity, the trial court was not right either directing the appellant Sachin Bhati to appear as the authorized representative of the three companies, or in sending him to judicial custody. The aforesaid three companies are being prosecuted and can be represented by any person in accordance with law and as per Section 309 of the Code of Criminal Procedure, 1973. In STANDARD CHARTERED BANK VERSUS DIRECTORATE OF ENFORCEMENT [ 2005 (5) TMI 327 - SUPREME COURT ], the majority opinion held that a corporation or a company though the juristic person can be prosecuted for offence punishable under law, but being a juristic person custodial sentence cannot be imposed. Thus, the direction given to send/remand the appellant Sachin Bhati to judicial custody is unsustainable in law and, therefore, set aside - appeal allowed.
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2023 (8) TMI 478
Seeking grant of anticipatory bail - Money Laundering - proceeds of crime - siphoning off of funds of partnership firm - HELD THAT:- It is directed that in the event of the appellant Suresh Kumar being arrested in a case registered under Section 3 and 4 of the Prevention of Money Laundering Act, 2002 pending in the court of learned Special Judge, CBI-cum-PMLA, Ranchi, he shall be released on bail by the arresting/investigating officer/trial court on terms and conditions to be fixed by the trial court. The appellant Suresh Kumar shall, in addition, comply with the conditions mentioned in Section 438(2) of the Code of Criminal Procedure, 1973 and will regularly appear before the trial court. Appeal allowed.
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2023 (8) TMI 477
Money Laundering - schedule offence - proceeds of crime - non-existent or non-functional or fake functional MSMEs - HELD THAT:- Issue notice returnable in the month of September 2023. It is stated that there were two First Information Reports (FIRs) pursuant to which proceedings under the Prevention of Money Laundering Act, 2002 (PMLA) were initiated. Therefore, the High Court has erred in quashing the proceedings under the PMLA, as the second FIR with regard to the predicated offence has not resulted in acquittal etc.
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2023 (8) TMI 476
Seeking grant of bail - Money Laundering - Scheduled Offence - confiscation of proceeds of crime - involvement in acquisition, use, possession and concealment of proceeds of crime with the assistance of other accused persons and entities - HELD THAT:- The petitioner was in no way associated with the West Bengal Board of Primary Education. However, her husband Manik Bhattacharya was the President of West Bengal Board of Primary Education. Section 2 (u) of the PMLA Act includes within its ambit proceeds of crime which relate to any property derived or obtained directly or indirectly by any person as a result of criminal activity relating to a schedule offence and Section 3 of the PMLA Act which defines the offences of money laundering includes within its ambit, the persons who directly or indirectly indulge or knowingly assists or is a party or is actually involved in any process or activity connected along with the concealment, possession, acquisition and use of proceeds of crime. Thus, a distinction has been created in the statute itself regarding a person who is involved in the criminal activity or generation of ill-gotten money and the person who conceals, possesses, acquires or uses the same from the person who generates it, although both are offences. Having regard to the fact that the high officials of the Enforcement Directorate did not exercise their powers of arrest at any point of time when the investigation continued till the submission of the complaint, a distinction has already been created between the person who was in office and had the capacity to generate the money by illegal means and the person who concealed or possessed or used the property which was acquired by that means. Further, there was no prayer before the learned trial court when the complaint was filed under Section 87 of the Code of Criminal Procedure that the warrant be issued at the first instance. What was prayed before the learned special court was for issuance of process. There was no allegation also in the prayer of the complaint that there is any possibility of the present petitioner absconding or fleeing away from justice. Petitioner also in response to the summons appeared on the first day before the court and prayed for bail. Learned court under Section 45 of the PMLA took cognizance of the offence but did not decide the issue of bail and also did not take the petitioner in custody - the court while dealing with the application for grant of bail, need not delve deep into the merits of the case and the consideration must on broad probabilities. It has been reiterated by the Hon ble Supreme Court that the word guilt appearing in Section 45 of the PMLA is not to be considered as the finding of guilt or acquittal at the end of the trial after the evidence is adduced before the court. Having considered the nature of blame worthiness or culpability of the present petitioner and the fact that she appeared in response to the summons before the learned special court/trial court and that she is in custody for more than 5 months, it is opined that further detention of the petitioner is unwarranted in the facts and circumstances of the present case. The prayer for bail of the petitioner is allowed - Bail application allowed subject to conditions imposed.
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Service Tax
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2023 (8) TMI 475
Classification of services - Commercial or Industrial Construction service or works contract - Service provided to Vyavasayi Vidhya Pratisthan (VVP), Rajkot and Sewa Bharti, Ahmedabad for construction of VVP Engineering college and Saraswati Shishu Mandir - Benefit of cum-tax value for determination of assessable value - TDS deducted by the recipient has to be considered as part of the taxable value or not - extended period of limitation - HELD THAT:- Hon ble Apex Court in the case of M/S. TOTAL ENVIRONMENT BUILDING SYSTEMS PVT. LTD. VERSUS THE DEPUTY COMMISSIONER OF COMMERCIAL TAXES ORS., YFC PROJECTS PVT. LTD. VERSUS UNION OF INDIA, M/S. G.D. BUILDERS VERSUS UNION OF INDIA ANR., M/S. NATIONAL BUILDING CONSTRUCTION CORPORATION LTD. (NBCC) VERSUS UNION OF INDIA ANR., M/S. UNITECH LTD. VERSUS UNION OF INDIA ORS., M/S. NATIONAL BUILDING CONSTRUCTION CORPORATION LTD. (NBCC) VERSUS UNION OF INDIA ORS., M/S. LARSEN AND TOUBRO LTD. VERSUS COMMISSIONER OF SERVICE TAX, DELHI, COMMISSIONER OF SERVICE TAX MUMBAI - II VERSUS M/S. IOT INFRASTRUCTURE ENERGY SERVICES LIMITED, M/S. L T HYDROCARBON ENGINEERING LIMITED (PREVIOUSLY KNOWN AS LARSEN TOUBRO LIMITED) VERSUS COMMISSIONER OF SERVICE TAX, MUMBAI [ 2022 (8) TMI 168 - SUPREME COURT] has held that prior to 01.06.2007, service tax levy was applicable to service contracts simpliciter and not to indivisible works contract which contained both the elements of transfer of property in goods as well as labour and services and same were brought under the service tax net for the first time on 01.06.2007. The contention of the appellant not agreed upon that service provided by them to M/s. Suzlon Infrastructure Limited and M/s. Suzlon Infrastructure Service Limited are also classifiable under the category of Erection, Commissioning or Installation service under Section 65(105)(zzd) Act, in addition to Commercial or Industrial Construction service. Service provided to Vyavasayi Vidhya Pratisthan (VVP), Rajkot and Sewa Bharti, Ahmedabad for construction of VVP Engineering college and Saraswati Shishu Mandir - HELD THAT:- Merely for the reason that some fee is charged by them from the students does not make them commercial organizations . These organizations need to charge fees from the students to meet their organizational expenses and the same cannot be criteria for determination that the same is for purposes of profit. No evidence has been brought on record that the profits are appropriated for benefits of the individuals or trustees of the organisation. Therefore, construction services provided Vyavasayi Vidhya Pratisthan (VVP), Rajkot and Sewa Bharti, Ahmedabad were not taxable. Benefit of cum-tax value for determination of assessable value - HELD THAT:- Where the appellant has not issued a taxable invoice, and the services have been held to be taxable later-on as a result of investigation, the gross value charged by the appellant has be considered as cum-tax value under rule 67(2) of the Act which reads as where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged . Whether TDS deducted by the recipient has to be considered as part of the taxable value or not? - HELD THAT:- TDS is nothing but part of the taxable value which comes back to the service provider in terms of the income tax deposited by the recipient. Thus the same is taxable and shall be part of the gross amount charged as given in explanation (c) to Section 67 of the Act. The appellant has further disputed the taxability of the two invoices which they claimed that the same were for raised for use of JCB and tractors on rental basis and were covered under the service of supply of tangible goods for use which was not covered under the Act at the relevant time. The Ld. Commissioner has rejected the claim on the ground that invoices produced are dated 8.6.2007 10.06.2007 and not 15.03.2007 as claimed by the appellant - the appellant should be given a chance to clarify to the adjudicating, the above discrepancy. Appellant has further claimed that an invoice Rs. 3000/- and invoice Rs. 4,00,000/- which has been computed twice pertain the service was provided prior to 10.09.2004 when the impugned service of construction was brought into the service tax net. The claim has been rejected by the Ld. Commissioner on the ground that the appellant could not produce documents that the service was provided prior to 10.09.2004 - the appellant should be given a chance to submit necessary evidence to the adjudicating authority. Extended period of limitation - applicability of proviso to Section 73(1) of the Act - HELD THAT:- The extended period is applicable qua the demand which would be worked out keeping in view the above observations as there is a clear cut case where the appellant had deliberately chosen not to pay the tax whereas he was fully aware of his tax liability. Interest provisions under Section 75 of the Act and Penalty provisions under Section 78 and 76 of the Act will also be attracted. However, penalty under Section 76 of the Act will not be attracted for demand which may pertain to the period from 10.05.2008 in view of the amendment to Section 78 by the Finance Act, 2008. Penalty under Section 77(2) is also held to be imposable for failure to file the service tax returns. The matter should be remanded back to the original adjudicating authority for redetermination of the demand in view of the findings. The appellant would be allowed to produce any documents which may be required in the interest of justice - appeal allowed by way of remand.
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2023 (8) TMI 474
Classification of services - Site Formation and Clearance service - land purchased outright by the appellant from the landowners and where site formation etc. is done after purchasing the land but before selling it - land sold by the appellant as per the GPA obtained from the landowners and where site formation etc. is done after obtaining GPA but before selling the land - extended period of limitation - suppression of facts or not - penalty. Whether on the land purchased outright by the appellant from the landowners and where site formation etc. is done after purchasing the land but before selling it, service tax is payable under the classification heading Site formation and clearance service? - HELD THAT:- The development charges in the present case is paid by the buyer of land for site formation done by the seller by way of levelling, plotting, boundary marking, road layout, clearance of the area etc done by the seller so that the buyer can enjoy a vacant land which is ready for use. The land development charge paid for such site formation carried out when such land was owned by the developer/ promoter will be liable to service tax - When land is purchased outright by the appellant from the landowners and where it is self-developed by site formation etc. after purchasing the land but before selling it, and the development work is not done for or on behalf of any person involving a consideration being collected, service tax is not payable by the landowner. Whether on the land sold by the appellant as per the GPA obtained from the landowners and where site formation etc. is done after obtaining GPA but before selling the land, service tax is payable under the classification heading Site formation and clearance service? - HELD THAT:- The sale price of the land has been fixed separately at Rs 4,35,000/- per acre. Ground leveling, earth filling, laying roads on the land, fixing of boundary stones etc. are part of site formation and clearance which are clearly covered by the inclusive definition of Section 65(97a) that defines site formation and clearance, excavation and earthmoving and demolition . The appellants activities do not fall under any of the exclusions of the said definition. The amount received by the appellant is shown as development charges in the Agreement. If any part of this charge was towards any other expenses they should have bifurcated it with the help of documents and informed the department. When any fact is especially within the knowledge of any person, the burden of proving that fact is upon him. Hence the service has been correctly classified and the value correctly determined in the impugned order. The power of attorney is only a creation of an agency whereby the grantor authorizes the grantee to do the acts specified therein, on behalf of grantor, which when executed will be binding on the grantor as if done by him. Even an irrevocable attorney does not have the effect of transferring title to the grantee. Hence the averment of the appellant that Section 53A of Transfer of Property Act envisages situations where under the contract of transfer of immovable property the transferee has paid the consideration and taken possession of the property even without the execution of the sale deed the transfer takes place and the transaction is recognized as a valid transfer of property, is incorrect and not sustainable in law. Their entire argument of self-service hence falls through. The activity of land development as rendered by them for a consideration is hence liable to Service Tax as per the taxable service Site Formation and Clearance Service under section 65(105)(zzza) of the Finance Act, 1994. Thus, even on the land sold by the appellant as per the GPA obtained from the landowners and where site formation etc. is done after obtaining GPA but before selling the land, service tax is payable under the classification heading Site formation and clearance service. Extended period of limitation - suppression of facts or not - HELD THAT:- The averment of the appellant cannot be accepted. Firstly, under Income Tax laws, illegal gains can be taxed at the hands of those who financially gained from these illegal actions. Hence this fact does not come to their rescue. The development of land by site formation was done by the appellant as per a registered agreement. The Agreement states that taxes like service tax and income tax etc. are to be paid by the appellant. This should have made them verify their obligations under the Finance Act 1994. What prompted them to believe that service tax on the development charges were not tenable is not forth coming from their pleadings. Hence their bonafide s cannot be accepted since as per the Agreement they have collected service tax from MRF - There is no complication in the definition of the service or the taxability of the activity as per the Finance Act 1994. It was clearly a suppression of fact from the department with the intention to fraudulently evade payment of duty. These facts would not have come to light without the investigation done by the Survey, Intelligence and Research Unit of the Service Tax Commissionerate, Chennai. It is now well settled that fraud vitiates all solemn acts. Any advantage obtained by practicing fraud is a nullity. Hence the extended period of time has been rightly invoked in this case - The penalty is also justified. Appeal dismissed.
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2023 (8) TMI 473
Levy of Service tax - declared services or not - penal interest and bouncing charges - penal interest or delayed payment charges in case of late payment of EMI or delay in payment of periodical instalments of loan/advance repayments - bouncing charges i.e., charges recovered for bouncing of repayment instruments such as dishonour of cheque/ECS or any other electronic or clearing mandate given by the customers/borrowers - Section 66E(e) of the Finance Act, 1994 read with Section 174 (2) CGST Act, 2017. Penal interest or delayed payment charges in case of late payment of EMI or delay in payment of periodical instalments of loan/advance repayments - HELD THAT:- From the perusal of the case records it transpires that the appellants are engaged in the business of financing including lending of loans and advances. As a consideration for lending/financing, the appellants charge interest from their customers/ borrowers at a particular rate, for the period for which such loan is taken. The principal and interest amount on such loan is repaid by customers/borrowers by way of EMI over a period of loan tenure. Accordingly, while computing the EMI, the appellants charges pro-rata interest payable on each due date, on the underlying assumption that the customers/borrowers would not default in payment of the EMI on the due dates. However, in case of any default, the appellants charge them an additional interest in the form of penal interest for the number of days of default - Considering the nature of the principal interest on the loan due over the entire loan tenure, collected in the form of EMI comprising of principal amount plus interest, in our considered opinion this principal interest could be treated as consideration for the usage or retention of money lent by the appellants to their customers/borrowers as per the agreement and EMIs in force. In a case where the borrower is unable to repay a particular EMI on the due date, penal interest is charged on the period of delay or additional time taken for repayment of EMI, beyond the due date. Such penal interest also represents the consideration for usage or retention of money lent beyond the agreed time for payment in the form of due date of EMI. In other words, both the principal interest and the penal interest represent the time value of money. While the former indicates the interest in the form of cost for agreed periodical repayments in the form of EMI period/due dates, the later represent the cost for period of delay or additional time taken for repayment of EMI, beyond the due date. Thus, it is found that both the principal interest and penal interest is covered under the scope of the term interest under Section 65B(30) ibid. Clause (iv) to sub-rule 2 to Rule 6 of the Service Tax (Determination of Value) Rules, 2006, notified vide Notification No.24/ 2012 - S.T. dated 06.06.2012, inter alia, provide that the value of any taxable service does not include, (iv) interest on delayed payment of any consideration for the provision of services or sale of property, whether movable or immovable . Thus, the above entry clearly provide the Government had excluded the interest on delayed payment from the scope of payment of service tax. In the impugned order, the learned Commissioner had held that penal charges and bounce charges are in the nature of consideration for having agreed to tolerate an act or a situation and thus it is a declared service of agreeing to tolerate an act or a situation under section 66 E(e) of the Finance Act, 1994. Charging of penal interest in respect of delay in payment of EMI, had been examined by the Ministry of Finance in the context of applicability of GST - HELD THAT:- It was clarified vide CBIC Circular No. 102/21/2019-GST dated 28.06.2019, that the transaction of levy of additional/penal interest does not fall within the ambit of entry 5(e) of Schedule II of the CGST Act i.e. agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act , as this levy of additional/penal interest satisfies the definition of interest as contained in Notification No.12/2017-Central Tax (Rate) dated 28.06.2017. Accordingly, it was clarified that penal interest charged on a transaction would not be subject to GST. The issue of penal charges in respect of delay in payment amounting to declared service as contemplated by the department under section 66E(e) of the Finance Act, on which service became taxable w.e.f. July 1, 2012, has already been decided by Principal Bench of this Tribunal in the case of M/S SOUTH EASTERN COALFIELDS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, RAIPUR [ 2020 (12) TMI 912 - CESTAT NEW DELHI] . In this case, the Tribunal had held that the penal clauses are in the nature of providing a safeguard to the commercial interest of the appellant and it cannot, by any stretch of imagination, be said that recovering any sum by invoking the penalty clauses is the reason behind the execution of the contract for an agreed consideration. It is not the intention of the appellant to impose any penalty upon the other party nor is it the intention of the other party to get penalized. Hence, it was held by the Tribunal that it is not possible to sustain the view that penalty amount, forfeiture of earnest money deposit and liquidated damages have been received by the appellant towards consideration for tolerating an act leviable to service tax under section 66E(e) of the Finance Act. The issue of liability of service tax on the declared service of Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act under clause (e) of Section 66E of the Finance Act, 1994 was clarified by the CBEC in its Circular No.214/1/2023Service Tax dated 28.02.2023, in the context of the orders passed by this Tribunal in various cases. Accordingly, it was clarified that there should be a flow of consideration for this activity of tolerating an act or a situation. It was also decided by the Board not to pursue the Civil Appeals filed before the Apex Court in those cases, where the Tribunal had ordered for setting aside the orders of lower authorities for confirming the service tax demands under Section 66E(e). The impugned order holding that penal interest and bouncing charges received by the appellants as consideration for tolerating an act , and are leviable to service tax under section 66E(e) of the Finance Act, 1994, cannot be sustained. Appeal allowed.
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2023 (8) TMI 472
Demand of service Tax - Business Auxiliary Service - Non-payment/short payment of service tax - Incentive/ Commission - Ex-Works (EXW) Services - Destination Charges. Incentive/ Commission - Discount received by the appellant from the shipping lines/ airlines on sale of space by the shipping line/ airline to the appellant which is reflected as incentive/ commission/ market price adjustment in the books of accounts of the appellant - HELD THAT:- The Revenue has picked up some activities, from the bundle of services rendered by the appellants, in a convenient manner. One has to see the nature of the service in total. Segmenting the series of actions involved in the provision of a particular service, would result in ridiculous propositions. The Department has not viewed the service rendered by the appellants in a holistic manner, ignoring the very fact that the services rendered by the appellants are not complete just by loading of the goods on a vessel or on an aircraft. They go beyond. If the case of the Department is accepted, the provisions of Section 66F of the Finance Act, 1994 would become redundant. Such an approach is not permissible under the law. Ex-Works (EXW) Services - Providing logistic and allied/ ancillary services to the main service of transportation of cargo - HELD THAT:- Other than alleging that the appellants have rendered Business Auxiliary Service to the ship liners/ airlines, it is not brought forth as to which category of the Business Auxiliary Service is rendered by the appellants. It is also not explained as to how the service rendered by the appellants enhances the business prospects of the ship liners/ airlines. It is a simple case of booking of space and selling of the same by the appellants - the issue stands settled by the Tribunal in the case of Kafila Hospitality and Travels Pvt. Ltd. [ 2021 (3) TMI 773 - CESTAT NEW DELHI ] wherein it has been held that these contentions as to whether the air travel agent is promoting the business of the airlines or the CRS Companies have been dealt with in the earlier portion of this order. The order also discusses whether the classification of service would fall under air travel agents services or under BAS and whether incentives paid for achieving the targets are taxable. Destination Charges - Expenditures such as Custom Duty, Delivery order charges, port handling etc. incurred by the appellant post arrival of the shipment at a foreign port, nomenclature as Destination Charges - HELD THAT:- It is found that the amounts collected by the appellants from the Indian clients is towards the expenditure such as customs duty, delivery order charges, port handling at the foreign ports; as the charges pertain to the activity rendered at a foreign destination, the same cannot be charged in India. Moreover, these are in the nature of reimbursement of expenses. Moreover, it is seen that under this Head too, Revenue does not specify as to which was the category under Business Auxiliary Service , the services rendered by the appellants fall - there are no type of service rendered by the appellants in regards to promotion of the business of their Indian clients. Their activity and the payments received thereof squarely fall under the main activity of goods transport operator or cargo handler. By no stretch of imagination, it can be argued that the appellants have rendered Business Auxiliary Service to their customers. The Hon ble Apex Court, in the case of Intercontinental Consultants and Technocrats Private Limited [ 2018 (3) TMI 357 - SUPREME COURT ] held that only with effect from May 14, 2015, by virtue of provisions of Section 67 itself, such reimbursable expenditure or cost would also form part of valuation of taxable services for charging service tax. Thus, the demands confirmed vide the impugned order cannot be sustained - appeal allowed.
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2023 (8) TMI 471
CENVAT Credit - Whether the appellant is eligible to avail credit of the service tax paid by them on the invoices issued by automobile dealers? - Difference of opinion between Judicial member and Technical member. As PER MS. SULEKHA BEEVI, C.S. (Judicial Member) CENVAT Credit - invoices on which credit is taken do not reflect the true description of the services provided by the dealers to the appellant - credit availed based on unsigned invoices issued (in respect of M/s. Honda Motors India Ltd.) - credit availed on two sets of invoice documents (for M/s. TVS Sundaram Motors). The first ground of rejection is invoices on which credit is taken do not reflect the true description of the services provided by the dealers to the appellant. The very same issue came up for consideration before the Tribunal in the case of M/S. CHOLAMANDALAM MS GENERAL INSURANCE CO. LTD. VERSUS THE COMMISSIONER OF G.S.T. CENTRAL EXCISE, CHENNAI [ 2021 (3) TMI 24 - CESTAT CHENNAI] . The facts and allegations are identical. The Tribunal followed the decision of the Jurisdictional High court in the case of Modular Auto Ltd. [ 2018 (8) TMI 1691 - MADRAS HIGH COURT] holding that i t can be seen that the case of the Department is that the payout paid by the appellant to the dealers on the OD premium collected by the dealers from the customers is camouflaged as service provided by the dealers to the appellant; that therefore, the services contained in the invoices have actually not been provided by the dealers to the appellant and thus, Cenvat credit is not eligible. The second ground for rejecting the credit is credit availed based on unsigned invoices issued (in respect of M/s. Honda Motors India Ltd. In para 40 of the impugned OIO dt. 23.12.2016, the adjudicating authority has noted that in regard to the invoices raised by M/s. Honda Cars India Ltd., the credit to the tune of Rs. 6,93,203/- is ineligible for the reason that the invoices do not bear signature. It is further stated that the Board has issued instructions only w.e.f 06.07.2015 that invoices in electronic forms and authentication with digital signature is permissible - In the present case, it is not disputed that the tax has been paid by the appellant. Merely because the computer generated invoice does not contain the signature, it cannot be said that the credit is ineligible. The third issue is rejection of credit on the ground that the invoices issued by M/s. TVS Sundaram Motors (service provider) contains a different description of the service. It is alleged in the SCN that invoice maintained by dealer mentions the description of service tax as additional incentives whereas the invoice with the same serial number maintained by the assessee has the description as data processing and policy related services . Again, it is not disputed that the tax has been paid as per the invoices. Appellant who is the service recipient cannot be found fault for the description mentioned in the invoice maintained by the service provider. Appellant has no control over the accounts maintained by the service provider (dealer). The credit at the recipient s end cannot be denied for this reason. Thus, the denial of credit is not justified. The impugned orders are set aside. The appeals are allowed with consequential relief, if any. As PER M. AJIT KUMAR (Technical Member) CENVAT Credit - case of fake invoicing with its attendant evils - defrauding the ultimate taxpayer on whom the incidence of tax rests - ingenious and creative method of using tax laws for unjustly enriching participants to the specially devised scheme, at the cost of the ingenuous and hapless taxpayer - violation of IRDA circular. HELD THAT:- The findings given by technical members are as follows:- A) Tax liability does not arise due to consent of parties. There has to be a legally valid levy. B) As per proviso to Rule 9(2) of CCR 2004 the appellant being the provider of output service, is required to satisfy the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, that the input services on which CENVAT credit is sought to be taken has been received and is covered by the description given in the invoice and accounted for in the books of the appellant. C) Rule 9(5) of CCR, 2004 makes the principle clear that the burden of proof regarding the admissibility of CENVAT, while taking input credit, falls on the recipient of service i.e. the appellant. D) As per the general rule in legal proceedings also, he who asserts must prove. The appellant who is asserting the taxability of the activity received by him, if any, should have shown that the activity described in the invoice was indeed received and secondly that it was a taxable service eligible for being claimed as CENVAT credit. E) For the reasons cited at (A), (B) and (C) above the SCN had rightly required the appellant to show cause as to why the credit availed should not be denied and on failure to do so the impugned has confirmed the demand. F) As per section 67 of the FA 1994 service tax is collected with reference to the value of service. As a necessary corollary, it is the value of the service which is actually rendered which is to be ascertained for the purpose of calculating the service tax payable thereupon. Any other amount which is calculated not for providing such taxable service, in this case the service as declared in the invoice, cannot be a part of that valuation as that amount is not calculated for providing such taxable service . G) As per Section 73A(2) of the FA, 1994, even if the tax is not liable to be collected from a person, if collected, the collected amount has to be paid to the credit of government. This does not mean that department has accepted the taxpayer s assessment and that the actions of the taxpayer have been ratified. H) Any tax collected, retained or not refunded by the department in accordance with the provisions of a statute must be held to be collected, retained or not refunded, as the case may be, under the authority of law. Hence any excess money collected as tax and paid to government is seen to have been retained under the authority of law. I) The Finance Act, 1994, is a self-contained enactment. It contains provisions for collecting the taxes which are due according to law but have not been collected and also for refunding the taxes which have been collected contrary to law. It, therefore, follows that any and every claim for a refund of service tax can be made only under and in accordance with the provisions of the Act and in the forums provided by the Act. Hence in this case it is for the person who remitted tax to government to claim any eligible refund, if he feels so, only in terms of Section 11B of the Central Excise Act, 1944 (CEA 1944) as made applicable to FA,1994 by virtue of Section 83 of the said Act. J) A fact asserted by a person which is within his knowledge must be proved by him, as the burden of proof is cast upon him. Moreso, when he is confronted with documents and manner of working which are within his special knowledge. Section 106 of the Indian Evidence Act., 1872 gives statutory recognition to this universally accepted rule of evidence. The appellant in the present case has shown remarkable shyness in showing physical / documentary proof which would establish that the activities mentioned in the agreements with dealers were being actually performed. K) The belief, knowledge and intention of the parties are a part of evidence. Documents do not always speak in a language understood by the layman. These are effectively brought to life through the statements of officials who are in the know of things. Based on this evidence the learned AA has to form his own conclusion. L) Persons claiming that statements were obtained under threat / duress must, for that ground to operate, establish that the threat is such that the person in making the statement believed or supposed that by making it he would pin any advantage or avoid any evil of temporal nature in reference to the proceedings against him. This has not been done by the officials concerned. M) In spite of a large list of 25 activities that were to be performed by the automobile dealers as per the Service Provider Agreement listed at para 33 above, the officials of both the appellant and the dealers company, when questioned were unable to list out the activities that were actually performed. In fact, they admitted that no service at all was performed. N) Appellants company officials have stated in legally admissible statements that they have no option but to pay the payouts to the car dealers due to their agreement with the car manufacturers and that there is no separate sale of insurance policies because it is automatically sold with the sale of the new car as the price of the insurance is in-built in the On Road Price of the car. O) It is relevant to note that the Service Charge paid to infra companies for their service is in the range of 1.75 to 4% of OD premium and the dealer, who cannot recall having provided any service activity as per the agreement, to the Insurance Company gets paid a percentage between 10 to 55 % on the OD premium amount for the insurance policies booked, allegedly for providing services . These cannot be held to be genuine consideration towards transactions for data processing and policy servicing . When examined in totality the payments do not satisfy the test of what a reasonable person of ordinary prudence would do while hiring services. They signify something more. P) What monies were received by the car dealers based on invoice prepared and sent to them by the appellant was not the fruit of a taxable activity as declared in the invoice. In such a situation the service tax shown to be paid on the invoices was not a tax. Q) The SCN does not disclose that no action has been taken against the car dealers. The appellant s claim is hence not substantiated and is not a part of the dispute. Further if an illegality or irregularity has been committed in favour of an individual or a group of individuals and even if there has been no action on the said individual or group of individuals, that benefit cannot be relied upon as a principle of parity or equality by the appellant. R) System generated invoices created without legal safeguards are easy to manipulate, much more easily than manual document. In daily life no person, including the appellant, would be prepared to freely allow the bank to encash a cheque even for a paltry amount, bearing the company s name if it is not signed by an authorized representative. There is no reason why government finances and tax payment should be handled differently and in a cavalier manner. Even otherwise if this pernicious practice is accepted it will allow all assesses to take credit on incomplete documents and when found out seek the benefit of proviso to Rule 9(2) of CCR 1994. A situation not envisaged by the Rules. Proviso to a Rule cannot become the Rule. It has to be applied to the facts of each case as per the satisfaction of the proper officer, when approached by assessee s with clean hands. Secondly proviso to Rule 9(2) ibid clearly mandates that the document should contain the details of the correct description of the goods or taxable service, among other things. The proper officer does not have the discretion to overlook this important fact. S) Allegations made by Revenue regarding non-compliance with IRDAI guidelines, were only meant to show that the huge payouts by the appellant to the car dealers were not on account of Data Processing and Policy Servicing and related activities . Revenue has succeeded in this limited objective. To find whether the amounts paid by the appellant to car dealers were within or in violation of IRDAI guidelines is not the remit of this Authority. T) The appellant has made a submission to the effect that, without prejudice, the illegality of a transaction does not determine or alter its tax implications. The concept has met with legal traction in matters relating to Income Tax laws, where the illegal gains are to be taxed at the hands of those who financially gained from these actions. However, in the case of Indirect Taxes where the burden of tax rests on the final consumer, while those who perpetuate the illegality are beneficiaries of the illegal monies collected as tax - due to input credit schemes meant to neutralize the cascading effect of tax - needs to be tested against the legal principle that a person ought not to be able to profit from his or her own wrong. U) The entire scheme as unraveled by Revenue points to fraud, collusion, willful misstatement in the invoices at the behest of the appellant and suppression of facts by contravention of the Act and the Rules made thereunder with intention to evade payment of duty, using ineligible credit. The blame worthy act by the appellant is deliberate and with the intent to enrich themselves unjustly at the cost of the car customer who bears the ultimate incidence of the non-tax . The matter could not have been unraveled by supervisory checks of the jurisdictional Division / Range staff and without an in-depth investigation by departmental officers based on documents, agreements and statements from officials concerned explaining the whole matter, as was done by DGCEI. Hence the extended period of time under proviso to section 73 of the Finance Act, 1994, for issue of SCN has been correctly invoked. V) This is a case where tax laws have been subverted by using colourable legal devices like agreements tailor made to serve as a legal cover for blame worthy conduct. Hence penalty has been correctly imposed for a deliberate act of fraud by the appellant. In this situation it scarcely lies in the mouth of the appellant, who played with fire, to complain of burnt fingers. W) Under the scheme of the Finance Act 1994, interest liability arises automatically by operation of law and has to be paid on delayed or deferred payment of duty for whatever reasons. DIFFERENCE OF OPINION In view of the difference of opinion between the Members, the following questions are framed for resolving the difference: - Whether the appeals is to be allowed by setting aside the impugned orders as held by Member (Judicial)? (OR) Whether the appeals is to be dismissed by upholding the impugned orders as held by Member (Technical)?
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2023 (8) TMI 470
Refund of Service Tax - taxability of chit fund - relevant date for computation of time limitation - HELD THAT:- As per the documents produced by the appellant, appellant is a Member of All Kerala Chitty Formen s Association who is one of the petitioner in Writ Petition No.32097 of 2007 and revenue had filed an appeal against judgment of the Ld. Single bench to clarify as to whether the decision of the Hon ble Supreme court in the case of Margadarshi Chit Funds [ 2017 (7) TMI 224 - SUPREME COURT] applies to the period post introduction of Negative list in 2012. Thus the entire issue regarding taxability on chit fund attained finality only as per the judgment dated 14.03.2018 and not w.e.f 04.07.2017 as held by adjudication authority. As per the judgment dated 14 March, 2018, Hon ble High court specified that the limitation for filing refund application will be extended for one year from 14.03.2018 - However, Commissioner (Appeals) has not extended the period of limitation on the ground that the appellant was not party to the proceedings pending before the Hon ble High Court. Such finding is unsustainable. It is evident that Appellant is a Member of All Kerala Chitty Formen s Association who is one of the petitioner in Writ Petition No.32097 of 2007 and revenue had filed an appeal against judgment of the Ld. Single bench to clarify as to whether the decision of the Hon ble Supreme court in the case of Margadarshi Chit Funds applies to the period post introduction of Negative list in 2012. Thus the entire issue regarding taxability on chit fund attained finality only as per the judgment dated 14.03.2018 and not w.e.f 04.07.2017 as held by adjudication authority. The appellant are eligible to claim the benefit of extended period of limitation for one year from 14.03.2018. Since there is no other issue raised by the Adjudication/Appellate Authority, the appeal is allowed.
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Central Excise
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2023 (8) TMI 469
Classification of service - photography service or not - agreement with the District Election Officer Cum D.M., Lakhisarai, Bihar for execution of the work of preparation of photo identity card in terms of the said agreement - HELD THAT:- The issue in dispute is settled in the case of COMMISSIONER OF CUS. C. EX., HYDERABAD-II VERSUS CMC LIMITED [ 2007 (7) TMI 17 - CESTAT, BANGALORE] that the appellant is providing the service to District Election Officer for entire work of processing of EPIC, which consists of camping at several places for capturing photos of electors after verification, printing of details of electors, pasting of photo identity card, electors on cards, preparation of duplicate of EPIC in miniaturized form and the Tribunal also held that the preparation of EPIC is not covered under the photography service. Thus, the activity undertaken by the appellant for preparation of Election Photo Identity Card, does not qualify under Photography Service . Appeal allowed.
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2023 (8) TMI 468
Violation of principles of natural justice - Validity of SCN - order passed without considering the Director s statement - no reasons were mentioned for invoking of extended period of limitation - HELD THAT:- There is no basis for arriving at the quantity of inputs which is presumed to be in excess of the so called appropriate quantity of inputs for manufacture. It is also found that it is beyond the jurisdiction of the adjudicating authority to decide as to what is the appropriate quantity of inputs required for manufacture of specified quantity of final product. It is, therefore, clear that the show-cause notice was issued on the basis of presumption and therefore, the said show-cause notice is not sustainable. The impugned orders cannot be sustained and the same are set aside - Appeal allowed.
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CST, VAT & Sales Tax
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2023 (8) TMI 467
Validity of order of tribunal in Review Appeal - Denial of benefit which was allowed earlier - Power to Review - Penultimate sale - Disallowance of claim of exemption and levy of penalty - Inter-State stock transfer of goods purchased for foreign country export - it was held by High Court that The actual portion of the raw seeds procured in Tamil Nadu, transported to Karnataka and thereafter, exported to foreign after processing, has not been specifically stated under Form-H, which would reflect the quantum of the seeds procured actually transported to the foreign countries. In the absence of purchase order from the Karnataka Branch and export order from foreign buyer or contract between foreign buyer and Karnataka Unit, exemption cannot be granted to the dealer. HELD THAT:- No case for interference is made out in exercise of our jurisdiction under Article 136 of the Constitution of India - The Special Leave Petition is accordingly dismissed.
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2023 (8) TMI 466
Default in payment of Tax under the Gujarat Value Added Tax Act, 2003 - Charge levied on personal properties of Directors (for default of company) - entry is mutated in the City Survey records recording Charge on the properties owned by the petitioners - Time limitation - HELD THAT:- What is evident from the chain of events is that only after the petitioners made an application for mutation of their names in the Revenue Records did the authorities, both, the Revenue and the Tax authorities swung into action and by exchange of communications and relying on some communication dated 27.04.2018, which is not on record did instructions go forward by the Tax Authorities to the Revenue Authorities to record a charge on the property which was already sold by the Director. Apart from it being a personal property, nothing has come on record to satisfy this Court as to what proceedings were undertaken by the authorities to attach the properties in question, when they were still in correspondence seeking details thereof. It was incumbent upon the Revenue Authorities in exercise of powers under Section 135 C of the Bombay Land Revenue Code to record the entries. There is no obligation, as rightly submitted by the learned counsel for the petitioner, to even apply for entering the names in the revenue records. When a registered document is produced, the authorities are bound to record the same in the revenue records. As held in the case of Jhaverbhai Savjibhai Patel [ 2005 (5) TMI 693 - GUJARAT HIGH COURT] when a registered document is produced the authority must prima-facie post an entry in the record of rights leaving it for the competent Court or Authorities to adjudicate on the dispute. In accordance with the provisions of the Bombay Land Revenue Code therefore once a registered document is produced before the revenue authority, he is bound to record a revenue entry based on such a document. The contention of the learned Assistant Government Pleader that in accordance with the provisions of Section 48 of the GVAT, 2003 the authorities are empowered to enter a charge as the sale could be a bogus one and a shield to overcome attachment of a property is also misconceived. On the date on which the petitioners had purchased the property, neither any attachment proceeding was pending nor finalised. No proceedings to record a charge were also in progress or a decision so taken. The default in question had already culminated into the attachment of the showroom and the workshop of Eagle Motors Private Limited by an order dated 09.01.2015 and akin thereto there were no proceedings vis-a-vis the property in question which was even the personal property of the Director. Even otherwise for assessment proceedings which were initiated for the years 2012 to 2014 whether attachment proceedings could be issued is an issue which begs a question, however not considered as even otherwise, it is held that the property in question was of the personal ownership of the Director and therefore could not have been attached. The personal liability of the Director in the facts of this case when related to the personal property of the Director cannot be a matter of attachment or creation of a charge as is sought to be done in the facts of the present case. What therefore is culled out from the facts of the case is that apart from the fact that the attachment of the properties is beyond the reach of the taxation authorities in light of being the personal properties of the Director and the fact that they have been sold by a registered sale deed prior to the exercise of undertaking any proceedings of attachment or creation of a charge, the only option open, if the authorities were of the opinion that the sale was with a view to defraud the government, is to file a civil suit - the prayers made by the petitioners are answered in their favor. The communication dated 03.08.2019 passed by the City Survey Superintendent of Rajkot is quashed and set aside. The communications and directions/orders dated 17.06.2019 mutating the entry no. 8056 and 8057 recording the charge of the Tax authorities is also quashed and set aside. Application allowed.
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2023 (8) TMI 465
Charging employees twice on same misconduct by issuing two charge memos - Penal proceedings agaisnt the Assistant Commercial Tax Officer - HELD THAT:- In the facts of the present case, the 2nd charge memo must be understood as continuation of the 1st charge memo and inasmuch as there is no hiatus between the 1st charge memo and the 2nd charge memo. As a matter of fact, the 2nd charge memo came to be issued even during the pendency of the 1st charge memo which was withdrawn only thereafter. In the circumstances, this Court is unable to agree with the submissions of the learned counsel for the petitioner that the 1st charge memo gets obliterated on being withdrawn and thus there was no charge memo pending on the crucial date. The 1st charge memo was pending on the crucial date and the 2nd charge memo was issued as a matter of continuation of the 1st charge memo which this Court was informed has ended in punishment, thus there is no merit in the submission of the learned counsel for the petitioner. There is no merit in the writ petition and the same stands dismissed.
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2023 (8) TMI 464
Provisional attachment of transaction of shares - request to share the depository account/s held by the petitioner and the KYC details relating to PAN as enlisted in the said letter and freeze the transactions of shares - time limitation - HELD THAT:- There are substance in the contention as urged on behalf of the petitioner, insofar as the effect of provisions of sub-section (2) of Section 35 of the MVAT Act would have in regard to the fact situation and the legality of the impugned attachment dated 11 April 2022 is concerned, after the expiry of a period of one year. Sub-section (2) of Section 35 clearly provides that the provisional attachment as made under sub-section (1) of Section 35 shall cease to have effect after expiry of a period of one year from the date of service of the order issued under sub-Section (1). However, the power under proviso to sub-section (2) to extend the period for one year, has not been exercised. In this view of the matter, certainly the attachment has ceased to have effect by operation of law after 12 April 2023. The petitioner would be correct in praying for the reliefs - Petition allowed.
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Indian Laws
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2023 (8) TMI 463
Computation of compensation and admissible loss to be compensated by Insurance company - breach by the appellant of the policy conditions - records were not maintained properly and accurately - records were not produced at the time of the survey - whatever records were produced were unsubstantiated - HELD THAT:- Despite the second surveyors report dated 22.09.1995 quantifying the appellant s loss at ₹ 17,64,097/-, the respondent insurance company chose to repudiate the appellant s claim in its entirety, basing on the wholly unfounded assertion that the appellant had failed to maintain and provide proper records. This was also despite the clear finding of its earlier surveyors, M/s. Frank and Fair Investigators, that total loss was suffered by the appellant. Further, having attached great importance to the death certificate given by the MPEDA/State Fisheries Department in its policy and its prescribed claim procedure, the insurance company baldly brushed aside the Death Certificate dated 01.05.1995 furnished by the officials of the State Fisheries Department at Visakhapatnam. Merely because the contents thereof were not to its liking, the insurance company could not have ignored the same and swept it under the carpet. More so, as such certification was being made by impartial and independent bodies of significant stature and that, perhaps, was precisely the reason why the insurance company had attached such importance to it in its norms - Having undertaken to indemnify an insured against possible loss in specified situations, an insurance company is expected to make good on its promise in a bonafide and fair manner and not just care for and cater to its own profits. In effect, the action of the insurance company in refusing to act upon the Death Certificate dated 01.05.1995 issued by the Directorate of Fisheries, Visakhapatnam, cannot be countenanced. Admittedly, the appellant would be entitled to the lowest of the aforestated three valuations, viz., ₹ 75,87,750/-. As the respondent company would have already paid the appellant the amount quantified by the NCDRC in the impugned order, viz., ₹ 30,69,486.80, the appellant would be entitled to receive the balance amount of 45,18,263.20. The delay on the part of the insurance ₹ company in settling the appellant s claim fairly and in a timely manner warrants that it pays interest on the amount due and payable to the appellant in terms of this order - Though the appellant claims that bank deposit interest rates ranged between 12% to 13% during the financial year 1995-1996, we find from the RBI statement, relied upon in this regard, that the interest rate for the financial year 1994-95 was 11% and for the year 1996-97, it was between 11% to 13%. That being so, the interest rate fixed by the NCDRC, viz, 10% is held to be just and equitable. The sum of ₹.45,18,263.20 shall be remitted by the respondent insurance company to the appellant, with simple interest thereon @ 10% from the date of the complaint till the date of realization, within six weeks from today. Appeal disposed off.
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2023 (8) TMI 462
Dishonour of Cheque - complainant filed the complaint on the basis of notice posted on second occasion - complaint dismissed on the ground of being time barred - opportunity to the complainant to explain delay occurred or not - HELD THAT:- The Hon ble Supreme Court in case of BIRENDRA PRASAD SAH VERSUS THE STATE OF BIHAR AND ORS. [ 2019 (5) TMI 1912 - SUPREME COURT ] dealt with similar situation. When the notice is sent on first occasion and when no service proof is available and when notice is posted on second occasion, what should be the approach of the trial Court is discussed and it was held that The High Court has merely adverted to the presumption that the first notice would be deemed to have been served if it was dispatched in the ordinary course. Even if that presumption applies, we are of the view that sufficient cause was shown by the Appellant for condoning the delay in instituting the complaint taking the basis of the complaint as the issuance of the first legal notice dated 31 December 2015. The observation in case Birendra Prasad Sah will be applicable except with one modification. There was no prayer for condonation of delay in present complaint. But foundation is there. Complainant has pleaded why notice was sent by U.P.C. During evidence, he has also produced the envelopes which were unclaimed. This Court feels that the litigant should not suffer for want of necessary prayers for condonation of delay. The prosecution under Negotiable Instruments Act is quasi civil. The appellant needs to be given an opportunity to pray for condonation of delay. This Court has not given any findings on other issues. At the same point, the complainant needs to be saddled with cost of Rs.5,000/- If the delay is condoned there is no need to adduce fresh evidence - appeal allowed.
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2023 (8) TMI 461
Dishonour of Cheque - insufficiency of funds - failing to discharge his initial burden of proof by the complainant - rebuttal of statutory presumption - HELD THAT:- On going through the judgements of the learned Magistrate and the learned Session Judge, it is before this court that there is sufficient evidence to show that the cheque was duly issued and after completion of all formalities the proceedings under section 138 NI act was initiated. The findings of the session judge that respondent No.1/complainant completely failed to discharge his initial burden of proof is totally erroneous and bad in law. The Session Judge totally overlooked the fact that Sec 139 N.I Act clearly includes a presumption that there exists a legally enforceable debt or liability. However the presumption is rebuttable by the accused. There is no such requirement of the complainant to discharge his initial burden of proof as held by the Session Judge. The question of failing to discharge his initial burden of proof by the complainant as held by the session is erroneous and bad in law and the judgement under revision is thus liable to be set aside - The case is of the year 2017. Five years have passed. Accordingly the amount of fine is modified to Rupees 4,00,000/- instead of Rs 5,20,000/- to be paid within two months from the date of this judgement, in default the accused shall serve out his sentence of imprisonment in default of fine. The Judgement is hereby set aside - revision disposed off.
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