TMI Tax Updates - e-Newsletter
May 8, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Detention of goods alongwith penalty - Expired e-way Bill - The High Court noted that the goods were indeed covered by a tax invoice and e-way bill, with the expiration of the latter occurring before reaching the consignee. However, it observed that there was no evidence of intentional tax evasion. Considering the circumstances and lack of intent, the court found that the expiration of the e-way bill did not automatically imply tax evasion. - The court concluded that there was no basis for assuming tax evasion solely based on the expiration of the e-way bill. - Consequently, the court set aside the orders of penalty imposition and dismissal of the appeal.
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GST:
Reversal of ITC - The High Court found that certain findings recorded by the adjudicating authority were outside the scope of the allegations in the show-cause notice. The authority had admitted that the appellant made payment of tax to the supplier against the transaction, but failed to remit the tax to the State exchequer. However, the court deemed it arbitrary to penalize the appellant without first conducting an enquiry with the supplier. - The Court reiterated the conditions prescribed in Section 16 (2) of the Act for a dealer to be eligible to avail credit of any input tax. - The Court highlighted the importance of action against the selling dealer before directing the appellant to reverse the input tax credit. It emphasized that unless exceptional circumstances exist, proceedings should be initiated against the supplier first.
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GST:
Levy of GST on un-denatured Extra Neutral Alcohol supplied by the petitioner - The court observed that the show cause notice called upon the petitioner to submit a written explanation within 30 days, along with the opportunity for a personal hearing. However, the petitioner failed to provide any explanation or seek a hearing. The court emphasized that the petitioner's failure to provide a written explanation in response to the notice rendered the petition not maintainable. It underscored the importance of availing the opportunity to present a defense before challenging such notices in court.
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GST:
Imposition of GST under the reverse charge mechanism on the mining lease amount paid by the petitioner to the Government (royalty) - The High Court directed the submission of objections/representations by petitioners challenging show cause notices within four weeks. Adjudication is to proceed, with orders being kept in abeyance until a decision by the Nine Judge Constitution Bench on the nature of royalty. Further, no recovery of GST on royalty shall be made until the Nine Judge Constitution Bench decides. Writ petitioners are granted liberty to redress grievances after the outcome of the Nine Judge Constitution Bench decision. Challenge to the notification and circular is open for the petitioners after the outcome of the case before the Nine Judge Constitution Bench.
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GST:
Rejection of refund on the ground of delay - time limitation - The High Court examined the timeline of the refund applications in light of the Covid-19 pandemic's impact on statutory limitations. It noted that the applications were indeed filed within the extended timeframe provided by the Government Notification No.13 of 2022, which suspended limitations from February 15, 2020, to February 28, 2022. The Court cited a precedent case, Gamma Gaana Ltd. vs. Union of India, to reinforce this interpretation. - The Court directed the authority to process the refund applications without objections regarding delay.
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Income Tax:
Addition u/s 68 - ITAT confirmed the additions - The High Court upheld the Tribunal's decision, affirming the dismissal of the appeal. It concurred with the Tribunal's analysis, emphasizing that the assessment of income tax is a civil proceeding, wherein the test of preponderance of probability is applicable. The Court agreed that the explanation provided by the appellant regarding the gifts lacked sufficient evidence of genuineness. It noted the absence of any disclosed basis or relationship for the gifts, reinforcing the Tribunal's decision.
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Income Tax:
Validity of Reassessment proceedings - reason to believe escapement of income - The High Court agreed with the petitioner's contention that the reasons provided by the Assessing Officer indicated a clear case of change of opinion. The expenses in question had been considered and allowed during the assessment proceedings, and reopening the assessment based on the same grounds was unjustified.
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Income Tax:
Faceless Assessment - Non affording a reasonable opportunity to be heard through video conferencing - The court referred to Section 144B(6)(vii) and (viii) of the Income Tax Act, which mandates that where a request for a personal hearing is made, it must be provided, and the hearing shall be conducted through video conferencing. The court noted that since the petitioner had requested a video conferencing hearing, it was mandatory for the respondent to accede to the request. The court emphasized the importance of affording the assessee a reasonable opportunity of being heard before passing an adverse order, citing it as a fundamental principle of natural justice. - Consequently, the court set aside the assessment order and remanded the matter to the concerned Assessing Officer for reconsideration.
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Income Tax:
Validity of order passed u/s 147 r.w.s.144B - availability of alternate statutory remedy - The High Court recognized that the arguments presented could be considered by examining the record. However, the Court refrained from conducting a fishing inquiry into the case under its writ jurisdiction due to factual complexities. - The High Court referred to Supreme Court decisions emphasizing the importance of exhausting statutory remedies before approaching the court under Article 226 of the Constitution. It held that when an alternate remedy is available, judicial prudence dictates refraining from exercising jurisdiction under constitutional provisions. Therefore, the High Court dismissed the writ petition, directing the petitioner to avail themselves of the statutory remedy of appeal.
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Income Tax:
Validity of reassessment proceedings - non-issue of the statutory notice u/s 143(2) - The Appellate Tribunal found that the AO had not issued the statutory notice under section 143(2) in response to the appellant's return filed under section 148. Despite repeated requests and payments for inspection of case records, the AO did not provide the necessary documents to verify the issuance of the notice. The Tribunal held that the non-issuance of the statutory notice constituted an incurable defect, rendering the assessment proceedings void ab initio. Therefore, the Tribunal allowed the appeal in favor of the appellant.
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Income Tax:
Deduction u/s 80IAB on the disallowance of depreciation on Water-use Rights (Intangibles Asset) - The Tribunal acknowledged the payment made by the assessee for water-use rights but concurred with the AO that such rights do not constitute a depreciable capital asset. The Tribunal upheld the AO's decision to disallow depreciation on water-use rights. - Hwever, the Tribunal found merit in the appellant's claim. It observed that the disallowance of depreciation indeed enhanced the profit of the undertaking, making it eligible for deduction under Section 80IAB. The Tribunal cited a CBDT Circular supporting this interpretation. Consequently, it directed the AO to allow the deduction under Section 80IAB on the disallowed depreciation, providing consequential relief to the assessee.
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Income Tax:
Penalty u/s 271(1)(b) - Non-compliance with a notice issued u/s 142(1) - The Tribunal noted that in a previous round of proceedings, a penalty under section 271(1)(b) of the Act had been deleted by the Tribunal, indicating a precedent in favor of the appellant. Considering the circumstances, including the quashing of the assessment order by the High Court in the second round of proceedings, the Tribunal found that the penalty imposed in connection with those proceedings was untenable.
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Income Tax:
Income taxable in India or not - Business of supplying reservoir simulation software and related services. - Receipts from Indian customers - Taxing the entire receipts of the assessee by applying the provisions of section 44BB - The Tribunal agreed with the assessee that the absence of a PE in India was critical and thus Section 44BB of the Act was not applicable. The tribunal found that the impugned receipts could not be taxed as either royalties or FTS under the India-Canada DTAA because they did not meet the necessary criteria. It upheld the beneficial provisions of the DTAA over domestic tax laws, stating that the assessee could choose the more favorable treaty benefits.
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Income Tax:
TP Adjustment - MAM - Management consultancy services - The tribunal noted discrepancies in how services were valued between Associated Enterprises (AE) and Non-AEs. The CUP method was initially rejected by the TPO in favor of TNMM, citing lack of stringent comparability. However, the tribunal supported the appellant's use of CUP, observing that internal comparables provided a reasonable basis for determining arm's length prices.
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Income Tax:
Income from Other Sources u/s 56(2) - interest received u/Sec. 28 of the Land Acquisition Act, 1894 granted by the learned Reference Court - The Tribunal agrees with the appellant's contention that interest received under Section 28 of the Land Acquisition Act is part of the land acquisition compensation itself and thus not taxable under Section 56(2) of the Income Tax Act. - The Tribunal holds that decisions of the Bombay bench of the High Court, within its territorial jurisdiction, prevail over those of the Aurangabad bench. Therefore, it upholds the appellant's argument that the Bombay bench's decision applies to the case at hand, leading to a favorable outcome for the assessee.
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Income Tax:
Loss on valuation of foreign exchange contract on M2M basis - Loss on forward contracts - speculative loss - The AO disallowed the addition on the grounds that the losses were notional and did not represent actual losses. However, the Appellate Tribunal found that the losses were incurred as part of the appellant's business activities to hedge against foreign exchange fluctuations. The Tribunal relied on established legal principles and previous judgments to support its decision. Therefore, the addition was deleted. - The AO treated the loss on forward contracts as speculative, disallowing it for set-off against profits. However, the Tribunal disagreed, stating that the contracts were entered into to safeguard business interests, not for speculative purposes.
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Income Tax:
Bogus Purchases - Credibility of Statements - The tribunal was not convinced by the appellant's argument that the initial statements were made under duress or misinterpreted. They emphasized that the retraction came after substantial delay and seemed more like an afterthought designed to escape tax liability. - Despite the retraction, the tribunal held that the original statements admitting to bogus purchases and additional income were credible. They relied on the timing of the retraction and the specifics of the declarations made during the survey. The admissions of additional income were deemed to substantiate the reopening of assessments for the years in question. The tribunal supported the additions made to the taxable income based on these declarations.
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Income Tax:
Validity of reassessment proceedings - Reason to believe - The tribunal found that there was sufficient "reason to believe" that income had escaped assessment due to the admissions made during the survey. They referenced section 147 and noted that reassessment was justified based on the prima facie evidence available from the survey. - The tribunal concluded that the notices under section 148 were correctly issued, considering the sworn statements and other corroborating material from the survey, such as the admission of bogus purchases.
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Income Tax:
Reopening of assessment - reason to believe - onus to prove - The High court noted that reassessment beyond four years from the end of the relevant assessment year is permissible only if there is a failure by the taxpayer to disclose fully and truly all material facts necessary for assessment. - The court observed that the petitioner had disclosed all primary facts related to the waiver of loans in the original assessment proceedings. It was emphasized that the production of account books or other evidence does not necessarily amount to full disclosure as required by law. - As such, the reassessment was deemed to be based on a change of opinion, which is not a valid ground for reopening an assessment under the relevant sections of the Act.
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Income Tax:
Assessment completed u/s 153A - addition on account of peak balance maintained by the assessee with HSBC Bank, Geneva - The Appellate Tribunal, after reviewing the submissions and record, found in favor of the appellant. They emphasized the absence of incriminating material and reliable evidence establishing ownership of the foreign bank account. Consequently, the Tribunal quashed the assessment orders of the lower authorities, effectively allowing the appellant's appeal.
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Customs:
Classification of imported goods - Applicable rate of IGST - 28% or 18% - Scope of the term "i.e."- Interpretation of the Notification No.1/2017-IGST-Rate - Import of branded nutrition/ dietary supplements - Regarding the classification of goods, it determined that the appellant's goods did not fall under the specific items listed under Entry No. 9 of Schedule IV. Instead, they were found to be covered under Entry No. 453 of Schedule III, as they were not specified in any other schedule. - In relation to the interpretation of the Schedule IV entry, the Tribunal reiterated that the use of "i.e." in the entry limited its scope to the items listed thereafter, excluding any other products not explicitly mentioned.
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Customs:
Re-export of even after the expiry of the warehousing period - Due to COVID-19 pandemic, the appellants were unable to proceed with their construction project and clear the goods for home consumption - In light of the circumstances, including the COVID-19 pandemic and the appellant's efforts to re-export the goods, the Tribunal found merit in the appellant's arguments. They emphasized the need for flexibility in such exceptional situations and cited the judgement of the Hon’ble Supreme Court regarding the extension of limitation period. Consequently, the Tribunal set aside the impugned order and directed the respondent to allow re-export of the goods within a specified period without insisting on payment of duty, interest, fine, or penalty.
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Customs:
Re-Classification of "Hot/Cold Rolled Stainless Steel Coils - Exemption from duty - Certificate of Origin - The Tribunal noted that the appellants provided substantial evidence, including the Indian Standard IS 15997; 2012 and an email clarification from the India Stainless Steel Development Association, supporting their classification. The Tribunal found that the lower nickel content as per the Indian Standard still categorizes the steel under "Austenitic Nickel Chromium Stainless Steel", dismissing the department's reliance on other sources suggesting a higher nickel content requirement. - The Tribunal acknowledged that the denial of exemption based on the manufacturer's identity was inappropriate, as the goods met the required specifications and were accompanied by a Certificate of Origin, satisfying the conditions under the Asia Pacific Trade Agreement Rules.
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Customs:
Appealable order - Whether the communication would be considered as an ‘order’ for filing of appeal before the Tribunal - The Tribunal determined that the communication from the Superintendent was not a decision but merely conveyed the date fixed by the Commissioner. However, the Tribunal acknowledged that the appellant had a right to know why their request for cross-examination was denied, which was not clearly stated in the communication. Citing precedent, the Tribunal held that such communications could be considered as appealable orders, especially when the decision on cross-examination was neither accepted nor denied by the Commissioner. Therefore, the Tribunal concluded that the appellant correctly filed the appeal before them.
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Corporate Law:
Disqualification from participating in the tender - The High Court held that in the absence of a specific clause in the tender document mandating such compliance, the disqualification was incorrect. The Supreme Court disagreed with the High Court's reasoning, citing the importance of explanatory notes as integral parts of the Balance Sheet according to Section 134(7) of the Companies Act.
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Corporate Law:
Professional misconduct by CA - The NFRA concluded that the actions of the firm and the engagement partner constituted professional misconduct. They failed to cooperate with the NFRA's investigation by not providing the requested information and by submitting false statements. The authority imposed a monetary penalty of fifty lakhs INR on the audit firm and thirty lakhs INR on the engagement partner. Furthermore, they were barred from being appointed as auditors or undertaking any audits related to financial statements or internal audit functions of any company or body corporate for two and ten years, respectively.
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Indian Laws:
Dishonour of Cheque - Compoundable offences - frustration of settlement - Despite the respondent's opposition to compounding the offenses, the court emphasized the importance of compensatory justice in such cases. It acknowledged the appellant's efforts to repay the amount and noted that continuing the criminal proceedings would be unjustified. Therefore, the court quashed all pending criminal proceedings and directed the trial court to hand over the deposited amount to the respondent.
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IBC:
Rejection of claim filed by appellant - Appellant states that the Respondent / CD, did not perform its part of the contract from its inception and did not establish the letters of credit as contemplated - The Tribunal concurs with the Respondent that claims lacking supporting documents cannot be admitted. It upholds the Liquidator's decision to reject claims that lack substantiation and require adjudication by a competent civil court or arbitrator. Regarding the role of the Liquidator, the Tribunal agrees that her actions align with the IBC and Liquidation Regulations. She is obligated to verify claims based on available information and is not empowered to adjudicate disputes between parties.
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IBC:
Seeking to Condone Delay of 14 days in filing the Appeal - Sufficient cause for delay or not - Even if the Appellant's argument regarding the delay in accessing the order due to holidays is considered, it does not justify the delay of 15 days beyond the 30-day period. The reasons provided by the Appellant for the delay are deemed general and unconvincing, particularly in the digital age where prompt action is expected.
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Service Tax:
Exemption from service tax - providing transportation of agricultural produce - De-novo order passed by the adjudicating authority during the pendency of the appeal - The Tribunal directed the adjudicating authority to verify whether the transportation services were indeed for agricultural produce, potentially making them exempt from service tax. It remanded the matter to the adjudicating authority for further examination and consideration of the appellant's submissions. - Regarding the De Novo Adjudication Process: The Tribunal deemed the de novo order passed by the adjudicating authority during the pendency of the appeal before the Tribunal as a violation of principles of natural justice.
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Service Tax:
Benefit of exemption from service tax - Vehicle Hire Charges - Rent received for their trailers (vehicles) - Supply of transport vehicles to Goods Transport Agency - Despite the appellant’s contention that these services were exempt under various notifications, the tribunal agreed with the Commissioner that the exemption notifications needed strict interpretation, and it was the appellant's burden to prove their eligibility for exemption, which they failed to do by not meeting specific conditions outlined in the notifications.
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Service Tax:
Levy of service tax - water charges paid - transfer of right to use the water by the Government to the appellant - Deemed sale - Since the agreement was for water supply, not services, the Tribunal found that service tax was not applicable to the water charges paid. - Considering the agreement's pre-2016 date, the Tribunal held that any services provided should be governed by pre-2016 provisions, exempting the appellant from tax liability. - Further, the Tribunal agreed with the appellant's argument that the water supply constituted the supply of goods, not services, aligning with the Finance Act's definition.
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Central Excise:
Input Service Distributor (ISD) - Entitlement to Cenvat credit on the entire credit distributed by their head office despite the fact that the appellant company having three units - Rule 7 before 2012 allowed the ISD discretion to distribute the credit among its units without a mandatory proportional distribution. This rule changed post-2012 to require proportional distribution based on turnover, which was not the case during the period in question. - The tribunal noted several precedents where similar distributions of Cenvat credit were upheld under the unamended rules. - The tribunal agreed with the appellant that the show cause notices on jurisdictional grounds were inappropriate and that claims regarding the extended period were time-barred due to the absence of any factual suppression or misrepresentation by the appellant.
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VAT:
Exemption from Tax - Classification of goods sold - emery cloth - unclassified item or not - tarpaulins - cotton fabrics or not - The Tribunal, after considering submissions from both parties, concluded that the initial assessment of turnover was flawed. It held that emery cloth and tarpaulins qualified for tax exemptions under relevant provisions of the APGST Act and the Additional Duties of Excise Act, 1957. The Tribunal's decision was based on interpretations of legal provisions and precedents, affirming that the goods in question fell within exempt categories. - The High Court, upon review, upheld the Tribunal's decision, emphasizing the correct interpretation of the law and precedents. It affirmed that emery cloth and tarpaulins were rightly classified as exempt from tax, as per the provisions of the APGST Act and the Additional Duties of Excise Act, 1957.
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2024 (5) TMI 363
Detention of goods alongwith penalty - e-way bill in the present case had expired on the date when the vehicle-in-question along with the goods were intercepted - HELD THAT:- There is no reference to the ground of non-evasion of tax or deliberate delay. Simply because there was no extension of the e-way bill, the same does not pre-supposes that there was an intention to evade tax. There is no finding either by the adjudicating officer or by the appellate authority as regards the intent of evasion of tax. There appears to be no material available to conclude evasion of Tax. Hon ble Supreme Court in the case of Vardan Associates [ 2024 (2) TMI 189 - SUPREME COURT] had been pleased to observe that the appellant cannot shirk from its responsibilities to comply with the requirements in law to generate a fresh e-way bill or to seek extension thereof. But the observations made by the Hon ble Supreme Court in the said judgment are in relation to a challenge as regards payment of tax and penalty and not in relation to the factum of presumption being drawn on the intention to evade tax on the non-extension of the validity of the e-way bill. Petition disposed off.
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2024 (5) TMI 362
Reversal of ITC - notice has been issued without causing any verification from the supplier s end and denying credit to the appellant - violation of principles of natural justice - HELD THAT:- The effect and purport of Form GSTR-2A was explained by the Hon'ble Supreme Court in Bharti Airtel Ltd [ 2021 (11) TMI 109 - SUPREME COURT] . It was held that Form GSTR-2A is only a facilitator for taking a confirm decision while doing such self-assessment. Non-performance or nonoperability of Form GSTR-2A or for that matter, other forms will be of no avail because the dispensation stipulated at the relevant time obliged the registered persons to submit return on the basis of such self-assessment in Form GSTR-3B manually on electronic platform. The first respondent without resorting to any action against the fourth respondent who is the selling dealer has ignored the tax invoices produced by the appellant as well as the bank statement to substantiate that they have paid the price for the goods and services rendered as well as the tax payable there on, the action of the first respondent has to be branded as arbitrarily. Therefore, before directing the appellant to reverse the input tax credit and remit the same to the government, the first respondent ought to have taken action against the fourth respondent the selling dealer and unless and until the first respondent is able to bring out the exceptional case where there has been collusion between the appellant and the fourth respondent or where the fourth respondent is missing or the fourth respondent has closed down its business or the fourth respondent does not have any assets and such other contingencies, straight away the first respondent was not justified in directing the appellant to reverse the input tax credit availed by them. The orders passed in the writ petition is set aside and the order passed by the first respondent namely the Assistant Commissioner, State Tax, Ballygunge Charge, is set aside - Appeal allowed.
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2024 (5) TMI 361
Validity of assessment order - challenge to assessment order on the ground that the Petitioner's reply dated 01.03.2023 was not duly taken into account - benefit of Input Tax Credit - HELD THAT:- On perusal of the impugned order, it is evident that two purchase bills that were submitted by the Petitioner as enclosures to the reply dated 05.01.2023 were referred to therein. However, there is no reference therein to the subsequent reply dated 01.03.2023. The Petitioner has approached this Court almost one year after the impugned order was issued. In these circumstances, reconsideration is warranted by putting the Petitioner on terms. The impugned order dated 09.05.2023 is set aside on condition that the Petitioner remits 15% of the disputed tax demand within a period of two weeks from the date of receipt of a copy of this order. Within the aforesaid period, the Petitioner is permitted to submit a further reply by enclosing all relevant documents - Petition is disposed off.
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2024 (5) TMI 359
Restraint on levying GST on un-denatured Extra Neutral Alcohol supplied by the petitioner - no written explanation was submitted nor the opportunity to have the personal hearing is sought for by the petitioner - violation of principles of natural justice - HELD THAT:- It is only a show-cause notice issued by respondent No. 4 calling upon the petitioner to submit his explanation. An option was also given to seek personal hearing. Even though, there is no explanation by the petitioner for the reasons best known to him, the petitioner has rushed to this court seeking to quash the show-cause notice on several grounds and such grounds could have been raised by the petitioner in his written explanation as to why said show-cause notice could not have been issued. The Apex Court in UNION OF INDIA OTHERS VERSUS COASTAL CONTAINER TRANSPORTERS ASSOCIATION OTHERS [ 2019 (2) TMI 1497 - SUPREME COURT] frowned upon practice on approaching this court of issuance of show-cause notice, without giving written explanation to enable the authority to consider his defence and to pass appropriate orders. Therefore, the petitioner has rushed to this court to challenge the show-cause notice without availing the opportunity given to him to submit his written explanation. Therefore, the writ petition is not maintainable. The writ petition is dismissed.
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2024 (5) TMI 358
Violation of principles of natural justice - non-service of SCN - notices that preceded the assessment order and the impugned order were uploaded on the GST portal, but not served on the petitioner through any other mode - cancellation of petitioner's registration - HELD THAT:- The petitioner has placed on record the document indicating the cancellation of registration with effect from 30.03.2019. Since it appears that the registration was cancelled, it cannot be expected that the petitioner should monitor the GST portal in the same manner as a registered person. However, learned Government Advocate submits, on instructions, that the show cause notice was also sent to the petitioner by e-mail. The petitioner has also placed on record the reminder dated 20.12.2023, which indicates that the petitioner accessed the portal. The petitioner agrees to remit 10% of the disputed tax demand as a condition for remand - it is just and appropriate that the petitioner be provided an opportunity to contest the tax demand, albeit by putting the petitioner on terms. The impugned order is quashed subject to the petitioner remitting 10% of the disputed tax demand as agreed to within fifteen days from the date of receipt of a copy of this order - Petition disposed off.
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2024 (5) TMI 357
Imposition of GST under the reverse charge mechanism on the mining lease amount paid by the petitioner to the Government (royalty) - HELD THAT:- The Division Bench Judgment in a batch of cases where the lead case is A.Venkatachalam v. Assistant Commissioner (ST), Palladam [ 2024 (2) TMI 488 - MADRAS HIGH COURT] has disposed off the issues with specific directions. In view of the said judgment, this petition is liable to be disposed of on the same terms. Consequently, the petitioner is permitted to submit his reply to the intimation within a maximum period of four weeks from the date of receipt of a copy of this order. - petition disposed off.
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2024 (5) TMI 356
Rejection of refund on the ground of delay - time limitation - HELD THAT:- Undoubtedly the claim for refund should have been made by the petitioner within two years from the relevant date i.e. date of export. The export having been made during the years 2018 and 2019, the refund applications should have been filed by 2020 and 2021. At the same time, it cannot be lost sight that owing to spread of Pandemic Covid-19, first upon orders passed by the Supreme Court, in Public Interest Litigation and then in terms of the Government Notification No.13 of 2022, dated 5th July, 2022, the limitation for the duration 15.2.2020 to 28.2.2022 remained suspended. The applications for refund were filed by the petitioner not later than 21.6.2021 (for the tax period April, 2018 to March, 2019) and not later than 24.7.2021 (for the tax period April, 2019 to June, 2019). The matter remitted to respondent No.3 i.e. Assistant Commissioner, CGST, Division- (IV) to proceed to pass fresh orders on the refund applications made by the petitioner, without raising any objection as to delay - Petition disposed off by way of remand.
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2024 (5) TMI 355
Maintainability of petition - non-constitution of the Tribunal - petitioner is deprived of his statutory remedy under sub-section (8) and sub-section (9) of Section 112 of the BGST Act - HELD THAT:- The respondent State authorities have acknowledged the fact of non-constitution of the Tribunal and come out with a notification bearing Order No. 9/2019-State Tax, S.O. 399, dated 11-12-2019 for removal of difficulties, in exercise of powers under Section 172 of the BGST Act, which provides that period of limitation for the purpose of preferring an appeal before the Tribunal under Section 112 shall start only after the date on which the President, or the State President, as the case may be, of the Tribunal after its constitution under Section 109 of the BGST Act, enters office. Petition is disposed off subject to deposit of a sum equal to 20 per cent of the remaining amount of tax in dispute, if not already deposited, in addition to the amount deposited earlier under sub-section (6) of Section 107 of the BGST Act, the petitioner must be extended the statutory benefit of stay under sub-section (9) of Section 112 of the BGST Act. The petitioner cannot be deprived of the benefit, due to non-constitution of the Tribunal by the respondents themselves.
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Income Tax
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2024 (5) TMI 354
Prayer for stay against demand - second round of petition - order of demand has been stayed subject to depositing 10% of the demand - In the second round of writ petition, petitioner now submits that the authorities have again committed patent illegality and perversity and acted with arbitrariness in deciding the petitioner s application. As decided by HC [ 2024 (2) TMI 1376 - RAJASTHAN HIGH COURT] the authority having jurisdiction, has passed a brief order, keeping in view that it is only deciding the stay application and not the merits of the case. The argument of petitioner that various figures and details which were given by him have not received consideration, does not merit acceptance - We find that the authority has not restricted the relief of 20% but has granted stay subject to deposit of only 10% of the demand. The demand is based on order of assessment. The matter is in appeal. It is a tax matter and a party cannot, as a right, claim that merely because he files an appeal, the demand should be stayed. HELD THAT:- We are not inclined to interfere with the impugned judgment, and hence, the special leave petition is dismissed. We, however, clarify that we have not commented on whether or not a reference should have been made to the High-Pitched Scrutiny Assessment Committee. Pending application(s), if any, shall stand disposed of.
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2024 (5) TMI 353
Addition u/s 68 - Tribunal had disbelieved the explanation furnished by the assessee as to genuineness of the gifts received by him from six individuals - HELD THAT:- Tribunal had delved deep into the matter and discovered that there was no pre-existing relationship or circumstances disclosed as may have given rise to any gift to the assessee. Appellant is a well to do person whereas the donors were persons of modest means. In absence of any relationship shown or basis disclosed for generation of the gift, the Tribunal has disbelieved the explanation furnished by the assessee on the preponderance of probability emerging from evidence led by the parties. Insofar as assessment of the income tax is purely a civil proceeding, the test of preponderance of probability applied by the Tribunal cannot be faulted. In the context of gift set up by the assessee, merely because the assessee may have been able to establish such gift was received through bank channel and merely because the donors may not have disputed the gift made may never have been enough to establish genuineness of the transaction. Slight difference of test may continue to exist in cases involving gift, and deposits that are to be repaid by the recipient. Insofar as gift claimed by the petitioner amounted to change of title in the money, we do not find any defect in the course adopted by the Tribunal in disbelieving the claim on the basis of holistic consideration of the material before the Tribunal. Its findings are pure findings of fact. They do not give rise to any substantial question of law.
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2024 (5) TMI 352
Validity of Reassessment proceedings - reason to believe escapement of income - notice issued within four years from the end of the relevant assessment year - what tangible material which AO has done in the reasons to believe? - reason to believe under two heads, i.e., expenses towards designing fees which was capitalized and a sum that assessee paid towards concession fee to Punjab Urban Development Authority (PUDA) - HELD THAT:- The reasons made available itself shows that it was a clear case of change of opinion. On the first item, i.e., expenses towards designing fees, which was capitalized, the A.O. states the said contention was accepted and expenses was allowed by the department . In Paragraph No. 2.3 it is stated such expenses was not to be allowed as revenue expense and should have been capitalized and required to be disallowed and added back . Therefore, it is a clear case of change of opinion. For amount paid towards concession fee to PUDA it is stated that it is arising out of the contractual obligation between assessee company and PUDA, the same had been claimed as deduction while computing income. The said deduction was accepted and deduction was allowed to assessee - In Paragraph No. 3.1 it is stated that such expense was also required to be capitalized as work in progress in the books of accounts of assessee and should have been disallowed. Therefore, this is also a clear case of change of opinion. Moreover, during the course of assessment proceedings petitioner had also received a notice under Section 142(1) of the Act calling upon to furnish various materials under different heads including details of designing fees expense with copy of ledger and party wise details as also details regarding concession paid to PUDA. By its letter petitioner provided all the details. Therefore, these two items were also subject of consideration during the assessment proceedings. Since the reasons to believe itself indicate as noted above that the reopening is based purely on change of opinion, as held in Aroni Commercials Limited [ 2014 (2) TMI 659 - BOMBAY HIGH COURT ] this change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. Decided in favour of assessee.
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2024 (5) TMI 351
Faceless Assessment - Validity of assessment order passed u/s 143(3) r.w.s. 144B - non affording a reasonable opportunity to be heard through video conferencing - Denial of natural justice - HELD THAT:- A plain reading of Section 144B (6)(viii) of the Act indicates that where a request for personal hearing is received, the Income Tax Authority of the relevant unit shall allow a hearing through National Faceless Assessment Centre, which shall be effected exclusively through a video conferencing or video telephone. Since the request for video conferencing was made by the petitioner, it is mandatory for the respondent to accede to the same in terms of Section 144B (6)(viii) of the Act. It is well recognized that an opportunity to be heard is an important facet of natural justice. Thus, before passing an adverse order, a reasonable opportunity of hearing is required to be afforded to the petitioner. Undisputedly, in the present case, the Act expressly provided for the concerned Unit to afford the assessee an opportunity of hearing. In this view, we find merit in Mr. Kapoor s contention that the impugned assessment order falls foul of the principles of natural justice and the statutory requirement of affording the assessee an opportunity of being heard. Accordingly, we set aside the impugned assessment order and remand the matter to the concerned Assessing Officer to consider afresh after affording a reasonable opportunity to be heard through video conferencing as is required in terms of Section 144B (6)(viii) of the Act.
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2024 (5) TMI 350
Validity of order passed u/s 147 r.w.s.144B - availability of alternate statutory remedy - conditions for exercise of jurisdiction by HC - writ petition contending that the provisions of section 69C read with section 115BBE of the Act could not be invoked and the show-cause notice did not refer to these provisions - petitioner submits that the AO has failed to give sufficient time to the petitioner while issuing notice u/s 69C - HELD THAT:- Considering that factual aspects are involved, this Court would refrain from entering into a fishing enquiry while examining a case under writ jurisdiction. We also notice that the judgment cited by the learned counsel of Full Bench of the Hon'ble Supreme Court of India in Calcutta Discount Co. Ltd. [ 1960 (11) TMI 8 - SUPREME COURT] is with regard to the issue where the concerned Income Tax Officer acted without jurisdiction and in these circumstances Supreme Court held that the writ Court may entertain a plea challenging such assessments done without jurisdiction. The Hon'ble Supreme Court in case of The State of Maharashtra and others versus Greatship (India) Limited [ 2022 (9) TMI 896 - SUPREME COURT] as held High Court has seriously erred in entertaining the writ petition against the assessment order. The High Court ought to have relegated the writ petitioner assessee to avail the statutory remedy of appeal and thereafter to avail other remedies provided under the statute. Similarly, in case of The State of Madhya Pradesh and another versus M/s Commercial Engineers and Body Building Company Limited [ 2022 (10) TMI 576 - SUPREME COURT] the issue was regarding maintainability of writ petition in relation to tax matters where statutory remedy of appeal is available and it was held that the impugned judgment and order passed by the High Court entertaining the writ petition under Article 226 of the Constitution of India against the Assessment Order denying the benefit of Input rebate is unsustainable and the same deserves to be quashed and set aside. This Court refrains from entertaining the present writ petition. Consequently, the present petition is hereby dismissed. It is made clear that the period for filing of appeal has expired, however, in the circumstances, the appellate authority is directed to hear the appeal on merit if it is filed within a period of 15 days subject to making pre-deposits if required in law.
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2024 (5) TMI 349
Validity of reassessment proceedings - non-issue of the statutory notice u/s 143(2) - HELD THAT:- We find that the assessee has repeatedly applied for inspection of case records, for obtaining certified copies of order sheets, and for obtaining copies of notice u/s 143(2), if the same at all exists in the files of the assessing officer, and has even paid the requisite fees by way of challan, but the same has not been allowed by the AO. DR, could not confirm whether the statutory notice u/s 143(2) has been issued or not in absence of assessment records in his custody. DR also expressed his inability to produce the same and he has also not brought anything on record contrary to the arguments advanced by the Ld. AR. Thus we hold that the AO has not issued the statutory notice u/s 143(2) in response to return filed u/s 148 of the Act 1961. It is not a case that notice u/s 143(2) has been issued, and not served upon the assessee, but it is a case where the notice u/s 143(2) has never been issued at all, for assumption of jurisdiction, and the non-issue of the statutory notice u/s 143(2) is an incurable defect which cannot be cured, because the basic foundation of the assessment proceedings is bad in law. Decided in favour of assessee.
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2024 (5) TMI 348
Deduction u/s 80IAB on the disallowance of depreciation on Water-use Rights (Intangibles Asset) - As per revenue payment cannot be considered to be on account of acquisition of capital asset as right to use water neither diminishes nor enhances by any means. The Government has just given a facility to the assessee to use the same and the assessee has clearly tried to claim the depreciation on the same, this cannot be allowed - HELD THAT:- As decided in assessee own case we agree with the contention of the Id, counsel that such an enhancement of profit by way of disallowance of depreciation would be eligible for deduction u/s. 80IAB and this position is now set at rest by CBDT Circular No. 37/2016 dated November 2, 2016, wherein the CBDT has accepted that if disallowance leading to enhancement in the profits of eligible business, then deduction under Chapter-VIA of the Act is admissible on the profits so enhanced by the disallowance. Accordingly, we direct the Assessing Officer to allow the deduction u/s. 80IAB on the disallowance of depreciation and gave consequential relief. In view of our aforesaid direction, the issue raised on merits on allowability of depreciation on intangible assets is purely academic - Appeal of the assessee is allowed.
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2024 (5) TMI 347
Penalty u/s 271(1)(b) - Non-compliance with a notice issued u/s 142(1) - first round of proceedings was deleted by the Tribunal - HELD THAT:- Vide our order of date [ 2024 (5) TMI 320 - ITAT DELHI] in quantum appeal, we have quashed the orders of the Ld. AO/CIT(A) passed by them in the second round of assessment proceedings. In such a scenario, the present appeal against the orders of penalty under section 271(1)(b) of the Act arising out of quantum assessment proceedings in the second round cannot survive. Appeal of the assessee is allowed.
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2024 (5) TMI 346
CIT(A) justification of admitting additional evidenced produced - whether the Ld. CIT(A) is right in law in admitting the additional evidence under clause (c) (d) of Rule 46A(1) of the Rules? - HELD THAT:- In our opinion, the reply is in affirmative. This is because the issue is squarely covered by the decision of Hon ble Delhi High Court in CIT vs. Virgin Securities and Credits (P) Ltd. [ 2011 (2) TMI 207 - DELHI HIGH COURT ] it could not be disputed that this additional evidence was crucial to the disposal of the appeal and had a direct bearing on the quantum of claim made by the assessee. The plea of the assessee which taken before the AO remained the same. The Assessing Officer had taken adverse note because of non-production of certain documents to support the plea and it was in these circumstances, the additional evidence was submitted before the Commissioner (Appeals). It could not be said nor was it the case of the revenue that additional evidence was not permissible at all before the first appellate authority. On the contrary, rule 46A of the Income-tax Rules permits the Commissioner (Appeals) to admit additional evidence if he finds that the same is crucial for disposal of the appeal. In the facts of the instant case, therefore, no substantial question of law arose Thus we reject this ground and hold that the Ld. CIT(A) was perfectly justified in admitting the additional evidence produced by the assessee before him. Unexplained receipts - Addition of receipts as per cash book maintained by the assessee - copy of sale deed of the property sold by the assessee to authenticate the said receipts shown in assessee s cash book was not submitted - HELD THAT:- Before the Ld. CIT(A) the assessee not only produced sale deed but also sale agreement between assessee and M/s. S.R. Forging Ltd. showing advance given to the assessee and confirmation of M/s. S.R. Forging Ltd. whom the assessee sold the property. It is quite evident that the source of receipt of the impugned sum been explained. Therefore the Ld. CIT(A) was convinced about the genuineness of the advances of Rs. 1.47 crore received by the assessee. We find no reason to interfere with the findings of the Ld. CIT(A). Only because documentary evidence was not filed at the time of assessment which were filed by way of additional evidence before the Ld. CIT(A) which he admitted after giving full opportunity to the Ld. AO to rebut/offer comments in remand proceeding. In our humble opinion, the impugned addition cannot be sustained. This ground is decided against the Revenue. Addition u/s 40A(3) - said sum was found debited to the trading account as purchases which according to Ld. AO could not be substantiated by the assessee - HELD THAT:- We found by the Ld. CIT(A) on the basis of evidence validly admitted by him by following the due process of law and recording his finding that during the year the assessee had not, in fact, made any purchases. As ascertained from the sale deed dated 10.05.2011 of the property that the assessee had bought the property, 50% of which was his share. This accounted for payment of Rs. 90 lacs towards purchase of the property. The finding of the Ld. CIT(A) in this regard could not be assailed by the Revenue by bringing on record any adverse material. We, therefore, concur with the view of the Ld. CIT(A) and reject this ground of the Revenue too. Addition deleted by the Ld. CIT(A) is on account of calculation mistake - HELD THAT:- DR could not explain as to how there was no calculation mistake. In this view of the matter, this ground is without any basis and is rejected. Disallowance of interest u/s 36(1)(iii) - assessee had paid interest on borrowed funds and claimed deduction thereof whereas he had advanced interest free loans to six parties - CIT(A) sustained the said disallowance - HELD THAT:- There is no finding either of the Ld. AO or of the Ld. CIT(A) that interest has been paid for purposes other than business. The contention of the assessee has been that the interest bearing capital borrowed has been used for the purposes of assessee s business. This contention of the assessee has not been controverted. The assessee is the best judge of his business needs. Revenue cannot allege that there was no business exigency to borrow interest bearing funds for the purposes of business of the assessee. No direct linkage has been established by the Revenue that interest bearing borrowed funds have been diverted for advancing interest free loans. There is no such allegation at all. The impugned disallowance, in our view, does not rest on any solid legal foundation. In this view of the matter, the alternate plea raised by the assessee that rate of interest has been applied for the whole year and not only for the period of advances given becomes infructuous. We therefore decide the main ground in favour of the assessee. Addition commission expenses for want of documentary evidence - disallowance has been maintained by the Ld. CIT(A) with the observation that he was not convinced that the payments were made through accounted money of the assessee - HELD THAT:- The assessee brought on record before the Ld. CIT(A) party-wise details of commission paid by him along with PAN and addresses of the recipients of the impugned commission. Evidence produced before CIT(A) were examined in remand proceedings by the AO and no fault was found by him. The sustenance of the claim of impugned commission expenses by the Ld. CIT(A) is based on conjecture and surmises alone and not on facts. We, therefore, hold that the impugned disallowance is not warranted. We, therefore direct the Ld. AO to delete the same. Decided in favour of assessee.
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2024 (5) TMI 345
Income taxable in India or not - Business of supplying reservoir simulation software and related services. - Receipts from Indian customers - Finding or allegation of a Permanent Establishment (PE) of the assessee in India - taxability of its impugned receipts from Indian customers - taxing the entire receipts of the assessee by applying the provisions of section 44BB - HELD THAT:- It is an admitted fact that the assessee does not have a PE in India and that being a resident of Canada it is governed by the beneficial provisions of the India-Canada DTAA. The Revenue has not been able to bring anything on record to prove the contrary. The main grievance of the assessee relates to taxability of its impugned receipts from Indian customers by applying the provisions of section 44BB of the Act despite the fact that the assessee does not have any presence (PE) in India. Section 44BB does not override the provisions of section 90 and therefore, a non-resident assessee can opt to be governed by the applicable treaty if more beneficial to it, which is now a settled position of law. The impugned receipts of the assessee are not taxable in India under the provisions of section 44BB of the Act for the reason that the assessee does not have a PE in India in the relevant AYs under consideration and that being a resident of Canada, the assessee is governed by the more beneficial provisions under the India-Canada DTAA. It is the claim of the Revenue that the assessee s case is covered by the decision of the Apex Court in the case of ONGC [ 2015 (7) TMI 91 - SUPREME COURT ] We do not agree with this contention of the Revenue as in our considered view, the assessee s case is distinguishable on facts as the substantial question of law determined in ONGC s case was not concerning the eligibility of tax payers to the beneficial provisions of tax treaty but the taxability of income in the nature of FTS whether under the provisions of section 44D or 44BB of the Act. The Revenue has not been able to bring on record anything to establish the existence/ presence of a PE of the assessee in India either before us or before the lower authorities. It is not even the case of the Revenue that the assessee has PE in India in the relevant AYs under consideration. In this view of the matter, non-existence of PE of the assessee in India is unquestionable. Since the assessee does not have a PE in India in the relevant AYs, its business income (impugned receipts) under dispute in the relevant AYs is not taxable under section 44BB of the Act. Whether the impugned receipts are not in the nature of royalty/ FTS in terms of the provisions of Article 12 of the India-Canada DTAA? - It is not in dispute that the impugned receipts partake the character of business income of the assessee for the relevant AYs under consideration. In this view of the matter, the question of treating the impugned receipts as royalty or FTS is irrelevant and becomes academic in nature. Having said so, as per Article 7 of DTAA, the impugned receipts being the business profit/income of the assessee during the relevant AYs under consideration are not taxable in India in the absence of a PE of the assessee in India. Levy of interest u/s 234B of the Act on the ground of its inapplicability in case of a non-resident - HELD THAT:- As clarifying the position that proviso to Section 209(1) issued by Finance Act, 2012 was applicable prospectively after FY 2012-13, there was no liability for the assessee to pay interest under Section 234B of the Act for the impugned AYs, since the entire income was tax deductible at source in the hands of the payer. Respectfully following the decision in the case of Mitsubishi Corporation and Amadeus IT Group SA [ 2021 (9) TMI 875 - SUPREME COURT ] we hold that levy of interest under section 234B of the Act is not called for.
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2024 (5) TMI 344
TP Adjustment - MAM - application of TNMM by TPO as most appropriate method - Addition of proviso for management consultancy services - wherever Internal TNMM is available the same should be given preference over external TNMM analysis? - HELD THAT:- It would be pertinent to understand the setup of a large consultant global firm like that of the assessee, the consultants are not only qualified but many of them are super qualified specialists and super specialists having different years of experiences. For Example, the consultant can be a simple MBA, MBA + IIT Graduate, MBA + CA, though they may be placed in the same category like project leader, or manager but due to their qualification and super specialty their hourly rates may be differ. Therefore, it would be incorrect to say that there is a discrimination in charging of hourly rates. Considering the facts of the case in totality, we are of the considered view that the action of the Transfer Pricing Officer is not only erroneous but also against the facts of the case in hand. Assuming that the TPO application of TNMM is the most appropriate method, we find that while applying the TNMM, the TPO has computed the profitability of BCG India at a company level and subsequently computed a proportionate profitability to impute the adjustment with respect to the international transaction of provision of management consultancy services. If the assessee s segmental profit and loss account is considered wherein the revenue and expenses are allocated between AE and Non-AE on an appropriate basis. Then the profitability arising of the AE segment is 44.02% whereas in case of Non-AE it is 3.77%. On a perusal of the internal TNMM analysis, we find that the assessee has earned significantly higher margins in the AE Segment vis- -vis Non-AE Segment. Rule 10B also provides that the net profit margin realized by the enterprise or by an unrelated enterprise from a comparable uncontrolled transaction or a number of such transactions is computed having regard to the same base . In our considered opinion the word comparable may encompass internal comparable or external comparable. It is because the delegated legislature has firstly referred to the net profit margin realized by the enterprise (internal) from a comparable uncontrolled transaction and, thereafter, it points towards net profit margin realized by an unrelated enterprise (external) from a comparable uncontrolled transaction. Thus wherever Internal TNMM is available the same should be given preference over external TNMM analysis. Even on this point the assessee is in a better footing, However, as mentioned elsewhere, we are of the considered view that the CUP applied by the assessee does not have any flaw or error and the same should be accepted. We accordingly direct the Assessing Officer to delete the TP Adjustment in relation to proviso for management consultancy services. Ground No. 1 is allowed. T.P Adjustment in relation to payment of licence fees for time and billing software - HELD THAT:- As decided in assessee own case [ 2024 (2) TMI 1377 - ITAT MUMBAI] for the A.Y. 2010-11 TPO/AO has arrived at the ALP by not adopting any of the methods prescribed u/s 92C of the Act in respect of (i) payment of license fees for time and billing software, (ii) payment of regional administration and regional co-ordination cost allocation and (iii) payment of information technology cost allocation, thus we direct the Assessing Officer / Transfer Pricing Officer to delete the TP Adjustment in relation to payment of licence fees for time and billing software. Decided in favour of assessee. TP adjustment on provision of regional coordination services - selection of comparables companies - Before us, it has been argued that the TPO has grossly erred in excluding Vatika Marketing Limited - as emphatically pointed out that Lancor Maintenance Services Ltd., included in the final determination of Arm s Length Price has similar services and therefore, either Vatika Marketing Limited should be included or Lancor Maintenance Services Ltd. should also be excluded - HELD THAT:- The reasons given by the Transfer Pricing Officer for excluding Vatika Marketing Limited are mentioned elsewhere. Let us now see the business of Lancor Maintenance Services Ltd.,. The income shown by this company is income from Maintenance operations and in its segment information the company is engaged in the business of maintenance and management of properties and there is no separately identifiable business or geographical segments . In the light of the above, we are of the considered view that the Transfer Pricing Officer has erred in excluding Vatika Marketing Limited which is also engaged in the similar business as that of the Lancor Maintenance Services Ltd.,. We accordingly direct the TPO / AO to include Vatika Marketing Limited for the determination of Arm s Length Price of the impugned transaction. Ground No. 3 is Accordingly, allowed. TP Adjustment on payment of information technology cost allocation - HELD THAT:- As decided in own case A.Y. 2008-09 [ 2020 (8) TMI 172 - ITAT MUMBAI ] TPO/AO has arrived at the ALP by not adopting any of the methods prescribed u/s 92C of the Act in respect of (i) payment of license fees for time and billing software, (ii) payment of regional administration and regional co-ordination cost allocation and (iii) payment of information technology cost allocation. We are of the considered view that the ratio laid down in Lever India Exports Ltd. [ 2017 (2) TMI 120 - BOMBAY HIGH COURT ] Merck Ltd. [ 2016 (8) TMI 561 - BOMBAY HIGH COURT ]; Johnson Johnson Ltd. [ 2017 (4) TMI 1281 - BOMBAY HIGH COURT ] and Kodak India Pvt .Ltd. [ 2016 (7) TMI 677 - BOMBAY HIGH COURT ] is squarely applicable to the facts of the case. Therefore, following the same, we allow the 1st, 2nd and 3rd ground of appeal. Short granting interest u/s 244A - HELD THAT:- As decided in asseessee own case A.Y. 2010-11 [ 2024 (2) TMI 1377 - ITAT MUMBAI] issue raised by the assessee is allowed with the direction that the AO may consider extending the benefit to the assessee upto the date of actual receipt of refund.
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2024 (5) TMI 343
Income from Other Sources u/s 56(2) - interest received u/Sec. 28 of the Land Acquisition Act, 1894 granted by the learned Reference Court - HELD THAT:- As decided in Raghunath Budhaji Patil, Uran [ 2023 (4) TMI 1323 - ITAT PUNE] has already settled the issue in assessee s favour and against the department wherein as held that taxability of the assessee s interest income received under section 28 of the Act is covered in assessee s favour as per the hon ble high court s Bombay bench [ 2019 (8) TMI 518 - BOMBAY HIGH COURT ] holding that the same is not taxable under section 56(2)(viii) of the Act as against the Revenue s contentions that the Aurangabad bench of the very hon ble jurisdictional high court has taken a divergent view against the taxpayer in Shivajirao and Others [ 2013 (8) TMI 1160 - BOMBAY HIGH COURT ] - Decided in favour of assessee.
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2024 (5) TMI 342
Loss on valuation of foreign exchange contract on M2M basis - addition has been made with regard to loss in the forward contract for foreign currency due to the fall in value on the date of balance sheet i.e. 31/03/2009 - AO while making the addition observed that claim of deduction on account of losses computed on Mark to Market basis cannot be allowed as the losses have not crystallized - CIT(A) deleted the above said disallowance - HELD THAT:- In the case of VS Dempo Co. Pvt. Ltd [ 1993 (7) TMI 63 - BOMBAY HIGH COURT] held that loss arising in the process of conversion of foreign currency is a trading loss. As the case of the assessee before the authorities that the assessee booked forward contracts to hedge against the foreign currency fluctuation risk to business transaction viz export orders undertaken by the assessee and hence the taking of the aforesaid hedge cover was incidental to the business. Forward contracts were related to the exports proceeds expected to be received in the course of the business and not for acquisition for any capital asset and hence the loss is arising on revenue account, thus the same is allowable. Contracts entered by the assessee are binding and enforceable in law and hence the loss incurred on the date of balance sheet, due to the adverse exchange fluctuations would be allowable under the mercantile system of accounting entered that the same had not been actually paid, thus the same cannot be termed as notional loss in view of the decisions of Woodward Governor [ 2009 (4) TMI 4 - SUPREME COURT] Thus we find no error in the order of the CIT(A) in deleting the subject addition and find no merit in the Ground No. 1 of the Revenue. Loss on forward contracts - As per the assessee, the losses suffered by the assessee are normal business losses and therefore deductable - speculative loss - - AO made addition on the ground that since the transaction entered into Forex Directive by the assessee Company do not fall in the exclusionary clauses of Section 43(5) - CIT(A) deleted addition - HELD THAT:- The assessee is not a dealer of Foreign Exchange and contract in foreign exchange were to safeguard the business interest of the assessee and conducted in regular course of business, therefore, it cannot be termed as speculative in nature as no motive or action in this regard is in exist. It is not in dispute that there has been no delivery of foreign exchange, but the Forex Company being not a traded commodity as held in the case of Munjal Showa Ltd. [ 2003 (6) TMI 188 - ITAT DELHI-E] and Soorajmull Nagarmull [ 1980 (9) TMI 69 - CALCUTTA HIGH COURT] - CIT(A) while deleting the addition has relied on the above judicial precedents. In the absence of any contrary facts or the ratio brought to the notice of the Bench, we find no error or infirmity in the order of the Ld. CIT(A) in deleting the addition, accordingly we dismiss the Ground No. 2 of the Revenue. Deduction under the forward premium account which represents the amortized loss, computed as the difference between the forward rate and the spot rate at the date of the inspection of the forward exchange contract - A.O. disallowed the same holding that expenditure claimed by the assessee is speculative in nature and hence not allowable as business expenditure - HELD THAT:- We have already dealt with the issue in Ground No. 2 and held that the CIT(A) has committed no error in deleting the addition observing that the forward mark contracts on foreign currency is incurred during the normal course of business and the losses incurred are the part and parcel of the business activity of the assessee, which are allowable as business expenditure and not speculative in nature, thus any expenditure incurred for such premium account computed as difference between the forward rate and the spot rate in such contract is also to be treated as business expenditure incurred in the course of business by the assessee. We find no error in the order of the Ld. CIT(A) in deleting the addition.
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2024 (5) TMI 341
Disallowance being 25% of Material Purchase and Indirect Expenses - assessee could not submit any documentary evidence except for the ledger, which can prove the genuineness of the purchase of Material - HELD THAT:- We find that the assessee had not produced the complete books of accounts along with bills and vouchers and other documentary evidence to substantiate the claim of the assessee before the AO. It is quite evident that the material referred by the assessee is relevant to determine the total income and tax liability of the Assessee correctly. Since the Assessee has produced the documents before the Tribunal in support of his claim, in the facts and circumstances of the case and as the lower authorities had no opportunity to verify the documents produced before us, without commenting anything on the merit of the case, we admit the additional documents produced by the Assessee and in the interest of justice, restore the matter to the file of the AO with a direction to consider the documents produced by the assessee and adjudicate the issues, after giving due opportunity of being heard to the assessee. Accordingly, we partly allow the appeal filed by the assessee. Appeal filed by the assessee is treated as allowed for statistical purposes.
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2024 (5) TMI 340
Validity of reassessment proceedings - Reason to believe - sworn statement recorded from the partner in view of the bogus purchase as later retracted - as per assessee statement recorded u/s 132(4) of the Act which was retracted cannot be relied upon to reopen the assessment u/s 148 of the Act when the department has accepted the retraction - HELD THAT:- As in the present case, the department never accepted the retraction statement filed by the assessee. Being so, at the stage of reopening of assessment by the AO, it is not necessary to have conclusive opinion of escapement of income. On the other hand, he must have prima facie of the opinion that income has escaped from the assessment in these assessment years. To that extent, in our opinion, at the time of reopening of assessment, the AO has reason to believe that income has escaped from assessment on the basis of the sworn statement recorded from the partner in view of the bogus purchase said to be recorded by the assessee in its books of accounts. Being so, we do not find any merit in this ground of the assessee raised before us. This ground of assessee is rejected. Addition towards bogus purchase - sworn statement recorded in survey proceedings from the partner as later retracted - HELD THAT:- Once a statement is retracted, the contents stated in the retracted statement must be substantially corroborated by other independent and cogent evidence. It has been consistently held by various courts that a sworn statement cannot be relied upon for making any addition and must be corroborated by independent evidence for the purposes of making assessments. In view of the above, in our opinion, the lower authority erred in holding that the assessee has inserted bogus purchase into his accounts without bringing on any evidence to hold that entire transactions are not genuine and they relied upon only the statement of one of the partner Shri Uday Kumar Salian recorded on 8.2.2018, which was later retracted by all partners vide letter dated 14.2.2018 within short date of 6 days. This has been filed by assessee with department on 15.2.2018, which is not at all considered by the AO. It is noted that the ld. AO/CIT(A), never mentioned about this retraction statement in their order and this action of lower authorities cannot be appreciated. It is the duty of ld. AO to consider the letter in true perspective and to comment on it which he failed to do so. For statement recorded from employee of the assessee, who has confirmed bogus purchase from 1.4.2017 to 31.1.2018 for the financial year 2017-18 relevant to assessment year 2018-19 and not for the all-assessment years involved herein - Being so, it cannot be considered that Ms. Amitha given any statement related to bogus purchases relating to all assessment years. This being the position, framing assessment by AO without considering the retraction of statement filed by the assessee, in our opinion, the addition cannot be sustained. Only argument of D.R. is that assessee has accepted the bogus purchase in the assessment year 2018-19 and settled the issue by VSV Scheme 2020 and also accepted the bogus purchase in the assessment year 2016-17, the addition to be sustained - In our opinion, the acceptance by assessee in one assessment year cannot lead to conclusion that in all these assessment years, the assessee has inserted bogus purchases in a similar way. It cannot be said that the principle of estoppel to be applied. In our opinion, the case of assessee is to be examined in the light of evidence brought on record and in the present case, there was no evidence brought on record with regard to bogus purchase or creation of any undisclosed assets by the assessee in all these assessment years. Addition could be made only when it is shown by the evidence brought on record that the books of accounts are not reliable as there are material errors and omissions existed therein. In order to support this proposition, we place reliance on the judgment of Umacharan Shaw and Brothers [ 1959 (5) TMI 11 - SUPREME COURT ] wherein it was held that there was no material on which the ITO could come to the conclusion that the firm was not genuine. There were many surmise and conjectures and if the conclusion is the result of suspicion, which cannot take place of proof in this matter. Thus there should be concrete evidence for considering the purchase entries in the books of accounts as bogus. In the present case, sales and purchase shown by the assessee leading to profit and that the profit declared by assessee is progressively increasing from year to year and it cannot be said that purchases were bogus without having any material to suggest that it is a bogus. Thus once the statement recorded u/s 131 or 131(1A) or 133A of the Act or 133A of the Act is retracted by assessee, AO without rejecting the books of accounts cannot make any additions towards bogus purchases. Accordingly, the addition made on the premise of bogus purchase in all these assessment years is deleted and we allow the ground taken by the assessee in all these appeals. Addition of personal expenses of partners - Since we have already held that there was no corroborative material to support this addition and the statement has already been retracted, this addition based on no supporting evidence cannot be made.
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2024 (5) TMI 321
Reopening of assessment - reason to believe - onus to prove - Reassess v/s review the income - waiver of loans granted by the BIFR - remission of liability was not even remitted in the tax audit report i.e., Form 3CD - HELD THAT:- The courts have taken a consistent view that once the assessee has disclosed all the material and primary facts, truly and fully before the AO, it is for the AO to draw the requisite inferences from those primary facts. The onus on the assessee cannot be extended beyond the true and full disclosure of such facts. Also, the power of the AO to reassess an income chargeable to tax which has escaped assessment is strikingly different from the authority to review the decision taken during the original proceedings. While the former is permissible in light of the pith and substance enshrined in Section 147 of the Act, allowing the latter would be a violence with the mandate of the said Section Applying the principles laid down in Usha International Ltd. ( 2012 (9) TMI 767 - DELHI HIGH COURT] in the instant case, it is clearly seen that not only the aspects relating to the issue at hand had been fully disclosed by the petitioner before the AO but by recording the submissions and comments in the assessment order, it can be reasonably inferred that the AO has formed an opinion on the said issues. Thus, allowing the reassessment proceedings to continue in the present case would be contrary to the mandate expounded in Usha International Ltd. (supra). We are also mindful of the note of caution as articulated in the case of Techspan India P. Ltd. v. Income-tax Officer [ 2006 (2) TMI 88 - DELHI HIGH COURT] whereby, this Court, while relying upon Gruh Finance Ltd. v. [ 2000 (2) TMI 86 - GUJARAT HIGH COURT] has held that every attempt to bring to tax income that has escaped assessment cannot be aborted by judicial intervention on an assumed change of opinion. Thus non-disclosure of full material cannot be attributed to the petitioner in the instant case. Rather, the AO had omitted to make any addition qua the issue at hand, despite noting the submissions and forming an opinion on the same. Reopening notice set aside - Decided in favour of assessee.
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2024 (5) TMI 320
Assessment completed u/s 153A - addition on account of peak balance maintained by the assessee with HSBC Bank, Geneva - validity of second round of the quantum proceedings - HELD THAT:- As the original assessment order made in the first round stands quashed by the Hon ble Delhi High Court [ 2024 (2) TMI 401 - DELHI HIGH COURT] wherein as held no incriminating material was found during the course of search carried out on the assessee and further that the Revenue was unable to place on record any reliable material to establish that the assessee was indeed the owner of alleged foreign bank account in HSBC Bank, Geneva. Therefore, the orders of Ld. AO/CIT(A) do not have any legs to stand. Accordingly, the orders of Ld. AO/CIT(A) made by them in the second round of proceedings are hereby quashed as a consequence. Appeal of the assessee is allowed.
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Customs
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2024 (5) TMI 339
Maintainability Of Appeal - Bar on monetary limit - Evasion of custom duty - HELD THAT:- It is stated at the Bar that in terms of the latest Circular dated 02.11.2023, the monetary limit has been enhanced to Rs.2 crores. The appeal would have to be disposed of having regard to the said threshold limit as the amount in dispute in the instant cases is only Rs.1,28,73,481/- (Rupees One Crore, Twenty Eight Lakhs, Seventy Three thousand, Four Hundred and Eighty One Only). In the circumstances, the appeals are dismissed owing to low tax effect.
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2024 (5) TMI 338
Classification of imported goods - Import of branded nutrition/ dietary supplements - liable to IGST at 28% under Sr.No.9 of Schedule IV of Notification No.1/2017-IGST-Rate or at 18% under Sr. No.453 of Schedule III of the said Notification - demand barred by time limitation or not - suppression of facts or not - HELD THAT:- As regard demand being time barred, it is submitted that this is not a case of mis-declaration or mis-classification. The dispute is only regarding applicable rate of IGST. It is settled law that the applicable rate of tax is the function of department. Appellant had claimed one rate as per its understanding and belief. If the department have any objection in the claim of the appellant, nothing prevented the department to make appropriate changes this does not involve any suppression. The department s view is also based on data and facts, which were on record available at the time of assessment. Since, there is no suppression of fact, the entire demand is time barred. From the reading of Sr. No. 9, it is seen that the description of goods covers food preparations not elsewhere specified or included i.e. Protein concentrates and textured protein substances, etc. From the description of the goods imported by the appellant, clearly do not fall under the description Protein concentrates and textured protein substances. Since, in the entry the word i.e. is prefixed that means only the description mentioned after i.e. are covered because i.e. denotes the specific item. Therefore, as per the list of the item imported by the appellant, none of the goods is covered under Protein concentrates and textured protein substances. Therefore, the aappellant s imported goods are not covered under Sr. No. 9. The appellant claimed the IGST rate @ of 18% as per Sr. No. 453 of Schedule III, which reads as goods of any chapter which are not specified in schedule I,II,IV,V or VI. As discussed, the appellant s goods is not specified in schedule IV which is claim of the department. The same will fall under Sr. No. 453. Accordingly, the correct rate of IGST applicable is 18% under residuary entry Sr. No. 453 of schedule III of IGST Notification 01/2017- Integrated Tax (Rate) dated 28.06.2017, as amended. The very issue has been considered by this Tribunal in the case of Neuvera Wellness Venture 2023 (10) TMI 964 - CESTAT AHMEDABAD . Thus, it can be seen, the facts of the said decision and that of the present case are absolutely identical. Therefore, the ratio of the above decision is directly applicable in the fact of the present case. Accordingly, impugned order is not sustainable. Hence, the same is set aside. Appeal is allowed.
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2024 (5) TMI 337
Seeking extension of the warehousing period due to COVID-19 pandemic and to permit re-export - without insisting for payment of duty, interest and without imposing fine and penalty - Import of insulated Glass Unit with accessories for a multi-storied office building project - HELD THAT:- The issue in the present appeal is limited to illegality in clearance of bonded warehouse goods within the stipulated period of time. As per the impugned order, it is evident that the appellant made a request for extension of period and pleaded that there is no willful negligence on the part of appellant to clear the goods during the warehousing period and it is only due to the COVID-19 situation. As per the Circular issued by the Board circular 3/2003 dated 14.01.2003. From the above Circular and considering the ratio of the judgment of Hon ble Supreme Court in Cognizance for extension of Limitation [ 2022 (1) TMI 385 - SC ORDER] , when a request is made especially in a situation like COVID-19 and where there is no allegation of any fraud of willful omission on the part of importer, the respondent ought to have allowed re-export of goods without insisting for payment of duty, interest and without imposing fine and penalty. Thus, the appeal is allowed and the impugned order is set aside. The respondent is directed to allow re-export of goods within a period of 3(three) months from the receipt of the Final Order without insisting for payment of duty, interest, fine and penalty.
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2024 (5) TMI 336
Re-Classification of Hot/Cold Rolled Stainless Steel Coils Grade 13 ( subject goods ) - Denial of exemption under Sr. No. 734 of customs Notification No. 50/2018- Cus - Extended period of limitation - duty demand - Interest - Penalty - Change of classification on the basis that the 1% Nickel content in the product - HELD THAT:- The whole case was made out for change of classification on the basis that the 1% Nickel content in the product will not qualify the imported goods as ''Nickel Chromium Austenitic Stainless Steel''. The important point to be examined is to qualify the product namely, Nickel Chromium Austenitic Stainless Steel whether it is mandatory to have Nickel content of 4.5% to 12% or otherwise. We find that department's reliance on the websites of M/s Aalco metals ltd. (England and Wales) and M/s ASM international Limited cannot be a conclusive factor to classify the product as other than Austenitic Nickel Chromium Stainless Steel for the reason that from the said evidence it is clear that not only those products which contain 4.5% to 12% Nickel will fall under Austenitic Stainless Steel but even the low content Nickel in Stainless Steel will also fall under Austenitic Stainless Steel. Therefore, the mere reliance on the websites of M/s Aalco metals ltd. (England and Wales) and M/s ASM international Limited is incorrect for arriving at classification. Therefore, on the fact of the case which is not under dispute and on the authority mainly Indian Standards, the goods imported by the appellant are correctly classifiable under Chapter Tariff Heading 7220 9022 as Nickel Chromium Austenitic Type. Without prejudice to the above, we also find that the adjudicating authority has not confirmed the classification proposed in the show cause notice. The department in the show cause notice in respect of Hot Rolled Nickel Chromium Austenitic Type was proposed to be classified under 7220 1090 and Cold Rolled Nickel Chromium Austenitic Type was proposed to be classified under 7220 9090 whereas the adjudicating authority decided the classification of both the product under 7220 1229 and 7220 2029 respectively. It is a settled legal position that if the goods cannot be classified under a classification which has been proposed in the show cause notice, then even if its correct classification is different than the classification claimed by the assessee, the entire show cause notice fails on this point itself. It is settled that the department cannot travel beyond the proposals made in the show cause notice. In the present case the impugned order travelled completely beyond the classification proposed in the show cause notice. Therefore, on this ground also, the impugned orders are not sustainable. We find that the entire case is based upon Mill Test Certificate or the documents produced by the appellant. The Nickel content was very much available in the Mill Test Certificate, therefore there is no suppression on the part of the appellant. Since the case was made out on the basis of Nickel content which was available before the department, the department could have taken the action within the normal period. In these facts, since no suppression of fact is there and the show cause notice was issued beyond two years from the import, the entire demand is time barred. In this regard, the judgments cited by the appellant support their case on limitation also. Thus, we are of the view that the demand is not sustainable on limitation also. As per our discussion and finding made herein above, the impugned orders are not sustainable, hence, the same are set aside. Appeals are allowed with consequential relief, if any, in accordance with law.
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2024 (5) TMI 335
Appealable order - Communication for fixing the next date - Seeking grant of permission to cross examination of the officers and witnesses to be reviewed - Whether the impugned communication addressed by the Superintendent (Adjn.) to the appellant would be considered as an order for filing of appeal before the Tribunal, in terms of section 129A - Without disposing the request application made by the appellant for cross examining the witnesses, whether the adjudicating authority can proceed to decide the SCN by granting the date of personal hearing to the appellant? - HELD THAT:- Section 129A ibid provides various decisions and orders passed by different authorities for filing of appeal before the Tribunal. Clause (a) of sub-section (1) of section 129A ibid provides that a decision or order passed by the Commissioner of Customs may be appealed against before the Appellate Tribunal. In this case, the impugned communication dated 25-09-2023 has conveyed the date of personal hearing fixed before the adjudicating authority in respect of the SCN dated 20.10.2022 issued by him. The notice for personal hearing issued by the Superintendent is only a communication of the date fixed by the Commissioner of Customs and is not a decision of the Superintendent himself. Normally, it is for the Commissioner to fix or re-fix the dates of personal hearing. However, the grievance of the appellant is that no decision has been taken by the Commissioner on its request for cross examination. In our considered view, for this reason, this should be construed as an appealable order for filing of appeal before the Tribunal, in terms of the above statutory provisions. The views of the DRI on the cross examination neither give it an opportunity to appeal (because DRI is not the adjudicating authority) nor allow it for cross examination. Therefore, we conclude that the appellant has correctly filed the appeal before the Tribunal against the impugned communication dated 25.09.2023 addressed by the Superintendent (Adjn.). On perusal of the letter dated 12.09.2023 and the impugned communication dated 25.09.2023, we are of the view that the adjudicating authority was simply carried away by the views of the Deputy Director of DRI that the request for cross-examination of various persons should not be accepted and he simply got a copy of the DRI s letter sent to the noticee and has not taken a decision on the question of allowing cross-examination. It is incumbent upon the adjudicating authority to decide on the request independently and in a just and fair manner, and communicate it with reasons to the appellant and then he can fix the personal hearing. We are of the view that fixing the personal hearing in the matter without considering and deciding on the application for cross examination and instead sending a copy of the letter of DRI on the request is not correct. Thus, we find that the impugned communication dated 25.09.2023, fixing personal hearing without deciding on the request for cross examination and instead sending a letter from DRI on the question of cross-examination (although it does not explicitly say that DRI s views have been adopted by the Commissioner) deserves to be set aside and is accordingly, set aside. We cannot countenance any difficult in the Commissioner taking an independent view on this application and conveying it to the appellant before fixing the personal hearing. In the result, the appeal is allowed. The Commissioner may take a decision on the request for cross-examination independently and communicate it to the appellant and then proceed further. The miscellaneous application also stands disposed of accordingly.
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Corporate Laws
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2024 (5) TMI 334
Disqualification from participating in the tender - Scope of the Balance Sheet Prepared under the Companies Act - Importance of explanatory notes to the Balance Sheet - rejection of technical bid on the premise that it has not complied with the necessary pre-requisite qualification in filing the explanatory notes of account being an integral part of the Balance Sheet - HELD THAT:- The Balance Sheets can only be understood by going into the factual narrations made in the explanatory notes of accounts. When one speaks about Balance Sheet, it takes along with it the explanatory note. To be noted, all the other bidders have complied with this part, even M/s. BVG India Ltd. was quite conscious of the said compliance as could be seen from one of the communication made by it. Thus, it is held that the reasoning of the High Court, finding fault with disqualification of the technical bid of M/s. BVG India Ltd. cannot be sustained in the eye of law. The only other issue to be considered is with respect to disqualification of M/s. Pashupatinath Distributors Private Limited. All the bidders had been called for a meeting and their queries have been answered by the tendering authority. As rightly pointed out by the learned senior counsel appearing for the respondent No.1, the document concerned would clearly show that even the technical committee was of the view that the request made by M/s. Pashupatinath Distributors Private Limited to dilute Clause 2.2 and 2.3 is not feasible of consideration. While interpreting the terms of a tender, a simple interpretation is to be followed. Thus, both M/s. BVG India Ltd. and M/s. Pashupatinath Distributors Private Limited are disqualified from participating in the tender concluded. In view of the aforesaid conclusion, the ultimate decision of the High Court in remitting matter back for a fresh consideration by the State is upheld while clarifying that the aforesaid two entities cannot be permitted to participate with the existing disqualification as discussed above, unless they are otherwise qualified in the light of the interpretation of the notice inviting tender. Appeal disposed off by way of remand.
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2024 (5) TMI 333
Professional misconduct by CA - Liability of the Engagement partner with audit firm - Failure to submit requisite information and non-cooperation with NFRA - Penalties and sanctions - HELD THAT:- It is established that M/s PCN Associates, and CA Gopala Krishna Kandula committed professional misconduct by not submitting the requisite information to NFRA; not attending personal hearing; and submitting false affidavit. We conclude that the following failures on their part, as contained under the Articles of Charges in the SCN, stand established: a) Failure to exercise due diligence and being grossly negligent in the conduct of professional duties as defined by clause 7 of Part I of the Second Schedule of the Chartered Accountants Act 1949. b) Failure to supply the information called for, and non-compliance with the requests of NFRA, as defined in clause 2 of Part-II of First Schedule of The Chartered Accountants Act, 1949. Considering the professional misconduct by the Firm and the EP; and considering the nature of the violation, in exercise of powers under section 132(4)(c) of the Companies Act, 2013, it is ordered as follows: a) Imposition of a monetary penalty of Rupees Fifty Lakhs upon. M/s PCN Associates (FRN: 0160168), the Audit Firm and Rupees Thirty Lakhs upon CA Gopala Krishna Kandula (ICAI Membership No. 203605), the Engagement Partner. b) In addition, M/s PCN Associates and CA Gopala Krishna Kandula are debarred for a period of Two years and Ten years respectively from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.
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Insolvency & Bankruptcy
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2024 (5) TMI 332
Rejection of claim filed by appellant - Role of the Liquidator - Appellant states that the Respondent / CD, did not perform its part of the contract from its inception and did not establish the letters of credit as contemplated - HELD THAT:- It is the Appellant s case that the CD having awarded the purchase order and the work order failed to honor its obligations and therefore, the Appellant could not get the expenditure incurred by it on these accounts to the tune of Rs.31.71 crore from the CD and therefore, it should be considered a debt due to be repaid by the CD and that the RP having admitted an amount of Rs.13.47 crore, payable by CD, to the Appellant, later changed his position to Rs.1.51 crore, as receivable from the Appellant to CD in contravention of the provisions of Insolvency and Bankruptcy Code, 2016 and the Liquidation Regulations. The Respondent / Liquidator fairly addresses these points by stating that the items of claim not admitted by her as due payable are those for which no documents such as invoice / dispatch documents were available in the records of CD and which were not also provided by the Appellant. She has also fairly answered the point by stating that the disallowed claims could be due to non-performance of CD which will require adjudication by a competent Civil Court / Arbitrator, before they can be translated into Dues within the framework of IBC and has cited the relevant law in form of a decision by the Hon ble Apex Court to support her assertion. It is also seen that the Respondent / Liquidator has given sufficient reasons for disallowing the claim of the Appellant in her letter to the Appellant. It is also seen that the AA / NCLT, Hyderabad have dealt on these issues in detail and given succinct reasons as to why they have accepted the submission and reasoning of the Liquidator as to why she has rejected the claim of the Appellant. They have rightly held that when claim and counter claims are involved Liquidator cannot decide the same and therefore the Liquidator rightly rejected the claim. The appeal is devoid of merits and deserves to be dismissed and is accordingly dismissed.
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2024 (5) TMI 331
Seeking to Condone Delay of 14 days in filing the Appeal - Sufficient cause for delay or not - HELD THAT:- It is seen that the Respondent has at least offered the index of the typed set of papers annexed to the Appeal before NCLAT and the Application filed before NCLT to support his contention. On the other hand, the Appellant has not shown a single document which as per his claim took a long time to trace and collect. This makes to come to the conclusion that sufficient cause has not been demonstrated to merit condonation of delay of 14 days beyond the 30-day period. The Appellant has cited a number of decisions of Hon ble Supreme Court to support his plea that a liberal approach be adopted for condonation of delay even in matters arising under the IBC. In this matter, it is said that the objective of IBC is to ensure timely resolution of insolvency and accordingly provisions have been put in place including strict timelines for the legal and administrative processes and therefore, adopting a liberal approach, needless to say, will defeat the objectives of the Code and will run counter to the view expressed in V NAGARAJAN VERSUS SKS ISPAT AND POWER LTD. ORS. [ 2021 (10) TMI 941 - SUPREME COURT] . The Company Appeal is not entertained , and hereby Rejected .
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Service Tax
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2024 (5) TMI 330
Exemption from service tax - Business Auxiliary Service - providing transportation of agricultural produce - Exemption as per Sl.No.21, 22 of the Mega N/N. 25/12 dt. 20.06.2012 - De-novo order passed by the adjudicating authority during the pendency of the appeal - HELD THAT:- The Commissioner (Appeals) vide order impugned in this appeal had remanded the matter. It is to be noted that the present appeal has been filed by the appellant after complying with the mandatory predeposit. Prior to 06.08.2014, the Section 35F of Central Excise Act as made applicable by Section 83 of Finance Act, 1994 included the procedure to file stay application along with appeal. The Tribunal then had to consider the stay applications and direct to make predeposit in order to grant stay of recovery of the demand by the department. After introduction of new Section 35F w.e.f 1.8.2014, the assessee has been cast with the responsibility of making a mandatory predeposit. The procedure of filing stay application has been given away with. The requirement to make mandatory predeposit implies that the recovery proceedings are stayed during pendency of the appeal before the Tribunal. Coming to the merits of the case, the Commissioner (Appeals) has analysed the issue and after considering the submissions made by the appellant that they are eligible for exemption under Sl.No.21, 22 of Notification No.25/2022 has remanded the matter to verify whether the transportations were made for agricultural produce. Taking note of this fact as well as the submissions made by the learned counsel at the time of hearing, the matter requires to be remanded to the adjudicating authority who is directed to look into the documents produced by the appellant with regard to transportation of goods. In case, the transportation is for agricultural produce, the appellant is eligible for exemption. The matter requires to be decided on merits as well as on limitation and is remanded to the adjudicating authority leaving all issues open - appeal is allowed by way of remand to the adjudicating authority.
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2024 (5) TMI 329
Benefit of exemption from service tax - Vehicle Hire Charges - Rent received for their trailers (vehicles) rented to M/s Kataria Carriers, Kanpur - Supply of transport vehicles to Goods Transport Agency - availability of CENVAT Credit on Document Charges, terminal handling charges and bill of lading charges - invocation of extended period of limitation - levy of penalty u/s 76 78 of FA. Whether the appellant was liable to pay service tax under the category of Supply of Tangible Goods Service on the rented received for their trailers (vehicles) rented to M/s Kataria Carriers, Kanpur? - HELD THAT:- Commissioner has denied the benefit of the said exemption as per N/N. 29/2008-ST dated 26/06/2008, 01/2009-ST dated 05/06/2009 and clause 22(b) of Mega- exemption Notification No. 25/2012-ST, only by stating that appellant has failed to produce the documentary evidence to show its eligibility to the said notification. They have failed to produce the documents as specified in Notification No 01/2009-ST. There are no hesitation in accepting the contention of Commissioner, to the effect that the exemption notifications need to be strictly construed and it is for the person claiming the benefit of exemption to satisfy with regards to his eligibility to the exemption. From perusal of the invoices it is quite evident that the name of the recipient of services is clearly mentioned as Kataria Carriers, H O 133/198 T P Nagar, Kanpur -208023 and description is stated as Goods Transport Vehicle (Trailers) Hire Charges . Appellant has substantially complied with the conditions as laid down by the Notification No 1/2009-ST and the benefit of this notification cannot be denied to them. For other periods for which this demand has been confirmed even the notification do not lay down this condition and hence the benefit of same cannot be denied. Thus, the demand made in the impugned order on this ground needs to be set aside. Whether the CENVAT Credit was admissible to them on the Document Charges, terminal handling charges and bill of lading charges? - HELD THAT:- Undisputedly appellant is a provider of taxable service and is registered with the department for providing output services - Having satisfied the conditions as laid down by the main clause of the definition of output services, the appellant would be eligible for CENVAT Credit in respect of these services, even without reference to the inclusive part of the definition. Appellant has contested the denial of CENVAT Credit before the adjudicating authority by referring to the inclusive part of definition and the said challenge was not accepted. Similar view has been expressed by Hon ble Gujarat High Court in the case of Excel Crop Care Ltd [ 2008 (7) TMI 160 - HIGH COURT GUJARAT] where it was held that ' The definition of the term output service under Rule 2(p) of the Rules means any taxable service provided by the provider of taxable service, to a customer, client, subscriber etc. The Explanation to the said clause makes it clear that if a person liable for paying Service tax does not provide any taxable service or does not manufacture final products, the service for which he is liable to pay service tax shall be deemed to be the output service. Similarly, the definition of the phrase provider of taxable service appearing in Rule 2(r) includes a person liable for paying Service tax.' - thus, there are no merits in this part of the order seeking to deny the credit in respect of these input services used by the appellant for providing the output services. Whether extended period of limitation is available for making this demand? - Whether penalty under Section 76 78 can be imposed on the appellant? - HELD THAT:- As the demands set aside on merit, these issues are not relevant and no findings recorded in respect of these issues. There are no merits in the impugned order and the same is set aside - appeal allowed.
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2024 (5) TMI 328
Reversal of CENVAT Credit - common facilities used in providing taxable and exempted services - non-maintenance of separate accounts as per Cenvat Credit Rules (CCR), 2004 - short payment of service tax which occurred due to utilisation of ineligible CENVAT credit - HELD THAT:- The issue on hand can be analysed separately for two periods (a) upto March 2008 and (b) after April 2008, when Rule 6 of CCR, 2004 was amended. - (a) For the period upto March 2008, there was no provision for proportionate reversal of the credit already taken and if entire credit is availed, they could utilise only 20% of the output tax of a month through cenvat credit - (b) For the period after April 2008, a procedure has been prescribed under Rule 6(3A) to provisionally reverse the credit every month based on a calculation/ formula prescribed therein and to finally pay difference in reversal after completion of annual calculation by 30th June of the succeeding year. The appellant submitted the certificates issued by Chartered Accountant(CA) to prove that they have maintained separate accounts. However, adjudication authority has not considered the certificates issued by CA, since it does not report that it is maintained from receipt stage and also do not state that they are in conformity with the statutory provisions viz., Rule 6 of CCR, 2004. On a combined reading of the report of Range officer, findings of the Adjudication authority as stated above and considering the report of Chartered Accountant(CA), which categorically certified that the appellant is maintaining separate records and have been making reversal of balance amounts at end of every month, the appellant has complied with the provisions of rule 6 of CCR, 2004 and hence findings in the impugned orders are not sustainable. However, it is found that there is an amount of 29,24,565/- which remains to be reversed by them. Thus, this amount is required to be reversed along with interest. Appeal allowed.
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2024 (5) TMI 327
Levy of service tax - act of providing corporate guarantee to the respondent for grant of loan from the banks without any consideration - HELD THAT:- There has been a consistent finding in all the decisions that the party had provided corporate guarantee on behalf of its sister concern to its lenders, who had not charged any commission or fee for providing guarantee and hence such activity is not chargeable to service tax. The observations made by this Tribunal in the latest decision in M/s.Pharmax Corporation Ltd. [ 2024 (3) TMI 1179 - CESTAT NEW DELHI] where it was held that 'The service provider shall be liable to pay service tax on the consideration which it receives for providing a taxable service. Any amount which is received but which is not a consideration for providing a taxable service is not exigible to service tax. Similarly, if a service is rendered, but no consideration is received no service tax can be charged. It is for the reason that if the consideration received is zero any percentage will be zero itself.' In the present case, it is found from the show cause notice, order-in-original and the impugned order that no consideration has been paid by the respondent in lieu of the corporate guarantee and in view of the judicial pronouncements, there are no reason to distinguish the same in the facts of the given case. Consequently, no service tax is leviable on the respondent on account of corporate guarantee . The impugned order deserves to be upheld - appeal of Revenue dismissed.
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2024 (5) TMI 326
Levy of service tax - water charges paid by the appellant to the department in lieu of supply of water under the Agreement dated 05.01.2013 - transfer of right to use the water by the Government to the appellant - deemed sale - HELD THAT:- A perusal of the Agreement executed between the government of Madhya Pradesh and the appellant would indicate that the appellant had applied to the government for permission to draw water from the Rihand Reservoir for use in the power project and the government had agreed to grant the said permission on certain terms and conditions in consideration of the appellant making payment to the government. The said permission was granted for a term of 30 years subject to the provisions of the Madhya Pradesh Irrigation Act 1931 and the Madhya Pradesh Irrigation Rules 1974 as is clear from clause 1 of the Agreement. The Title of the Agreement shows that it was for supply of water to the industrial power plant. The appellant was required to pay water charges to the government for the water drawn by it from the government water source at the rates fixed by the Water Department which would be Rs. 5.50/- per cubic meter. In addition, the appellant was also required to pay local fund cess or any other tax as may be fixed by the government. The appellant was required to make its own arrangement at its own cost for drawl of water from the water resource of the government to the plant - The appellant has to pay water rates/water charges depending on the quantity of water drawn by the appellant. The Agreement also deals with a situation where there can be reduction or shortage in the water supply. This clearly means that the Agreement is for supply of water and not mere access to water source. It is, therefore, more than apparent that the Agreement is for supply of water by the government to the appellant and is not for assignment of any right to the appellant to use the natural resources of the government. The appellant is justified in asserting that the Agreement executed between the appellant and the government is for supply of water for which charges are paid by the appellant on the basis of volume of water drawn and it is not a case of assignment of right to use natural resources of the government - no service was provided by the government to the appellant. The impugned order, therefore, deserves to be set aside on this ground alone. Appeal allowed.
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Central Excise
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2024 (5) TMI 325
Entitlement to Cenvat credit on the entire credit distributed by their head office despite the fact that the appellant company having three units - period April 2008 to March 2012 - HELD THAT:- In view of strict interpretation of Rule 7 prevailing prior to 01.04.2012, the entire credit distributed by the head office of the appellant to the appellant s unit alone is absolutely in the order and the same cannot be disputed. This issue has been considered by the Hon ble Bombay High Court in the case of THE COMMISSIONER, CENTRAL TAX, PUNE-I COMMISSIONERATE VERSUS M/S. OERLIKON BALZERS COATING INDIA P. LTD. [ 2018 (12) TMI 1300 - BOMBAY HIGH COURT ] wherein it was held that ' our attention is invited to Rule 7 of the CENVAT credit Rules, 2004 as substituted w.e.f. 1.4.2016 which has made it mandatory for distribution of input services to the various units providing output services. This is evidence by the use of words shall distribute the Cenvat Credit in the substituted Rule 7 as Cenvat Credit Rules 2004 w.e.f. 1.4.2016. Therefore, on plain reading of Rule 7 as existing both pre and post amendment 2012 covering period involved in these proceedings, the respondent - assessee was entitled to utilize the CENVAT credit available at its Pune unit.' Thus, the entire demand which is contrary to the Provision of Rule 7 and the various judgments given on this issue, the demand is not sustainable - the impugned order is set aside - appeal is allowed.
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2024 (5) TMI 324
Recovery of the cenvat credit wrongly availed along with interest and penalty - input services or not - Management Consultancy or Business Services - credit availed based on the invoices issued by M/s. Biocon Ltd. for mark-up fees / milestone fees against permanent services agreed to be provided - January 2009 to November 2012 - burden to prove on manufacturer. The adjudicating authority has held that the permanent services include ineligible services like supply of electricity, back-up power, steam, supply of water, extending canteen facilities, Effluent Treatment Plant(ETP) charges, potable water supply charges, etc.; hence not input service; accordingly the mark-up fees / milestone fees paid to the Biocon Limited in connection with ineligible permanent services are not covered under the scope of Rule 2(l) of the Cenvat Credit Rules, 2004. HELD THAT:- The reasoning of the adjudicating authority deserves to be rejected on two grounds: on going through the individual services i.e. supply of electricity, back-up power, steam, supply of water, extending canteen facilities, Effluent Treatment Plant(ETP) charges, potable water supply charges, etc. necessary for manufacturing activities and it cannot be said to have not been used in or in relation to the manufacture of finished excisable goods from the same premises, which was taken over by the appellant from Biocon Limited. Secondly, putting all these individual services under the taxable category of Management Consultancy Services on which service tax paid by Biocon Limited and not objected to by the Department for the relevant period from 2009 to 2012 cannot be questioned in the hands of the receiver i.e. appellant while availing cenvat credit on the said taxable services. This principle has been upheld by the Hon ble Supreme Court in the cases of SARVESH REFRACTORIES (P) LTD. VERSUS COMMISSIONER OF C. EX. CUSTOMS [ 2007 (11) TMI 23 - SUPREME COURT] and COMMISSIONER OF CENTRAL EXCISE CUSTOMS VERSUS MDS SWITCHGEAR LTD. [ 2008 (8) TMI 37 - SUPREME COURT] which has been followed subsequently by this Tribunal in a series of cases - it was held in the case of MDS SWITCHGEAR LTD. that 'A quantum of duty already determined by the jurisdictional officers of the supplier unit cannot be con tested or challenged by the officers in charge of recipient unit.' There are no reason to deny the cenvat credit availed by the appellant on Business Support Services received against Support Services Agreement dated 18.07.2007 on which service tax paid by M/s. Biocon Limited under the Management Consultancy Services during the said period - the impugned order is set aside. Appeal allowed.
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CST, VAT & Sales Tax
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2024 (5) TMI 360
Exemption from Tax - Classification of goods sold - emery cloth - unclassified item or not - tarpaulins - cotton fabrics or not - covered by item-174 of First Schedule to APGST Act or not - whether the first sales of emery cloth and tarpaulins are not excisable to the tax under APGST Act? - HELD THAT:- In Feno Plast Pvt. Ltd. [ 1994 (12) TMI 309 - ANDHRA PRADESH HIGH COURT] it has been held that the words cotton fabrics, man-made fabrics and woolen fabrics in item-5 must therefore be read as item-59.03 of the First Schedule to the Additional Duties Act 1957, which refers to textile fabrics, impregnated cloth-covered or laminated. It is evident from the impugned judgment that it was not disputed before the Appellate Tribunal that the based material for emery material was cloth and it was described as textile fabrics in item-59.03 which was to cover of any cloth which was impregnated covered or laminated. The emery cloth even if is based with, sand, for the purpose of its use, that does not change the basic nature of it being a cloth covered in item-5 read with item-59.03 of the First Schedule to the Additional Duties Act. With respect to tarpaulin, in Binny Limited [ 1997 (9) TMI 555 - MADRAS HIGH COURT] it was held that tarpaulin falls within the meaning of the expression cotton fabrics under item-5 of the Fourth Schedule to APGST Act. By reason of Section 8 of APGST Act, Tarpaulin cloth was exempt from tax and the inclusion of this item in item No. 174 made no difference - The Appellate Tribunal rightly concluded that once tarpaulin falls under cotton fabrics in item-5 of the Fourth Schedule to the APGST Act, inclusion of it in item-174 of the First Schedule would make no difference. A perusal of the Order of the learned Appellate Tribunal (at internal page-3) shows that the emery cloth was covered under item-59.03 and was exempted as the same was liable for additional duties of excise under the Additional Duties of Excise (Goods of Special Importance) Act 1957. There are no illegality in the order of the Appellate Tribunal. No case is made out for interference, inasmuch as the Appellate Tribunal has neither failed to decide any question of law nor has decided the question of law erroneously. The Tax Revision Case is dismissed.
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2024 (5) TMI 323
Computation/quantification of interest on the delayed refund in terms of Section 42 of Delhi Value Added Tax Act, 2017 w.e.f. 01.06.2015 - Time Limitation - expiry of two months from the date of filing of refund of the application till 23.05.2023 when the refund was disbursed to the petitioner - HELD THAT:- Section 42 (1) of the Act mandates grant of simple interest at the annual rate notified by the Government from time to time, to a person who is found entitled to refund in case of any delayed payment. In the instant case, refund has been sanctioned without any interest. It is an admitted position that annual rate notified by the Government for the purposes of Section 42 of the Act is simple interest @ 6% per annum. The petition is disposed off.
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Indian Laws
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2024 (5) TMI 322
Dishonour of Cheque - Cheating - wrongful retention of hard-earned money of the complainant - Compoundable offences - frustration of settlement - appellant could not pay the complainant on the deadlines stipulated in the said settlement - HELD THAT:- As per section 147 of the NI Act, all offences punishable under the Negotiable Instruments Act are compoundable. However, unlike Section 320 of CrPC, the NI Act does not elaborate upon the manner in which offences should be compounded. To fill up this legislative gap, three Judges Bench of this Court in DAMODAR S. PRABHU VERSUS SAYED BABALAL H. [ 2010 (5) TMI 380 - SUPREME COURT] , passed some guidelines under Article 142 of the Constitution of India regarding compounding of offence under Section 138 of NI Act. But most importantly, in that case, this Court discussed the importance of compounding offence under Section 138 of the NI Act and also the legislative intent behind making the dishonour of cheque a crime by enacting a special law. This Court has time and again reiterated that in cases of section 138 of NI Act, the accused must try for compounding at the initial stages instead of the later stage, however, there is no bar to seek the compounding of the offence at later stages of criminal proceedings including after conviction, like the present case - In the case at hand, initially, both sides agreed to compound the offence at the appellate stage but the appellant could not pay the amount within the time stipulated in the agreement and the complainant now has shown her unwillingness towards compounding of the offence, despite receiving the entire amount. The appellant has paid the entire Rs.1.55 crore and further Rs.10 lacs as interest. In the present case, the appellant has already been in jail for more than 1 year before being released on bail and has also compensated the complainant. Further, in compliance of the order dated 08.08.2023, the appellant has deposited an additional amount of Rs.10 lacs. There is no purpose now to keep the proceedings pending in appeal before the lower appellate court. Here, we would like to point out that quashing of a case is different from compounding - if the continuance of criminal appeals pending before Additional Sessions Judge against the appellant s conviction, is allowed then it would defeat all the efforts of this Court in the last year where this Court had monitored this matter and ensured that the complainant gets her money back. It is a fact that the appellant failed to procure and supply the machine even after taking the advance money from the complainant but there is nothing on record to show that the appellant had any ill intention of cheating or defrauding the complainant from the very inception. The transaction between the parties was purely civil in nature which does not attract criminal law in any way - Even though complainant is unwilling to compound the case but, considering the totality of facts and circumstances of the present case which we have referred above, we are of the considered view that these proceedings must come to an end. The impugned order is set aside - appeal allowed.
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