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TMI Tax Updates - e-Newsletter September 2, 2021 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws Highlights / Catch Notes GST: Recovery of Input Tax Credit - Revenue submitted that, it is not an actual action of recovery, which is being contemplated to be taken against the petitioner, rather it is only an intimation of demand and hence there is no imminent threat, which is being faced by the petitioner of the recovery of the amount, which has been reflected in the impugned order - Petition closed - HC Visit to Get Source GST: Cancellation of petitioner's registration - The entire purpose of issuance of show-cause notice frustrated because the Superintendent of Taxes merely forwarded a printed blank format of a show-cause notice to the petitioner asking the petitioner to meet with non-existent and non-disclosed grounds. - If such a show-cause notice does not specify the grounds on the basis of which the Superintendent desired to proceed further, the same would fail the test of minimum requirement of principles of natural justice and the statutory requirement for issuance of show-cause notice. - The Superintendent has passed a rather long order, going into range of legal issues not related to the case on hand. - order of cancellation of the petitioner’s registration is set aside - HC Visit to Get Source GST: Recovery of unpaid Central as well as GST and IGST from the petitioner with penalty - Even otherwise the impugned order cannot sustain. The Superintendent of Taxes has passed an order which runs into close to 150 pages in which he has discussed range of issues completely unconnected to the case on hand - The ultimate observations and conclusions in the order are hard to find and more difficult to understand. The task of the reader of this order to fish out the reasons in support of the demand is more difficult than finding a needle from a haystack. Howsoever hard we may try, it is difficult to separate the grain from the chaff. - HC Visit to Get Source GST: Blocking of input tax credit in the electronic credit ledger - Power of Commissioner or an officer authorised by him under Rule 86A - The power under Rule 86A of the Rules should neither be used as a tool to harass the assessee nor should it be used in a manner, which may have an irreversible detrimental effect on the business of the assessee. - Once the supervisory power is being exercised in absence of relevant record merely on the basis of certain noting, which is forwarded to the revisional authority for exercising the powers it is sheer misuse of the power. The said practice cannot be accepted by this Court - the Court is of the considered opinion that while exercising the revisional power the authority has given go-bye to the procedure, that too without application of independent mind. - HC Visit to Get Source Income Tax: Capital gain computation - value determined by the stamp duty authorities in terms of Section 50C(1) - When assessee objected the value adopted or assessed by the stamp duty authority with certain reasons, then it is the duty of the AO to refer the valuation of the property to the departmental valuation officer in terms of Section 50C(2) - Matter restored back - AT Visit to Get Source Income Tax: TDS u/s 194C - non deduction of TDS on lorry hire payments - addition u/s 40(a)(ia) - vehicles hired from the sub-contractors - Tribunal was right in dismissing the appeal filed by the Revenue and granting full relief to the assessee. - HC Visit to Get Source Income Tax: Addition u/s 68 - unexplained share capital receipts - Onus to prove -Addition u/s 68 - unexplained share capital receipts - Onus to prove - SC dismissed the SLP against the order of HC wherein it was held that, assessee did not discharge the primary onus cast upon them, the question of the Assessing Officer to investigate the creditworthiness of the creditors/subscribers would not arise in the case on hand. Visit to Get Source Income Tax: Taxability of amount of loan waived by the financial institution on account of one time settlement - income either u/s. 28(iv) or u/s. 41(1) - Taking support from the judgment of Hon'ble Apex Court, we are of the view that the sum amount in dispute representing waiver of loan liability was on the capital accounts, and not in the nature of income, more so when no deduction and allowance was made in respect of such loan in any assessment year. - AT Visit to Get Source Income Tax: Royalty Benchmarking - assessee had adopted TNMM at the entity level in which process royalty payment is considered as closely linked transaction and part of operating cost - once the net profit margin is tested on touchstone of arm's length price, it pre-supposes that the various components of income and expenditure considered in the process of arriving at the net profit are also at arm's length. - TPO has to follow a consistent approach and adopt net sales as denominator for the purpose of comparable royalty in the case of comparables and the assessee. - AT Visit to Get Source Income Tax: Deduction of Provision made towards long service benefit liability - Crystalization and Accrual of expenses - scientific basis for creating a provision - when the employee leaves the assessee-company prior to completion of ten years, how the provision is reduced on year to year basis, is also not explained. Before us, no explanation was offered - Matter remanded back - AT Visit to Get Source Income Tax: Payment towards membership fee and legal fund respectively to Federation of Indian Mineral Industries - this organization has been formed to safeguard the rights of mine owners and to protect interest of industries, present in this spear of mineral exploration and production. In our opinion the said amount does not qualify to be considered as donation. It is an expenditure incurred to safe-guard assessee's business interests and has to be considered under the provisions of Sec. 37(1). - AT Visit to Get Source Income Tax: Disallowance u/s 40A(3) for making cash payments - proof of business expediency - Assessee has also explained that the milk was to be lifted daily and the payments were to be collected in the evening which were to be made to the Verka Agency in the morning itself and further the Verka Milk Agency did not provide milk on credit basis and further the payment was made to the Union of Producers of milk. - Deduction allowed - AT Visit to Get Source Income Tax: Nature of expenditure - expenditure incurred on Research & Development - revenue or capital expenditure - The expression “related to business” is used in section 35(1)(iv) of the I.T.Act is an expression of wide import and it means associated with or connected with. The assessee is using research outcome for its business of manufacturing Defence Aircrafts, and hence, it cannot be denied that research is related to its business - Claim allowed - AT Visit to Get Source Income Tax: Deduction u/s 80IC - proof of manufacturing activities provided or not? - whether certain incriminating documents were seized during the course of search operation as mentioned in the so-called satisfaction note? -AO have no basis to disallow the claim u/s 80IC is borne out from the fact that contradictory stand have been made by the different Assessing Officer for part disallowance of deduction u/s 80IC before the search and even after the search, different formulas have been adopted for making ad-hoc disallowance of deduction us 80IC on surmises and conjectures and which has rightly been deleted by the CIT(A) - AT Visit to Get Source Income Tax: TDS u/s 195 - Royalty u/s.9(1)(vi) - right to use software - overriding effect of DTAA - since the analysis of the EULA is necessary to come to a conclusion regarding the nature of the right that is given to the user of the software and since this exercise has not been carried out by the authorities below, matter restored back - AT Visit to Get Source Income Tax: Validity of Settlement Commission order u/s 245D(4) - Proof of true and full disclosure of income - While this Court does not accept the contention of the petitioner regarding the Settlement Commission not being empowered to make assessment, it accepts the second submission of learned counsel for the petitioner that the Settlement Commission ought to have examined the matter after giving opportunity of hearing to the petitioner with regard to the true and correct disclosure - HC Visit to Get Source Income Tax: Exemption u/s 10(26B) - infrastructure capital fund - promotion of interest of members of SC, ST, OBC community only and the target group of the assessee are ‘ Safai Karmacharis’, who may or may not belong to SC, ST or OBC community - Since the Tribunal which is the highest fact finding authority has given a categorical finding, exemption granted by the ITAT sustained - HC Visit to Get Source Customs: Revocation of Customs Broker license - It is not possible to accept the contention advanced by learned counsel for the appellant that in view of the provisions of regulation 17(7) of the 2018 Regulations, the order dated 10.09.2020 passed by the Commissioner should be set aside merely for the reason that it was passed after the period of ninety days from the date of submission of the report by the Deputy Commissioner of Customs. - AT Visit to Get Source Indian Laws: Dishonor of Cheque - insufficiency of funds - forged signature or not - when accused is making allegation regarding forgery of his signature, he would not have kept quiet and he would have intimated the bank and he would have also lodged a complaint in this regard, but his silence speaks lot of things - HC Visit to Get Source Indian Laws: Dishonor of cheque - Insufficient Funds - In the absence of company (society) arraigned as accused, a complaint against the petitioners was therefore not maintainable. The petitioners being employed as General Manager and Branch Manager have signed the cheque, therefore, the proceedings against the petitioners are liable to be quashed. - HC Visit to Get Source Service Tax: Refund claim of pre-deposit while appeal is pending - adjustment of amount was paid in lieu of pre deposit for filing the appeal before this Tribunal - Since the demand is not yet been confirmed, the appropriation of money of pre-deposit against the proposed demand is highly unreasonable and is rather illegal. - The amount in excess of pre-deposit required u/s 35F of Central Excise Act cannot be appropriated towards pre-deposit - AT Visit to Get Source Central Excise: SSI Exemption - use of brand name of others - There is no ambiguity in the wordings of the Notification. Therefore, there are no reason for the appellants to entertain any doubts regarding the notification. The appellant’s submission that they had a bona fide belief that goods attracted NIL rate of duty was same as non-excisable goods. There is no merit in the argument. - it can only be concluded that the appellants have suppressed material facts from the Department. In such circumstances, the extended period is rightly invokable. - AT Visit to Get Source VAT: Grant of refund which was deducted from the petitioner’s bills in course of execution of a work contract - One cannot lose sight of the fact that the failure or inability of the revenue to frame an assessment should not place the assessee in a more disadvantages position then what it would have been an assessment had been made. - HC Visit to Get Source VAT: Validity of SCN issued by competent authority under Rule 58 - HC quashed the order on the ground that it was not in conformity with the provisions of Jharkhand Value Added Tax Act, 2005 - The High Court having set aside the show cause notice should have given liberty to the competent authority to proceed with the matter in accordance with law afresh - SC Visit to Get Source Articles GST on annuity received on Construction of Roads Notifications Customs 49/2021 - dated 31-8-2021 - ADD Seeks to amend Notification number 48/2016-Customs(ADD) dated 1st September, 2016 , to extend the levy on "Glass Fibre and Articles thereof" from China PR upto 31st October, 2021 . 70/2021 - dated 31-8-2021 - Cus (NT) Sea Cargo Manifest and Transhipment (Seventh Amendment) Regulations, 2021. 69/2021 - dated 31-8-2021 - Cus (NT) Fixation of Tariff Value of Edible Oils, Brass Scrap, Areca Nut, Gold and Silver DGFT 21/2015-2020 - dated 31-8-2021 - FTP Amendment in Policy Condition No. 1 of Chapter 88 of ITC (HS) 2017, Schedule-I (Import Policy) GST - States 20/2021-State Tax - dated 29-7-2021 - Chhattisgarh SGST Amendment in Notification No. 04/2018–State Tax, dated the 25th January, 2018 19/2021-State Tax - dated 29-7-2021 - Chhattisgarh SGST Amendment in Notification No. 76/2018–State Tax, dated the 31st December, 2018 18/2021-State Tax - dated 29-7-2021 - Chhattisgarh SGST Amendment in Notification No. 13 2017-State Tax, dated the 29th June, 2017 ERTS (T) 65/2017/Pt. I/337 - dated 30-6-2021 - Meghalaya SGST Meghalaya Goods and Services Tax (Sixth Amendment) Rules, 2021 Income Tax 95/2021 - dated 31-8-2021 - IT Income-tax (25th Amendment) Rules, 2021. - Calculation of taxable interest relating to contribution in a provident fund or recognised provided fund, exceeding specified limit. 94/2021 - dated 31-8-2021 - IT Seeks to amend Notification No. 85/2020, dated the 27th October, 2020 Circulars / Instructions / Orders SEBI - SEBI/HO/MRD/DSA/CIR/P/2021/623 - dated 1-9-2021 Revised guidelines for Liquidity Enhancement Scheme in the Equity Cash and Equity Derivatives Segments News GST Revenue collection for August 2021 Atal Pension Yojana total enrolments crossed 3.30 crore CCI approves acquisition by T.S. Rajam Rubbers Private Limited and Dhinrama Mobility Solution Private Limited of certain shareholding in TVS Supply Chain Solutions Private Limited Finance Minister Smt. Nirmala Sitharaman says improvement in health infrastructure will lead to confidence in revival of economy Case Laws: GST 2021 (9) TMI 55 Blocking of input tax credit in the electronic credit ledger - Power of Commissioner or an officer authorised by him under Rule 86A of the SGST Rules - pending inquiry or investigation into the allegations of fraudulent transactions with respect to fake/bogus invoices for the purpose of availing the ITC - SGST Rules, came into force vide Notification dated 05.2.2020 - power of revisional authority under Section 108 and to revise order passed by the Appellate Authority without adhering the procedure and especially without calling for and examining the record of the Appeal No.GST-95/2020 Year 2019 - Grant of opportunity of hearing - principles of natural justice. HELD THAT:- The Rule 86A is in respect of the power and procedure for blocking the input tax credit (ITC) in the electronic credit ledger of a registered person. A bare reading of Section 86A indicates that the Commissioner or an officer authorised by him in this behalf, not below the rank of an Assistant Commissioner, having reasons to believe that credit of input tax available in the electronic credit ledger has been fraudulently availed or is ineligible, may, for reasons to be recorded in writing, not allow debit of an amount equivalent to such credit in electronic credit ledger for discharge of any liability under section 49 or for claim of any refund of any unutilised amount. The invocation of Rule 86A of the Rules for the purpose of blocking the input tax credit may be justified, if the concerned authority or any other authority, empowered in law, is of the prima facie opinion based on some cogent materials that the ITC is sought to be availed based on fraudulent transactions like fake/bogus invoices etc. The power conferred upon the authority under Rule 86A of the Rules for blocking the ITC could be termed as a very drastic and farreaching power. Such power should be used sparingly and only on subjective weighty grounds and reasons. The power under Rule 86A of the Rules should neither be used as a tool to harass the assessee nor should it be used in a manner, which may have an irreversible detrimental effect on the business of the assessee. The aspect of availing the credit and utilization of credit are two different stages. The utilization of credit is a vested right. No vested right accrues before taking credit. There needs to be some guidelines or procedure for the purpose of invoking Rule 86A of the Rules. In the absence of the same, Rule 86A could be misused and may have an irreversible and detrimental effect on the business of the person concerned. Rules of natural justice are not embodied rules. The phrase natural justice is also not capable of a precise definition. The underlying principle of natural justice, evolved under the common law, is to check arbitrary exercise of power by the State or its functionaries. Therefore, the principle implies a duty to act fairly, i.e. fair play in action - the respondent no.3 has assumed the jurisdiction under Section 108 without calling for and examining the record of the aforesaid Appeal filed by the petitioner company. The respondent no.3 has assumed the jurisdiction under Section 108 merely on the basis of letter sent by the respondent no.4. The powers, as conferred under Rule 86A, could not have been exercised merely on the ground that an inquiry has been initiated as there is a suspicion that the transactions were sham. In the present matter, admittedly without summoning the record the notice was prepared by the subordinate officers in which two options were indicated to the revisional authority with an observation that in case second option is approved, accordingly stay order may be prepared. This may not be intention of the legislature while incorporating the said feature. Once the supervisory power is being exercised in absence of relevant record merely on the basis of certain noting, which is forwarded to the revisional authority for exercising the powers it is sheer misuse of the power. The said practice cannot be accepted by this Court - the Court is of the considered opinion that while exercising the revisional power the authority has given go-bye to the procedure, that too without application of independent mind. The intent of the legislature to accord such power under the revision with a rider is to ensure that there may not be errors in the order passed by the officer subordinate to the revisional authority and the order may not be prejudicial to the interest of revenue. Petition allowed. 2021 (9) TMI 54 Recovery of unpaid Central as well as GST and IGST from the petitioner with penalty - wrongful availment of input tax credit - cancellation of registration of petitioner - time limitation - HELD THAT:- First and foremost the Superintendent of Taxes has passed five separate orders for different tax periods starting with 2017-18 to 2020-21 raising tax demands with penalty. We have noticed that he had issued show cause notice for assessment and penalty on 10.03.2021 only for the assessment period 2018-19. Without any further show-cause notice he could not have assessed the petitioner for remaining years and imposed penalties. His stand that once notice is issued for a particular tax period, no notice is necessary for other tax periods stems from utter ignorance of law. This fundamental breach is sufficient to vitiate the orders of assessment barring one for the period in relation to the year 2018-19. Even otherwise the impugned order cannot sustain. The Superintendent of Taxes has passed an order which runs into close to 150 pages in which he has discussed range of issues completely unconnected to the case on hand - The ultimate observations and conclusions in the order are hard to find and more difficult to understand. The task of the reader of this order to fish out the reasons in support of the demand is more difficult than finding a needle from a haystack. Howsoever hard we may try, it is difficult to separate the grain from the chaff. The order passed by the Superintendent and the approach that he has adopted is totally unsatisfactory. To begin with, the order reads more like a thesis in several fields of law in which he has tried to exhibit his halfbaked, incomplete and internet acquired knowledge, in the process completely losing sight of the focal issue. He has made his order needlessly verbose, in the process not deciding the vital issues at all. More importantly he has referred to materials, documents and judgments and there is no evidence that he ever shared the same with the petitioner before relying upon them - Accurate or otherwise the noticee must have a chance to meet with such adverse material before it is used against him. For each individual reason namely the order being unintelligible, the action failing the test of principles of natural justice and the Superintendent of Taxes exceeding the show-cause notice, the impugned orders must be set aside. For sheer verbosity the orders must go. Petition disposed off. 2021 (9) TMI 53 Cancellation of petitioner's registration - Scope and validly of SCN issued for cancellation of GST registration - non compliance of specified provisions in the GST Act or the Rules made thereunder - HELD THAT:- he entire purpose of issuance of show-cause notice frustrated because the Superintendent of Taxes merely forwarded a printed blank format of a show-cause notice to the petitioner asking the petitioner to meet with non-existent and non-disclosed grounds. - If such a show-cause notice does not specify the grounds on the basis of which the Superintendent desired to proceed further, the same would fail the test of minimum requirement of principles of natural justice and the statutory requirement for issuance of show-cause notice. The grounds stated in the supporting order are totally unacceptable. The Superintendent has passed a rather long order, going into range of legal issues not related to the case on hand. The impugned order of cancellation of the petitioner s registration is set aside. Consequently, the demand confirmed under order dated 23.04.2021 on the ground that the petitioner s registration has been cancelled is set aside - petition allowed. 2021 (9) TMI 45 Maintainability of petition - statutory remedy available to the petitioner or not - Seizure order - appealable order or not - HELD THAT:- Against the said order of the Appellate Authority, the statutory remedy provided under the statute is available to the petitioner, under Section 112 of the Act by approaching before the Appellate Tribunal, as against the order passed in appeal under Section 107 of the Act - This is what has been held by the Coordinate Bench of Kerala High Court in M/S. PODARAN FOODS INDIA PRIVATE LIMITED VERSUS STATE OF KERALA, THE ASSISTANT STATE TAX OFFICER (SQUAD NO. I) , THE ASSISTANT STATE TAX OFFICER, COMMISSIONER STATE GOODS AND SERVICE TAX DEPARTMENT [ 2021 (1) TMI 552 - KERALA HIGH COURT] wherein, while exercising jurisdiction under Article 226 of the Constitution of India, as against the order passed under Section 129 (3) of the Act, for seizure of the goods, the Kerala High Court has considered the said aspect and has held that against the said appellate order, the only remedy, which would be available to the petitioner, would be to approach the Appellate Tribunal. In that eventuality, the Court has held that the writ jurisdiction under Article 226 of the Constitution of India, as against the appellate order passed against the order of seizure under Section 129 (3), would not be maintainable. The Writ Petition is dismissed with liberty left open for the petitioner to approach the Appellate Tribunal against the appellate order under Section 112 of the Act 2021 (9) TMI 44 Seeking cancellation of bail granted - tampering with the evidences - respondent submits that the respondent is ready and willing to co-operate with the Investigating Officer - HELD THAT:- There are no reason to entertain the petition. However, it is made clear that the submission made by the learned counsel for the respondent on behalf of the respondent is placed on record. Petition disposed off. 2021 (9) TMI 43 Recovery of Input Tax Credit - violation of Section 73 of CGST Act - proceedings are actual action of recovery or not - HELD THAT:- Revenue submitted that, it is not an actual action of recovery, which is being contemplated to be taken against the petitioner, rather it is only an intimation of demand and hence there is no imminent threat, which is being faced by the petitioner of the recovery of the amount, which has been reflected in the impugned order. This writ petition is closed, with liberty left open to the respondents, that if at all the respondents intend to take any action for the purposes of recovery of the Input Tax Credit, they would proceed with exclusively in accordance with law and particularly in accordance with the procedure provided under Sections 73 and 74 to be read with the Rules. Petition closed. Income Tax 2021 (9) TMI 57 Addition u/s 68 - unexplained share capital receipts - Onus to prove - whether evidence against the assessee lies and the assessee failed to discharge his initial burden on this account - Tribunal shifting the responsibility of proving genuineness of share application money to the Assessing Officer - whether mere furnishing list of person who have claimed to have advanced towards share capital thus constitute sufficient compliance on the part of the assessee? - HC held that assessee did not discharge the primary onus cast upon them, the question of the Assessing Officer to investigate the creditworthiness of the creditors/subscribers would not arise in the case on hand - HELD THAT:- We are not inclined to interfere in this Special Leave Petition. The Special Leave Petition is dismissed accordingly. 2021 (9) TMI 51 Exemption u/s 10(26B) - infrastructure capital fund - Whether ITAT erred in allowing the exemption to the Assessee by not appreciating that this benefit is specifically restricted to promotion of interest of members of SC, ST, OBC community only and the target group of the assessee are Safai Karmacharis , who may or may not belong to SC, ST or OBC community? - HELD THAT:- Since the Tribunal which is the highest fact finding authority has given a categorical finding, which suffers from no perversity, this Court finds no reason to interfere. Accordingly, the present appeal, being bereft of merit, is dismissed. 2021 (9) TMI 49 Validity of Settlement Commission order u/s 245D(4) - provisions relating to settlement of cases - Proof of true and full disclosure of income - whether petitioner is estopped to challenge the decision of the Settlement Commission after having made the requisite payments in 15 installments? - HELD THAT:- This Court finds that the petitioner himself submitted an application stating therein true and full disclosure of his income which was found to be incorrect. A person, who himself has not come out with clean hands, cannot take the benefit of the law for his own purposes - Settlement Commission, after having taken note of the report of the Commissioner of Income Tax, proceeded to assess the total income of the petitioner and has thereafter settled the income. On an application moved by the petitioner, installments were also increased from 6 to 15. The payments have already been made accordingly. In Brij Lal ors.[ 2010 (10) TMI 8 - SUPREME COURT] the Settlement Commission passes the order which is a complete code in itself. It is a quasi-judicial authority and there is no provision for the Settlement Commission to remand the matter back to the AO - contention of the petitioner solely based on the observations made in different context by the Supreme Court and the High Court of Madras and Bombay that the Settlement Commission should have rejected his application cannot be sustained once the Settlement Commission has reached to the conclusion that there is no full and true disclosure of income. The stage is no more available for the petitioner. Once the Settlement Commission has ceased with the matter and has proceeded to take on record the reports and has reached to the conclusion that additional income is required to be added to the income as purportedly submitted to be the full and true undisclosed income, the option is not available for the applicant-petitioner, who has approached the Settlement Commission, to withdraw his application and ask for assessment to be done by the regular AO. This Court finds that the Settlement Commission had, in-fact, directed for getting the FSL report relating to the documents, which were made a basis for adding of income to the disclosed income as submitted by the petitioner, without waiting for the result of the FSL report and without giving an opportunity to the petitioner to contest the report submitted by the Commissioner of Income Tax regarding full and true disclosure and the Settlement Commission has proceeded further with the matter and passed the impugned order. The petitioner was also not given opportunity of hearing. The principles of Audi-alteram-partem, which are imbibed and inherent in the entire procedure relating to Settlement Commission which is akin to arbitration proceedings, have been violated. This Court is not convinced with the submission of learned counsel for the Revenue that the petitioner is estopped to challenge the decision of the Settlement Commission after having made the requisite payments in 15 installments. There is no estoppel against the law. The Settlement Commission, which is a quasi-judicial body, is required to adhere to the principles of law in stricto sensu. The contention of Revenue that the petition deserves to be dismissed on the ground of acquiescence is noticed for rejection. In cases relating to Revenue, the law of acquiescence would have no application because the orders are of mandatory nature where a person is bound to comply with the orders of the AO/Settlement Commission. If the assessee has deposited the revenue as assessed, he cannot be said to have acquiesced to the findings arrived at for computing the amount. A person would always be entitled for seeking a judicial review to such assessment. Neither the Revenue Department nor the assessee can be estopped from challenging the orders of assessment which may be passed by the AO/Commissioner or the Settlement Commission. While this Court does not accept the contention of the petitioner regarding the Settlement Commission not being empowered to make assessment, it accepts the second submission of learned counsel for the petitioner that the Settlement Commission ought to have examined the matter after giving opportunity of hearing to the petitioner with regard to the true and correct disclosure and the assessment ought to have been done by giving fair opportunity to the petitioner. In this regard, the FSL report also should have been taken into consideration. Matter restored back. 2021 (9) TMI 46 TDS u/s 194C - non deduction of TDS on lorry hire payments - addition u/s 40(a)(ia) - vehicles hired from the sub-contractors - as per assessee there was no written contract nor any contract as presumed by the Department between the lorry owners/drivers and the assessee, and where ever it was feasible, TDS has been deducted, and only in cases where payments were made to the lorry owners, there is no feasibility of deducting any Tax at Source - HELD THAT:- While testing the correctness of the stand taken by the assessee, the Court considered the factual position that the assessee is providing vehicles to one of its customers, M/s.Mahindra Group, and in Clause-5 of the written agreement between the parties, a condition has been stipulated that provision of services would involve providing vehicles owned by the assessee or associates of assessee or agents, for transportation of the employees of Thomson Corporation, and further, on facts, it was found that the assessee is owning a fleet of vehicles, which is not sufficient to meet the agreement entered into between the assessee and such individual owners. The Court held that there is no necessity for a written agreement between the parties. The facts before us are entirely different, as both the CIT(A) as well as the Tribunal have held on facts that the assessee hired vehicles from the drivers and there was nothing on record to infer any unwritten contract. Therefore, we are of the view that the decision in the case of J.Rama [ 2012 (6) TMI 645 - KARNATAKA HIGH COURT ] cannot be made applicable to the facts and circumstances of the case on hand. Tribunal was right in dismissing the appeal filed by the Revenue and granting full relief to the assessee - Decided against revenue. 2021 (9) TMI 39 Disallowance u/s 14A r.w.r. 8D - proof of earning exempt income - CIT-A deleted the addition as assessee has not earned any exempt income during the relevant year - as per revenue CBDT Circular No.5/2014 dated 11.02.2014 which specifically clarifies that Rule 8D read with section 14A of the Income Tax Act, 1961 provides for disallowance of the expenditure even where the tax payer in a particular year has not earned any exempt income? - HELD THAT:- Revenue has not pointed out that during the year under appeal, the assessee has earned dividend income. Ld.CIT(A) has followed the decision rendered in the cases of CIT vs. Holcim India (P) Ltd [ 2014 (9) TMI 434 - DELHI HIGH COURT] and Cheminvest Ltd. [ 2015 (9) TMI 238 - DELHI HIGH COURT] - Revenue has not brought any other contrary binding precedents by the Hon ble Jurisdictional High Court or Hon ble Supreme Court to our notice. Therefore, we do not see any infirmity in the finding of Ld.CIT(A), the same is hereby affirmed. - Decided against revenue. 2021 (9) TMI 38 Long term capital gain - Addition on protective basis - assessee has claimed deduction u/s 54F of the Act against Long Term Capital Gain - HELD THAT:- There is no dispute with regard to the fact that the addition was made on the protective basis. As stated by the assessee that the assessment has been made on substantive basis in Assessment Year 2012-13 which is not controverted by Revenue. We, therefore, direct the Assessing Officer to delete the addition made in this year on protective basis after verifying that the income of the assessee has been assessed to tax in the correct Assessment Year i.e.2012-13. The appeal of the assessee is partly allowed in terms as indicate above 2021 (9) TMI 37 Claim of deduction u/s 54H - compensation received on compulsory acquisition - as contended that section 54/54H of the Act neither speak about the investment of additional compensation nor about the extension of the time limit in respect of claim of deduction u/s 54 - HELD THAT:- There is no dispute with regard to the fact that in the present case, there was compulsory acquisition. The quantum of compensation was increased by the Ld. Court of Addl. District Judge (North), Delhi. CIT(A) relying on the judgement of the Hon ble Andhra Pradesh High Court in the case of Chakri Ashok Kumar, Ongole [ 2014 (11) TMI 937 - ANDHRA PRADESH HIGH COURT] as held since the very adjudication before various authorities proceeded on the assumption that there exits a separate component of additional compensation and since we find that such a concept is alien to the Scheme and the Act of for that matter, the I.T.Act, we allow the appeal and accordingly set aside the impugned order. As directed that benefit of section 54H of the Act shall be extended to the entire amount of compensation as enhanced by Hon ble High Court. The Revenue has not brought any contrary binding precedents to our notice, therefore, we do not see any infirmity in the order of Ld.CIT(A) and the same is hereby affirmed. Thus, ground raised by the Revenue is rejected. 2021 (9) TMI 34 Rectification u/s 254 - nature of land whether agricultural land or not - Addition in respect of distance of land from the nearest municipality which constitutes mistake apparent on record which can be rectified u/s.254(2) - HELD THAT:- After hearing both sides set aside appeal to the file of the AO to ascertain fact with regard to nature of land when it was sold. This means, while deciding the issue the AO has to consider distance of land from nearest municipality, which is crucial to decide whether particular land is agricultural land or urban land which comes within the definition of capital asset as defined u/s.2(14) of the Income Tax Act, 1961 - to ascertain nature of land whether agricultural land or not primary document is to be chitta or addangal. Once there is a clear direction from the Tribunal to the Assessing Officer to ascertain nature of land which covers all the aspects including verification of chitta /addangal and to ascertain distance from nearest municipality. Since both the aspects are covered in the direction of the Tribunal, we are of the considered view that there is no error in the findings recorded by the Tribunal which can be rectified u/s.254(2) - Miscellaneous application filed by the assessee is dismissed. 2021 (9) TMI 31 Addition u/s 68 - unexplained source of loan - unexplained cash credit - AO has not accepted the explanation of the assessee and stated that because of non filing of documents pertaining to the lenders, the identity of the lenders, capacity and creditworthiness of the lenders and genuineness of the transactions of loan taken by the assessee could not be examined - HELD THAT:- The assessee has explained that he was prevented by the aforesaid cause from producing the details before the AO during the assessment. In spite of the undisputed fact that the assessee has categorically brought to the notice of the AO that he was not having access to the part of the information specifically available with the lenders, AO has not issued any summon u/s. 131 of the Act to the two lenders to carry out further verification and to find out legitimacy in the claim of the assessee. We have also considered the decision in the case of Smt. Prabhavati S. Shah [ 1998 (2) TMI 107 - BOMBAY HIGH COURT] referred by the ld. counsel for need of admitting additional evidence in the larger interest of justice - we consider that it is essential to restore this case to the file of AO for deciding the issue in appeal on merit after examination, verification of the additional evidences which could not be obtained during the course of assessment proceedings because of non-cooperation from the lender parties. Appeal of the assessee is allowed for statistical purposes. 2021 (9) TMI 27 Income deemed to accrue or arise in India - Royalty receipts - amounts received by the assessee on account of sale of software and other incidental receipts - whether it would constitute royalty within the meaning of section 9(1)(vi) and Article 12 of the DTAA between India and Australia - HELD THAT:- Hon'ble Supreme Court in ENGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LIMITED [ 2021 (3) TMI 138 - SUPREME COURT] after considering the end-users agreement, categorically held that in all the above four situations that sale of software would not constitute royalty within the provisions of section 9(1)(vi) of the I.T. Act and Article 12 of the treaty. In the instant case, the assessee is a foreign company, which sells software licences to the end- users in India. Therefore, this case falls within the first category grouped by the Hon'ble Apex Court. On perusal of the end-users licence agreement, it is seen that the end-users licence agreement considered by the Hon'ble Apex Court in the case of Engineering Analysis Centre of Excellence P. Ltd. (supra) is identical to the end users licence agreement in the instant case. On perusal of the end-users licence agreement, it is clear even in cases where some element of source code were made available to the end-users i.e. the Indian customers, it is only for the purpose of fixing the bugs, customizations etc. Under no circumstances we noticed there is a transfer of copy right in the software. In the facts of the instant case, it is clear the amounts received by the assessee is on account of sale of copyrighted software and not transfer of copyright in a software. Receipts on account of sale of software licences and other incidental receipts such as provision for software maintenance and related training services would not constitute royalty within the meaning of DTAA between India and Australia and provisions of section 9(1)(vi) - Decided in favour of assessee. 2021 (9) TMI 21 Income deemed to accrue or arise in India - Royalty u/s.9(1)(vi) - Payments made to non-residents - TDS u/s 195 - right to use software - overriding effect of DTAA - Payments for software subscription, access to portals, access to online databases etc. - Payments for software subscription, access to portals, access to online databases etc. - HELD THAT:- A copyright is an intangible right, in the nature of a privilege, entirely independent of any material substance. Owning copyright in a work is different from owning the physical material in which the copyrighted work may be embodied. Computer programs are categorized as literary work under the Copyright Act. Section 14 of the Copyright Act states that a copyright is an exclusive right to do or authorise the doing of certain acts in respect of a work, including literary work. Since the revenue authorities primarily relied on the decision of Samsung Electronics Co.Ltd. [ 2011 (10) TMI 195 - KARNATAKA HIGH COURT] in holding that the payment in question was in the nature of royalty and since in the light of the subsequent pronouncement in the case of Engineering Analysis [ 2021 (3) TMI 138 - SUPREME COURT] overruling the decision of Samsung Electronics Co.Ltd. (supra) and since the analysis of the EULA is necessary to come to a conclusion regarding the nature of the right that is given to the user of the software and since this exercise has not been carried out by the authorities below, we deem it fit and appropriate to remit the issue to the AO for consideration afresh. Payments towards webhosting charges - As in the case of EPRSS Prepaid Recharge Services India Pvt.Ltd. [ 2018 (10) TMI 1434 - ITAT PUNE] held that payments made for use of cloud space does not amount to payment of royalty. Cloud computing/cloud hosting charges - The concept of Cloud computing is the delivery of different services through the Internet, including data storage, servers, databases, networking, and software. Cloud-based storage makes it possible to save files to a remote database and retrieve them on demand. Traditionally we store our data in our computer and can access the data only if the computer is available. In cloud computing the data is store in a server and can be accessed through any system - conclusions with regard to payment for right to use software will equally apply to these payments also and the AO will examine the issue afresh as directed while remanding the issue with regard to payments for right to use software in the light of the agreement between the parties. Payments towards Data Connectivity Charges (also known as Network Connectivity charges, Lan Connectivity charges, Bandwidth Charges, Link Connectivity charges, Link Charges etc. - Revenue authorities concluded that payment is for use of equipment as well as several processes which are secreted and patented and hence in the nature of royalty under the DTAA and therefore liable to TDS u/s.195 - Hon ble Delhi High Court in the case of New Skies Satellite BV [ 2016 (2) TMI 415 - DELHI HIGH COURT] has held that income from providing data transmission services by lease of transponders would not be regarded as royalty under the DTAA.The Hon ble Karnataka High Court in the case of CIT Vs. Infosys Technologies Ltd. [ 2015 (3) TMI 850 - KARNATAKA HIGH COURT] has also taken similar view on taxability of Data connectivity charges (Down linking charges). The conclusions with regard to payment for right to use software will equally apply to these payments also and the AO will examine the issue afresh as directed while remanding the issue with regard to payments for right to use software in the light of the agreement between the parties. Payments towards transponder capacity, bandwidth - There is a wellknown distinction between lease of equipment and use of equipment . The Court held that there was no use of a process by the TV channels when no such purported use has taken place in India as the assessee and its customers are situated outside India. The agreements were executed abroad. The transponder was in orbit and merely because its footprint was on India did not mean that the process had taken place in India. The Court held that since the end consumers i.e. persons watching TV in India are paying the cable operators who in turn are paying the TV channels, the flow of fund is traced to India and therefore the sum is taxable in India was held to be a far-fetched argument and ignores the fact that the income which is generated in India has been subjected to tax in India in the hands of the telecast operators. The payment by the telecast operators outside India to the assessee cannot be taxed on the basis that the end consumers are in India; The conclusions with regard to payment for right to use software and the overriding effect of DTAA over the Act, will equally apply to these payments also and the AO will examine the issue afresh as directed while remanding the issue with regard to payments for right to use software in the light of the agreement between the parties. Payments towards consulting fees, legal fees, professional fees, training fees, certification fees and sub-contracting charges - Once the payment for use of software, access to online etc., is regarded as not in the nature of royalty, these payments should also be regarded not in the nature of royalty and hence not liable to TDS - another conclusion of the revenue authorities was that the payments were in the nature of Fees for Technical Services (FTS) cannot be sustained because the applicable DTAA regarding taxation of FTS have not been considered - issue needs re-examination by the income tax authorities in the light of the applicable DTAA provisions. Assessee appeal allowed for statistical purpose. 2021 (9) TMI 20 Assessments completed us 153C - Deduction u/s 80IC - proof of manufacturing activities provided or not? - whether certain incriminating documents were seized during the course of search operation as mentioned in the so-called satisfaction note? - HELD THAT:- On the basis of certain documents relating to the two months of the Financial Year 2008-09 have made consequential addition in the AY 2005-06, 2006-07, 2007-08 2008-09 and extrapolating the same other AY carries no logic without any material found during the course of search/survey and there is no basis for such extrapolating and, therefore, the conclusion for the Assessment Year 2005-06 to 2008-09 totally misplaced. No evidence have been brought on record to show the assessee has got work done for the sister concern in excess of what is recorded in the books of accounts and even the charges for the work done by the sister concern, is no way lower than the market rate and, therefore, the claim of deduction u/s 80IC for all the years i.e.; for Assessment Year 2005-06, 2006-07, 2007-08, 2008-09, 2009-10 and 2010-11 as claimed by the assessee has rightly been allowed by the different CIT(A)s and the documents which have been found during the course of search have successfully been rebutted before us and before the authorities below. Even the department have not rejected the books of accounts of the assessee or of any sister concern and the fact that the Assessing Officer have no basis to disallow the claim u/s 80IC is borne out from the fact that contradictory stand have been made by the different Assessing Officer for part disallowance of deduction u/s 80IC before the search and even after the search, different formulas have been adopted for making ad-hoc disallowance of deduction us 80IC on surmises and conjectures and which has rightly been deleted by the CIT(A) For the Assessment Year 2012-13, the deduction of 30% as eligible to the assessee under section 80IC had been allowed by the Assessing Officer, which was subject matter of the action u/s 263 by the PCIT and the matter was carried to the ITAT [ 2016 (9) TMI 1604 - ITAT AMRITSAR] which cancelled the order of the PCIT as passed us 263 and no further appeal was filed by the department - As issue have attained finality and further for Assessment Year 2013-14 2014- 15, the Assessing Officer had allowed the deduction as claimed by the assessee @30% as eligible deduction for that year in the order passed us 143(3) and since the facts and circumstances, for these years are the same as in the earlier years and, therefore, when on an issue, a particular claim has been settled one way or the other, then the consistency has to be maintained as per the binding judgment of the jurisdictional High Court in the case of Leader Valves Ltd.[ 2007 (1) TMI 70 - HIGH COURT, PUNJAB AND HARYANA] and Berger Paint [ 2004 (2) TMI 4 - SUPREME COURT] No merit in the argument of the department, and that the claim of the assessee for deduction u/s 80IC is hereby held to be legally justified and therefore, all the appeals of the department are dismissed. 2021 (9) TMI 19 Taxability of amount of loan waived by the financial institution on account of one time settlement - income either u/s. 28(iv) or u/s. 41(1) - AO did not accept treatment of waiver amount by the assessee, and held that since the assessee has shown the relief by way of waiver of part of principal amount of loan in the profit loss account, the character of loan changed from capital to revenue, and therefore, the same liable to be taxed in the hands of the assessee - HELD THAT:- When the matter carried in appeal before the ld. first appellate authority, claim of the assessee was allowed by relying upon the decision in the case of Mahindra Mahindra Ltd. [ 2018 (5) TMI 358 - SUPREME COURT] as held that the waiver of the amount of term loan availed by the assessee under OTS will not fall under the purview of income either u/s. 28(iv) or u/s. 41(1). Taking support from the judgment of Hon'ble Apex Court, we are of the view that the sum amount in dispute representing waiver of loan liability was on the capital accounts, and not in the nature of income, more so when no deduction and allowance was made in respect of such loan in any assessment year. CIT(A) has rightly appreciated the facts of the case in terms of the judgment of Hon'ble Supreme Court, and allowed the claim of the assessee, which we do not find any infirmityground of appeal of the Revenue is rejected. 2021 (9) TMI 18 Nature of expenditure - expenditure incurred on Research Development - revenue or capital expenditure - whether such expenditure would be eligible for deduction under section 28 to 44DB - HELD THAT:- As decided in own case for AY grants received by the assessee is not taxable being a capital receipt, as the same is bringing into existence a capital asset being technology for manufacturing Aircrafts - We find that research is related to the business of assessee and can be found from the same order of the ITAT. The expression related to business is used in section 35(1)(iv) of the I.T.Act is an expression of wide import and it means associated with or connected with. The assessee is using research outcome for its business of manufacturing Defence Aircrafts, and hence, it cannot be denied that research is related to its business - It is clear that the claim of expenditure incurred towards research and development activities u/s 35(1)(iv) of the I.T.Act is to be allowed, provided other conditions are satisfied. Disallowance u/s 14A r.w.r. 8D - addition being 0.5% of average value of investment held by the assessee and proportionate interest expenditure not directly attributable - HELD THAT:- The discussion made by the A.O. in the assessment order would show that the A.O. was not satisfied with the contentions of the assessee, and accordingly, we are of the view that the same would satisfy the requirement of recording of dissatisfaction by the Assessing Officer within the meaning of section 14A of the I.T.Act. We noticed that the A.O. has mechanically applied the provisions of Rule 8D of the I.T.Rules. We noticed that the assessee has received dividend income from only one company named M/s.Indo Russian Aviation Limited - we are of the view that the provisions of Rule 8D of the I.T. Rules should not have been applied mechanically - disallowance u/s 14A of the I.T.Act may be estimated in order to meet the requirement of section 14A of the I.T.Act, since dividend has been received only from one company - disallowance of ₹ 50,000 would meet the requirements of section 14A of the Act and the same will put a quietus to the issue. Therefore, we set aside the order passed by the learned CIT(A) on this issue and direct the A.O. to restrict the disallowance u/s 14A accordingly. 2021 (9) TMI 16 Disallowance u/s 40A(3) for making cash payments - proof of business expediency - CIT-A deleted addition - HELD THAT:- The assessee was bound to make payments on daily basis since no credit sales were allowed by the sole supply agency M/s. Verka Milk Agency of the M/s. Hoshiarpur Distt. Co-operative Milk Producer Union Ltd. The product was released only upon making full payment for the purchase. AO has not disbelieved the business expediency, practical difficulty in making payment in cash to the said Milk Agency. A certificate has also been produced from the General Manager, Verka, Hoshiarpur that the assessee was a cash carry dealer for supplying Verka Milk and fresh milk products in Palampur and adjoining areas. Assessee has also explained that the milk was to be lifted daily and the payments were to be collected in the evening which were to be made to the Verka Agency in the morning itself and further the Verka Milk Agency did not provide milk on credit basis and further the payment was made to the Union of Producers of milk. Considering the above practical aspects, factors and circumstances and business expediency, in our view, the ld. CIT(A) was justified in deleting the disallowance made by the AO. No merit in the appeal of the Revenue and the same is, accordingly, dismissed. 2021 (9) TMI 15 Income deemed to accrue or arise in India - Royalty receipts - treatment of income from sale of off-the-shelf software - whether the payments made to non-resident software suppliers is royalty and hence TDS u/s.195 was required to be deducted on those payments or not? - HELD THAT:- In the instant case neither the lower authorities nor the Tribunal in the AY 2016-17 have examined he relevant agreements entered into by the assessee with the concerned parties generate these receipts which relate to sale of shrink wrapped and off-the-shelf software. Even before us, no such document has been produced by the assessee - We remit the issue in dispute to the file of the Assessing Officer for deciding the comparability of these transactions in the light of the judgment of Engineering Analysis Centre of Excellence Private Limited [ 2021 (3) TMI 138 - SUPREME COURT] - Accordingly, the issue in dispute is remitted to the Assessing Officer for fresh decision with the above directions. - Assessee appeal allowed for statistical purposes. 2021 (9) TMI 14 Capital gain computation - value determined by the stamp duty authorities in terms of Section 50C(1) - justification of value shown in the registered document by obtaining a valuation report from the registered value - difference in consideration received for transfer of property is less than value adopted or assessed (or assessable) by any authority of a State Government for the purpose of payment of stamp duty - Location disadvantage - HELD THAT:- When assessee objected the value adopted or assessed by the stamp duty authority with certain reasons, then it is the duty of the AO to refer the valuation of the property to the departmental valuation officer in terms of Section 50C(2) - In this case, although the assessee has requested for reference to departmental valuation officer u/s. 50C(2) of the Act, before the AO as well as the CIT(A), both authorities have failed to comply with the requirement of law - We are of the considered view that the AO as well as the CIT(A) have erred in computing LTCG by taking value fixed by the State Government authority for payment of stamp duty, even though the assessee has filed his objection for taking such valuation, contrary to provisions of Section 50C(2). Matter remanded back to AO with directions. 2021 (9) TMI 13 Expenditure under the head Special Purpose Vehicle (SPV) Charges - allowable revenue expenditure u/s 37(1) or not? - contribution of 10% out of auction sales towards SPV - HELD THAT:- As decided in M/S RAMGAD MINERALS MINING LIMITED VERSUS ACIT CIRCLE 1, BELLARY [ 2020 (11) TMI 174 - ITAT BANGALORE] contribution to SPV being 15% of sale proceeds, under category B, is an allowable expenditure for year under consideration. Also see M/S VEERABHADRAPPA SANGAPPA CO. [ 2020 (12) TMI 1145 - ITAT BANGALORE] wherein held contribution to SPV being 10%/15% of sale proceeds, under category A/B, is to be allowable as expenditure for year under consideration. Contribution towards SPV under both the Category mines disallowed by applying Explanation 2 to section 37(1) - voluntary expenditure incurred by assessee towards community welfare - Asst. Year 2014-15 - HELD THAT:- As decided in SHRI B. RUDRAGOUDA VERSUS THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, BELLARY. [ 2021 (4) TMI 1249 - ITAT BANGALORE] the assessee being an individual, and not a corporation under the Companies Act, 2013, Explanation 2 to section 37 cannot be applied so as to deny the voluntary expenditure incurred by assessee towards community welfare. Accordingly, we are of the opinion that the expenditure incurred is wholly and exclusively for the purpose of business of assessee and has to be allowed as business expenditure. Accordingly, this ground of appeal is allowed. Contribution to Flood Relief - Eligibility of relief u/s. 80G - Contribution towards Flood Relief Works in pursuant to MOU dated 2/7/2010 entered with local Dy. Commissioner - as per CIT-A as per the MOU entered by assessee with Govt. of Karnataka the donations were given to Chief Minister's Relief Fund and was eligible for exemption u/s. 80G - only reason for not granting relief u/s. 80G is that assessee did not obtain the exemption certificate under the relevant provisions of the Act - HELD THAT:- It is not the case of the Revenue that said expenditure has not been incurred for the purpose as entered into Govt. of Karnataka. The above reproduced clause clearly states that assessee is eligible for exemption u/s. 80G - authorities below even after admitting these facts have not granted relief to the assessee as per the provisions of sec. 80G of the Act. We thus remand this issue to the Ld. AO for computing the deduction eligible to assessee under 80G of the Act for the donations given to the Chief Minister's Relief Fund (calamity).Accordingly the grounds raised by assessee for year under consideration stands allowed for statistical purposes. Payment towards membership fee and legal fund respectively to Federation of Indian Mineral Industries - Allowable revenue expenditure u/s 37 or not? - HELD THAT:- The legal payment incurred by assessee is towards representing case filed of FIMI against which TDS has been deducted as observed by the Ld. CIT(A) - this organization has been formed to safeguard the rights of mine owners and to protect interest of industries, present in this spear of mineral exploration and production. In our opinion the said amount does not qualify to be considered as donation. It is an expenditure incurred to safe-guard assessee's business interests and has to be considered under the provisions of Sec. 37(1). 2021 (9) TMI 12 Deduction of Provision made towards long service benefit liability - Crystalization and Accrual of expenses - scientific basis for creating a provision - Application of Accounting Standard 15 - AO disallowed the provision stating that such liability has neither crystallized nor accrued during the year and there was no contractual obligation on the assessee and such amount constituted loyalty bonus subject to section 192 at the time of actual payment - HELD THAT:- Taking into account the judicial pronouncements and the AS-15, we hold that if the liability is an known liability and the estimation of liability is reliable, the provision made for the relevant assessment year cannot be stated to be a contingent liability - if the assessee had made a provision on proportionate basis, i.e., taking into account 10% on an year to year basis for gifting the memento on completion of 10 years of service, we could have understood the valuation report is based on some reasonable basis - when the employee leaves the assessee-company prior to completion of ten years, how the provision is reduced on year to year basis, is also not explained. Before us, no explanation was offered as regards how the provision of ₹ 46,60,033 is arrived at. - the assessee has to prove before the A.O. the scientific basis for creating a provision - Ground restored to the files of the A.O. with the above directions. Allowable business expenditure or not - addition u/s. 37 being the expenditure related to construction of school at Bidadi, promotion of Japanese language and construction of basic civil structure for water purification plant at Ramanagaram - HELD THAT:- Majority of the expenses incurred by the assessee is incurred in villages very near to assessee's manufacturing plant. It is the claim of the assessee that the workers and their family has benefitted from the above expenditure. This fact has also accepted by the CIT(A) by allowing as deduction 10% of the total expenditure - Amount expended for promotion of Japanese language will also ultimately benefit the employees of the assessee. Taking the overall view and to put a quietus to the issue, we hold that 30% of the total expenditure would have benefitted the employees of the assessee-company. Restatement of the hedging transaction - Allowable revenue expenditure or not - interest rate fluctuation risk and foreign exchange fluctuation risk - HELD THAT:- This claim of the assessee is not mandated as per the judgment of the Hon'ble Supreme Court relied on by the A.O. as well as the provisions of the Income-tax Act. As rightly pointed out by the CIT(A), the A.O. had in letter and spirit followed the judgment of the Hon'ble Supreme Court in the case of CIT v. Woodward Governor India P. Ltd. [ 2009 (4) TMI 4 - SUPREME COURT] reiterated in the case of Oil and Natural Gas Corporation Ltd. v. CIT [ 2010 (3) TMI 81 - SUPREME COURT] and in the case of CIT v. Maruti Udyog Limited [ 2009 (10) TMI 42 - SUPREME COURT] - underlying reason for availing the foreign loans are for purchase of plant and machinery, which is admittedly is on the capital front and cannot be allowed as a revenue expenditure - Decided against assessee. TP Adjustment - comparable selection - inclusion of Tata Motors Limited and Maruti Suzuki India Limited - deselectio of comparables having RTP in excess of 25% - HELD THAT:- There is nothing on record to suggest how RPT ratio has been calculated for all the comparable companies. RPT ratio has to be consistently calculated on an aggregate basis taking the ratio of RPT income plus RPT expenses by sales. The said position was adopted by the Revenue in the past years. In this regard, the TPOs order in assessee's own case for assessment year 2007-2008 has been placed on record - RPT ratio has been calculated taking both RPT income transactions plus RPT expenses transactions on aggregate basis - It is not clear how RPT ratio has been calculated for Tata Motors Limited vis- -vis other comparable companies. Therefore, this issue is restored to the files of the A.O. The A.O. is directed to calculate RPT ratio on an aggregate basis taking the ratio of RPT income plus RPT expenses by sales across the board for all the comparable companies (including Tata Motors Ltd. and Maruti Suzuki India Limited. Provision Written back - Operating in Nature - assessee had written back provision that was no longer required same was credited to the profit and loss account - While computing the margin, the assessee treated the same as operating in nature and treated the same as non-operating in nature - HELD THAT:- The assessee has reversed the provision which were no longer required. In the year of creation of this provision, the same were treated as operating in nature and reversal of the same should also be treated as operating in nature. This view has been consistently held by the judicial pronouncements relied by the CIT(A). Working capital adjustment - HELD THAT:- The working capital adjustment is an accepted adjustment - we hold that the CIT(A) is justified in directing the AO to grant working capital adjustment. TP adjustment should be restricted to AEs transactions - HELD THAT:- We hold that the CIT(A) has correctly directed the AO/TPO to restrict the TP adjustment to the AEs transaction. Royalty Benchmarking - assessee had adopted TNMM at the entity level in which process royalty payment is considered as closely linked transaction and part of operating cost - TPO rejected the above stand of the assessee and benchmarked the royalty transaction as per the ALP computation of assessment year 2012-2013 - HELD THAT:- We are of the view that once the net profit margin is tested on touchstone of arm's length price, it pre-supposes that the various components of income and expenditure considered in the process of arriving at the net profit are also at arm's length. In taking the above view, we rely on the order of the ITAT in assessee's own case for assessment year 2007-2008 [ 2015 (3) TMI 304 - ITAT BANGALORE ] wherein the Tribunal had held that the royalty payment made by the assessee are at arm's length price - we hold that the CIT(A) was correct in partly allowing the assessee's ground by holding that the TPO has to follow a consistent approach and adopt net sales as denominator for the purpose of comparable royalty in the case of comparables and the assessee. 2021 (9) TMI 11 Reopening of assessment u/s 147 - AO jurisdiction for reopening the concluded assessment - notice beyond the prescribed period of 6 years - Addition u/s 68 on unexplained cash credit - HELD THAT:- As in the case before us the notice u/s. 148, had been served on the assessee for the first time on 25.06.2013 i.e. beyond the prescribed period of 6 years from the end of the relevant assessment year which expired as on 31.03.2013, therefore, respectfully following judgment of Harjeet Surajprakash Girotra [ 2019 (7) TMI 941 - BOMBAY HIGH COURT] we are of the considered view that the A.O. had invalidly assumed jurisdiction for reopening the concluded assessment of the assessee company and passed the reassessment order u/s. 143(3) r.w.s. 147, dated 24.03.2014. Accordingly, we herein in the backdrop of invalid assumption of jurisdiction by the A.O. u/s. 147 of the Act quash the reassessment order passed by him u/s. 143(3) r.w.s. 147. - Decided in favour of assessee. 2021 (9) TMI 7 Disallowance u/s 14A r.w.r. 8D - investments held as stock-in-trade - assessee had on a suo motto basis offered a voluntary disallowance - Validity of invoking of Rule 8D - HELD THAT:- As relying on judgment of the Hon ble Supreme Court in the case of Maxopp Investments Limited [ 2018 (3) TMI 805 - SUPREME COURT] had observed that as the assessee was a bank, therefore, investments held as stock-in-trade were not to be considered for the purpose of working of disallowance u/s 14A of the Act, irrespective of the fact that any exempt income was derived from such investments or not - We direct that the investments that were held by the assessee bank as stock-in-trade shall not be considered by the A.O for the purpose of working of disallowance u/s 14A of the Act, irrespective of the fact whether exempt income was derived from such investments or not. Whether disallowance u/s 14A cannot be less than the suo motto disallowance that was offered by the assessee in its return of income? - We set-aside the order of the CIT(A) to the extent he had directed the A.O to cap the disallowance u/s 14A at a minimal amount i.e the amount that was suo motto offered for disallowance by the assessee in its return of income of income - we direct the A.O to work out the disallowance u/s 14A r.w Rule 8D without being influenced in any way by the amount of disallowance that was offered by the assessee under Sec. 14A in its return of income. Accordingly, the Ground of appeal No. I raised by the assessee is partly allowed in terms of our aforesaid observations. Computing the disallowance of the interest expenditure u/s 14A r.w Rule 8D(2)(ii) - Sufficiency of own funds - Whether CIT(A) has erred in deleting disallowance u/s 14A r.w.r. 8D(2)(ii) following the case law in CIT vs. Reliance Utilities and Power Ltd.[ 2009 (1) TMI 4 - BOMBAY HIGH COURT] without realizing that this case law is different from the assessee's case as the same was dealt with expenses u/s.36(1)(iii) of the Act - AY 2012-13 - HELD THAT:- Hon ble High Court of Bombay in the assessee s own case i.e CIT Vs. HDFC Bank Ltd. [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] by drawing support from its aforesaid order passed in the case of Reliance Utility and Power Limited (supra), had observed, that where the assessee s own funds and other non-interest bearing funds were more than the investments in tax free securities, then, there was no justification for the A.O to have disallowed any part of interest payments u/s 14A of the Act. Again, the aforesaid view was taken in the assessee s own case i.e HDFC Bank Limited Vs. PCIT-2(3), Mumbai [ 2016 (3) TMI 755 - BOMBAY HIGH COURT] as observed by the Hon ble High Court that when there were sufficient own funds with the assessee, then, there was a presumption that investment in tax free securities was made out of own funds - no force in the aforesaid grievance of the revenue. Whether disallowance u/s 14A r.w.rule 8D can be made only after excluding the tax free investments which are strategic in nature? - We set-aside the order of the CIT(A) to the extent he had held that the tax free investments which are strategic in nature are to be excluded for the purpose of computing the disallowance u/s 14A r.w Rule 8D. At the same time, we may herein observe that only those strategic investments held by the assessee that had yielded exempt income are to be considered for the purpose of working out the disallowance u/s 14A r.w Rule 8D(2)(iii). In fact, a similar view had been taken by the Tribunal while disposing off the assessee s appeal for A.Y. 2011-12) [ 2020 (7) TMI 502 - ITAT MUMBAI] . Accordingly, in terms of our aforesaid deliberations we herein direct the A.O to include the strategic investments which had yielded exempt income during the year for the purpose of computing the disallowance u/s 14A r.w Rule 8D(2)(iii). Broken period interest is allowable on matching principles - HELD THAT:- As decided in assessee s appeal for A.Y. 2011-12) [ 2020 (7) TMI 502 - ITAT MUMBAI] the broken period interest paid by the assessee was allowable as a deduction while computing its total income - no infirmity in the view taken by the CIT(A) who had rightly vacated the disallowance of the broken period interest on HTM securities 2021 (9) TMI 6 Reopening of assessment u/s 147 or assessment u/s 153C - assessment initiated on the basis of third party incriminating material u/s 147/148 - meaning of word belongs to - transaction of sweat equity shares allotted to the assessee at NIL consideration recorded in the books and observed during the post search investigation - HELD THAT:- Undisputedly, 3,50,000 sweat equity shares of ₹ 10 each with premium of ₹ 190 per share were issued to the assessee by M/s. Rockland Hospital Ltd. in accordance with the agreement dated 28.01.2008 - during search operation conducted u/s 132 of the Act in M/s. Rockland Hospital Ltd. group of cases, no incriminating material was seized rather AO initiated the reopening on the basis of information and copy of sweat equity share agreement dated 28.01.2008 - assessee is neither an employee nor a Director of M/s. Rockland Hospital Ltd. and his wife is only a housewife - as per sweat equity share agreement, there is a lock-in period of three years and these shares would vest in the assessee only after lock-in period. It is also not in dispute that in case of Rajat Shubra Chatterjee who was also allottee of 1000 shares of ₹ 10 each at the premium of ₹ 190 each by M/s. Rockland Hospital Ltd., the coordinate Bench of the Tribunal in RAJAT SHUBRA CHATTERJI [ 2016 (7) TMI 258 - ITAT DELHI] quashed the reassessment initiated on the basis of incriminating material found during search in the case of third party, namely, M/s. Rockland Hospital Ltd. in which provisions contained u/s 153C were applicable and not the provisions contained under section 147/148. When undisputedly the reopening has been initiated u/s 147/148 of the Act on the basis of same third party document belonging to M/s. Rockland Hospital Ltd., the same is void ab initio because in any case the reopening was to be initiated it could have been initiated u/s 153C of the Act. Ld. CIT (A) has rightly quashed the assessment - Decided in favour of assessee. 2021 (9) TMI 5 Estimation of income - Rejection of books of accounts - estimation of profit rate @ 8% on contract turnover in civil construction business - HELD THAT:- Foremost argument against estimating the assessee s income @ 8% in issue, is not sustainable since the assessee s turnover pertains to sub-contract business only. He fails to dispute that the assessee had not given full details of the sub-contract receipts right from scrutiny till date. We, thus, find no reason to accept his technical as well as factual arguments regarding to books rejection resulting in the impugned profit estimation. We accordingly decline the assessee s substantive ground to this effect. Addition u/s. 40(a)(ia)in view of the rejections of books of accounts - We are of the opinion that the same has no legs to stand once the assessee s books stood rejected as per hon ble jurisdictional high court s decision in Indwell Constructions vs. CIT [ 1998 (3) TMI 121 - ANDHRA PRADESH HIGH COURT] that no disallowance could be made once an assessee s profits are estimated at the fixed percentage of it s turnover. We, thus, accept the assessee s instant third substantive grievance. Addition u/s 68 - unexplained cash credits - share application / premium and unsecured loan - only plea is that no such amounts had been collected in the relevant previous year so as to form subject matter of section 68 addition - HELD THAT:- Faced with this situation, we are of the opinion that the same requires afresh factual verification at the Assessing Officer s end as per law. We order accordingly. The assessee or its learned authorised representative shall appear before the Assessing Officer on or before 30/09/2021 with all the relevant details to be followed by three effective opportunities of hearing at its own risk and responsibility. 2021 (9) TMI 3 Exemption u/s 11 - rejection of application u/s 12AA - ex parte order of CIT rejecting application - non-submission of requisite details during the proceedings - assessee is a trust engaged in educational activities registered with Charity Commissioner - HELD THAT:- Upto the date of hearing, the assessee did not file the details but filed those details before the date of order. CIT has given opportunity upto 17.7.2018 and thereafter, it appears to have been reserved for order, during that period, the assessee filed the details. It is not discernible, whether those details were brought to the notice of ld.CIT or not. Though carefree attitude of the assessee in not complying with notice of the ld.CIT may justify action of the ld.CIT to some extent, but outright rejection of the application for grant of registration without considering the same on merit and material placed on record, would burden assessee with a huge tax liability. Before us, the assessee has filed a paper containing copies of its books accounts and auditor s report. Though the same were filed with the office of ld.CIT, they were not being considered by the ld.CIT while deciding the application of the assessee and dismissed the application of the assessee ex parte - we are of the view that assessee should have been given one more opportunity to support its case, and therefore, in the interest of justice, it is appropriate for us to set aside the impugned order and restore the issue, whether or not to grant registration to the assessee under the Income tax Act, back to the file of the CIT (Exemptions) for fresh examination - Decided in favour of assessee for statistical purpose. 2021 (9) TMI 2 Disallowance u/s 14A - assessee argued no exempted income was earned during the relevant assessment year - HELD THAT:- A.O. while making the disallowance u/s 14A had relied on the Special Bench order of the Tribunal in Cheminvest Ltd. [ 2009 (8) TMI 126 - ITAT DELHI-B] but the said order of the Tribunal was reversed by the Hon ble Delhi High Court 2015 (9) TMI 238 - DELHI HIGH COURT] wherein as clearly held that unless exempted income earned during the relevant assessment year, there cannot be any disallowance u/s 14A . Thus since no exempted income is earned during the relevant assessment year, no disallowance u/s 14A of the I.T.Act could be resorted to - Decided against revenue. 2021 (9) TMI 1 Stay on the recovery of demand - HELD THAT:- As seen that the stay originally granted was extended by the Tribunal for a period of 180 days or till the disposal of the appeal, whichever is earlier. The stay granted by the Tribunal was due to expire on 06.04.2020. However in view of the Covid-19 pandemic, the Hon ble Bombay High Court extended all interim orders operating as on the day of lockdown to be treated to be valid till 30.04.2020 - Hon ble Bombay High Court extended all interim orders passed till 31.01.2021 vide extension orders dated 15.04.2020, 15.06.2020, 15.07.2020, 31.08.2020, 30.09.2020, 29.10.2020 and 09.12.2020. As found that the appeal could not be disposed off for one reason or the other, but for no fault of the assessee. In fact, the case is fixed for hearing before the Tribunal on 23.02.2021. We also notice that the assessee has paid ₹ 41,16,60,980/- out of ₹ 1,12,29,02,350/- which is 36% of the demand. In the present case, we grant the extension of stay of demand for a further period of 180 days from the date of this order or till the disposal of present appeal, whichever is earlier - Stay application is allowed. 2021 (8) TMI 1232 Income deemed to accrue or arise in India - Royalty receipts - treatment of income from sale of off-the-shelf software - India- Ireland DTAA - whether the payments made to non-resident software suppliers is royalty and hence TDS u/s.195 was required to be deducted on those payments or not? - HELD THAT:- Issue involved in this appeal has been put to rest in view of the decision rendered in ENGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LIMITED [ 2021 (3) TMI 138 - SUPREME COURT] and the issue involved in this appeal has been answered against the Revenue and in favour of the assessee. Customs 2021 (9) TMI 59 Classification of imported goods - mill processed non-alloy ferrous waste metal goods wound in a coil - to be classified under tariff heading 7204 of the Customs Tariff Act, 1975 or otherwise? - HELD THAT:- Flat products are used in important manufacturing sectors like in automobiles, railways, shipping, pressure vessels including boilers, pipes for conveying fluids, domestic appliances like that of manufacturing white goods, security storage items, in construction like those in roofing, in packaging where tinplate plays important role. Strips and sheets are manufactured by hot rolling process, however, when they are required to have higher yield strength and to be used with closer tolerances of thickness and with smoother or brighter surface they are subjected to cold rolling - the claim of the applicant that the impugned goods are neither hot-rolled products nor cold-rolled products is untenable and these are nothing but cold-rolled products. Flat-rolled products are classified under subheadings 72.08 to 72.12. The applicant informed that the intended product to be imported is not cladded/plated/coated. Therefore, these cold-rolled products are specifically classifiable under subheading 72.09. The applicant has stated that the waste goods they intend to import are classifiable as per para 13.3. The applicant has submitted that the length of the coil will be of 10-20 metre - the impugned item is essentially a cold-rolled product. Thus, it is classifiable under subheading 72.09 Flat-rolled products of iron or non-alloy steel, of a width of 600 mm or more, cold-rolled (cold reduced), not clad, plated or coated . The width of the goods to be imported is in the range of 900 to 1400 mm and thickness in the range of 0.03 to 4 mm. Under this subheading the 8-digit classification depends upon the thickness of the coil. Therefore, depending upon the thickness of the goods to be imported, an appropriate 8-digit classification may be applied under subheading 72.09. In case of uneven thickness, the goods would be classified under residual tariff heading 72099000. The goods mill processed non-alloy ferrous waste metal goods wound in coil does not appear to be waste or scrap, and therefore, not classifiable under sub heading 72044900. These goods merit classification under subheading 72099000. 2021 (9) TMI 48 Maintainability of petition - availability of appellate remedy, which was not availed of - jurisdiction of officer to issue proceedings - Proper Officer - HELD THAT:- Admittedly, the appellate remedy is available and the petitioners have not chosen to file the appeal. Regarding the term 'Proper Officer' who is competent to issue proceedings, this Court considered the principles in the case of M/S. R.K.K.R. STEEL, JOSEPH PHILIP, RAJIV RAJI VERSUS THE CENTRAL BOARD OF EXCISE AND CUSTOMS, THE COMMISSIONER OF CUSTOMS, PORT IMPORT, THE COMMISSIONER OF CUSTOMS, THE ADDITIONAL DIRECTOR GENERAL [ 2021 (7) TMI 1153 - MADRAS HIGH COURT] . In the said judgment, this Court has considered the recent judgment of the Hon'ble Supreme Court in the case of M/S CANON INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS [ 2021 (3) TMI 384 - SUPREME COURT] wherein, the interpretation for the words 'proper officer' ruled by the Hon'ble Supreme Court in the case of COMMISSIONER OF CUSTOMS VERSUS SAYED ALI [ 2011 (2) TMI 5 - SUPREME COURT] was followed and affirmed - The Hon'ble Supreme Court, by referring to the decision in the case of Syed Ali held that the 'proper officer' is the officer having jurisdiction over the person concerned and therefore, the law regarding the interpretation 'Proper Officer' is settled by the Hon'ble Supreme Court. The petitioners are granted liberty to approach the appellate authority and file an appeal by following the procedures as contemplated and by complying with the conditions to prefer the appeal, within a period of 60 days from the date of receipt of a copy of this order, and in the event of filing of appeal by the writ petitioners within a period of 60 days, such appeal is directed to be entertained without reference to the period of limitation, and the matter has to be adjudicated on merits and in accordance with law and by affording opportunity to the parties concerned, and the appeal has to be disposed of, as expeditiously as possible. Petition disposed off. 2021 (9) TMI 32 Revocation of Customs Broker license - forfeiture of security deposit - imposition of penalty - time limitation - order passed after the expiry of ninety days from the date of submission of the report by the Deputy Commissioner of Customs - whether because of the provisions of section 6 of the 2020 Act relating to Relaxation of the Time Limit under certain Indirect Tax Laws , the time period stipulated under regulation 17(7) of the 2018 Regulations for passing an order within ninety days from the date of submissions of report by the Deputy Commissioner of Customs, stands extended upto 30.09.2020? HELD THAT:- A perusal of section 6 of the 2020 Act makes it clear that the time limit specified in, or prescribed or notified under the Customs Act falling between 20.03.2020 to 29.09.2020 for issuance of any order by any authority shall stand extended upto 30.09.2020. It is no doubt true that the Customs Act does not prescribe time limit for completion of any proceeding or issuance of any order, but time limit has been prescribed under the 2018 Regulations notified under the Customs Act - Such being the meaning assigned to under the Act , there is no manner of doubt that section 6 of the 2020 Act would also extend the time limit for an order to be passed under the Regulations framed under the Act. Thus, the time limit of ninety days prescribed in regulation 17(7) of the 2018 Regulations for issuance of the order within ninety days from the date of submission of the report by the Deputy Commissioner of Customs shall stand extended upto 30.09.2020. It is not possible to accept the contention advanced by learned counsel for the appellant that in view of the provisions of regulation 17(7) of the 2018 Regulations, the order dated 10.09.2020 passed by the Commissioner should be set aside merely for the reason that it was passed after the period of ninety days from the date of submission of the report by the Deputy Commissioner of Customs. This is for the reason that in view of the provisions of section 6 of the 2020 Act, the period prescribed under regulation 17(7) of the 2018 Regulations stands extended upto 30.09.2020. The appeal may now be listed for hearing on 14.09.2021. 2021 (9) TMI 17 Refund of duty - matter remanded back to the original adjudicating authority with observation for consideration of refund claim after production of CRC-I evidencing remission order - Section 27A of the Customs Act, 1962 - HELD THAT:- A close reading of the provision of Section 27A of the Customs Act, 1962 would reveal that date of order for refund is immaterial, since interest is to be calculated after the expiry of three months from the date of receipt of such application and there is nothing mentioned in the Section to pass a separate order for interest on refund as an order under Section 27(2) would suffice for application of interest in view of use of word shall be paid , if the refund is made beyond three months of receipt of application for such refund. Therefore, applicant is entitled to get the applicable rate of interest on the refunded duty amount to be calculated three months after the filing of refund application on 28.08.2014. The appeal is allowed in part to the extent of granting of interest on the already refunded amount. Corporate Laws 2021 (9) TMI 10 Sanction of Scheme of Amalgamation - Sections 230 to 232 of the Companies Act, 2013, and other applicable provisions of the companies Act, 2013 r/w Companies (CAA) Rules, 2016 - HELD THAT:- It is a settled position of law that any Scheme of Amalgamation or Arrangement, under the extant provisions of Companies Act, would not contemplate to waive any liability or legal action for any violation of provisions of Companies Act, so as to prevent Statutory Authorities from initiating any action against violation of provisions of Companies Act, in respect of the Companies involved, in accordance with law; In the instant case also, the Transferee Company would inherit all the liabilities/Responsibilities of Transferor Company and it is not being exempted from complying with all statutory requirement by virtue of this order. The Tribunal, in the instant proceedings, cannot examine every alleged violation committed by the Petitioner Companies, since the issue here is only to sanction of the Scheme, subject to compliance of extant provisions of Companies Act and to make them to comply all terms and conditions as mentioned in the proposed Scheme in question, and other consequential actions, after sanction of the Scheme. The Scheme in question is comprehensive one complying with the provisions of Sections 230 to 232 of the Companies Act, 2013 and the Rules made thereunder and the Petition/Application is filed in accordance with law - It is also appears to be fair, reasonable and it is not detrimental against the Members or Creditors or contrary to public policy. Therefore, we are inclined to sanction the scheme, however, subject to complying with various conditions/undertakings, post sanctioning the Scheme. The scheme is approved - application allowed. 2021 (9) TMI 9 Sanction of Scheme of Amalgamation - Sections 230 to 232 of the Companies Act, 2013 - HELD THAT:- The applicants having already filed the consent letters from the respective secured creditors under their respective official letter heads had failed to comply with the required provisions of Section 230(9) of the Companies Act 2013 which states that the Tribunal may dispense with calling of a meeting of creditor or class of creditors where such creditors or class of creditors, having at least ninety per cent value, agree and confirm, by way of affidavit, to the scheme of compromise or arrangement. The scheme is approved - application allowed. 2021 (8) TMI 1233 Recovery of Income Tax Arrears - property mentioned was already attached in Form ITCP 16 by the Income Tax Department - mortgage in existence - priority over the charge - HELD THAT:- A perusal of the entire Rule would reveal that it is not an appeal or Revision. It is an investigation by the Tax Recovery Officer, which is contemplated. Therefore, any third person if involved in such transfer of property, which is declared as void under Section 281 of the Income Tax Act may submit an application for investigation by Tax Recovery Officer. Therefore, the statute does not assume that every third person is liable under the Income Tax Act. Schedule II Rule 11 of the Income Tax Act is a beneficial provision in respect of the person, who was otherwise cheated by any of the defaulter of tax arrears, who in turn can submit an application for further investigation in order to cull out the truth or genuinity with reference to the transactions or transfers. Therefore, the Tax Recovery Officer during the pendency found that the charge created in favour of the petitioner Bank is valid, then he can pass appropriate orders withdrawing the attachment made under the provisions of the Act. On the one hand, the Income Tax Act states that, where during the pendency of any proceedings under the Income Tax Act or after completion thereof, any assessee creates a charge on or parts with the possession by way of mortgage, sale, etc. Shall be void against any claim in respect of any tax. So also, the SARFAESI Act states that Section 26E contemplates that the secured creditors shall be paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government of State Government or local authority. Therefore, equal weightage is given in respect of the secured creditors. So also Section 31B of Recovery of Debts and Bunkruptcy Act, 1993 states that sale of assets over which security interest is created, shall have priority and shall be paid in priority over all other debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or local authority - conflicting provisions in these three independent statutes are creating heart burning issues between the secured creditors as well as the Tax Department. The doctrine of constitutional priority will have precedence over the other priorities. If the priority clause is provided under various enactments, the question arises as to which priority is to be held precedence over the other priorities. The test of traceability and recognition under the constitutional provisions would be the proper procedure to form an opinion - In the present scenario, the SARFAESI Act and the DRT Act provides priority to secured creditors, i.e. the banks hold priority. The Income Tax Act contemplates any such mortgage or sale during the pendency of any proceedings under the Income Tax Act shall be void. Thus, this Court has to test the supremacy on the basis of the constitutional recognition, which is supreme than the statutes enacted under the constitution. The taxation laws are constitutionally recognised with reference to the sovereignty and the policies of the Government. Thus the supremacy of the Constitution overtakes the statutes enacted and such enactments constitutionally recognised directly takes precedence over the other statutes. The mortgages, transactions or transfers are made during the pendency of the Income Tax proceedings, then all such transfers, mortgages, transactions are void under Section 281 of the Income Tax Act and any such mortgage or attachment made by the Bank during the pendency of the Income tax proceedings, cannot be a ground to claim priority based on the provisions of the SARFAESI Act or DRT Act - the disputed factors cannot be adjudicated by the High Court under Article 226 of the Constitution of India and it is for the petitioner to establish the details regarding the mortgage and the pendency of Income tax proceedings under the Income Tax Act. It is for the petitioners to produce the documents in original and adjudicate the same in the manner prescribed under Schedule II Rule 11 of the Income Tax Act. Thus, it would be improper to form an opinion regarding the disputed facts between the parties to the lis in the present case, which requires adjudication of facts based on the documents and evidences. The petitioner is at liberty to approach the Tax Recovery Officer by filing an appropriate application under Schedule II, Rule 11 of the Income Tax Act. In the event of filing any such application, the Tax Recovery Officer is directed to investigate the same with reference to the original documents and pass appropriate orders as expeditiously as possible - petition disposed off. Insolvency & Bankruptcy 2021 (9) TMI 33 Alienation of accruals from the account of the Corporate Debtor upon imposition of moratorium after the initiation of the Corporate Insolvency Resolution Process - power of COC to take a decision regarding payments to a particular financial creditor during the CIRP - adjustment of amounts belonging to Corporate Debtor towards the claim of any particular financial creditor during the moratorium period - moratorium imposed u/s 14 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- Section 14 of the IBC, particularly sub-section (b) of section 14(1) prohibits transferring, encumbering, alienating or disposing of by the Corporate Debtor, any of its assets or any legal right or beneficial interest therein . It is quite clear about how accruals to the corporate debtor are to be treated during the currency of CIRP. This provision prohibits the corporate debtor, and the resolution professional who is managing the affairs of the corporate debtor during CIRP, from transferring any of the corporate debtor s assets to creditors. The amounts received by the corporate debtor during the currency of the CIRP are assets of the corporate debtor whose transfer to chosen creditor in priority without the process of Resolution Plan would be prohibited. Such a condition as was prescribed in the first COC meeting regarding apportioning of the accruals in the separate bank account of corporate debtor to the Bank of India would not be legal and against the provision in sub-section 3 of section 14, which allows only such transactions which may be notified by the central government, in consultation with any financial regulator, to be exempted from the rigour of moratorium. The accruals in the separate bank account in the Bank of India during the CIRP are not notified by the Central Government and hence they are the assets of the corporate debtor. In the present case, the Resolution Plan, which was approved by the Adjudicating Authority, included Bank of India s share as ₹ 9 crores only as full and final settlement with no conditions attached. Therefore ,the condition stipulated by the COC in its first meeting regarding the receipts by the corporate debtor during the CIRP period and apportioning of 25% of the accruals due to the operations of corporate debtor are not part of the final resolution plan and this has no legs to stand on vis a vis the approved resolution plan and the share of Bank of India contained therein. It is considered necessary that the erstwhile Resolution Professional be made responsible for proper monitoring of the implementation of the successful resolution plan to ensure its complete and proper implementation and to ensure that issues such as the one raised in this appeal do not cause unnecessary delays and obstructions in the implementation of the resolution plan - the amounts received towards interim finance during pendency of CIRP for which account was opened in the branch of Respondent No.4- Bank have to be held as amounts received by the Corporate Debtor during CIRP and are to be utilised as per the provisions of IBC, Rules and Regulations and the Resolution Professional is responsible for due utilisation of the same, strictly as per the provisions of IBC, Rules and Regulations and the Resolution Plan which was approved by the Adjudicating Authority. Appeal allowed. 2021 (9) TMI 30 Preferential transaction or not - sale agreement for transferring the land belonging to the Corporate Debtor to the Appellant towards partial settlement of the debt owed to the Appellant - Section 43 of the IBC 2016 - HELD THAT:- If the Adjudicating Authority is of the opinion that the said transaction is preferential in nature and is within the period of one year preceding the Insolvency commencement date, the said transaction can be declared as void and reverse the effect of such transaction in accordance with Section 45 sub-section (1) of the I B Code and in accordance with the Chapter III of the I B Code, 2016. In the present case, from the documents it is crystal clear that the Appellant is not a related party and the transaction is preceding one year from the date of admission of the application by the Adjudicating Authority on 04.02.2019. The sale agreement dated 22.06.2018 and the Application was admitted on 04.02.2019, is well within one year preceding the admission of Application - Further, the Resolution Professional need to see whether the property belongs to the Corporate Debtor or not? In the present case, admittedly the property belongs to the Corporate Debtor as evident from the sale agreement and there is no dispute with regard to the same. The vital point is whether the transaction is preferential one and whether the said transaction is beneficial to such creditor (Appellant herein) by discriminating the distribution of assets as per Section 53 of the I B Code in case of liquidation. The Ld. Adjudicating Authority at Para 23 drawn a table where the claims have been lodged and the waterfall mechanism need to be adopted in the case of liquidation. From the perusal of the table, the Operational Creditor stands at Serial No.7 under the waterfall mechanism. In the case of liquidation, the criteria as enumerated under Section 53 need to be followed. If the said principle is followed, the Appellant stands at Serial No.7. Certainly, it amounts to preferential treatment over other Creditors and the distribution of liquidation assets namely (a) Insolvency Resolution Process Costs, Liquidation Costs and the debts which shall rank equally between and among the following namely viz. workmen s dues, debts owed to secured creditors, wages to employees, debts to unsecured creditors, dues to the Central Government, State Governments etc. This Tribunal is of the view that the said transaction is a preferential transaction and not in the ordinary course of business - the said transaction entered between the Appellant and the Corporate Debtor by way of sale agreement dated 26.06.2018 certainly prejudice the interest of other Creditors who have precedence in relation to the claim being settled ahead of the Appellant or even in relation to other Operational Creditors who are similarly placed like the Appellant . Appeal dismissed. 2021 (9) TMI 8 Seeking to grant an extension of 120 days to the Applicant for balance payment - seeking to direct the Resolution Professional (RP) to complete all formalities including but not limited to opening of Bank Account, transfer of shareholding and directorship and hand over the management of the Corporate Debtor to the Resolution Applicant - HELD THAT:- The Resolution Applicant is seeking for extension of 120 days for making balance payment of ₹ 12.78 Crores as per the approved Resolution Plan from the Adjudicating Authority. Further, the matter has been negotiated by both the parties and approval has already been granted by the CoC i.e., sole financial creditor, and the successful Resolution Applicant agreed to pay ₹ 15,00,000/- extra over and above to the agreed amount. In view of the same, an extension of 03 months of time is granted for making the balance payment. Petition disposed of by granting 03 (Three) months of time for making the balance payment. PMLA 2021 (9) TMI 50 Seeking grant of anticipatory bail - predicate offence - alleged irregularities in the utilization of funds of Government of India - pre-trial detention of the accused-applicant - Sections 120-B r/w Sections 420, 409 of IPC and Section 13(2) r/w Section 13(1)(d) of the Prevention of Corruption Act against several persons - HELD THAT:- The twin conditions as imposed by Section 45 of PMLA cannot be looked into while deciding the bail/anticipatory bail application as the same are violative of Articles 14 and 21 of Constitution of India. The Hon'ble Supreme Court in different decisions held that economic offences constitute a class apart, the Court need to visit the same with a different approach in the matter of bail/anticipatory bail and should be loathed while extending the benefit of bail/pre-arrest bail to a person accused of such offences. In the instant case, during the course of investigation under the PMLA, 2002, searches were conducted under Section 17 of PMLA, 2002 at the office, factory and residential premises of Naresh Grover, Director of M/s Surgicoin Medequip Pvt. Ltd. During these searches several incriminating documents were seized. These documents included letters written by Naresh Grover, who was in judicial custody at that time, to his son Pankaj Grover directing him to manipulate the accounts and records to defeat the allegation of supply of material under NRHM Scheme at astronomical rates of profit as well as of short supply of the said material - the fact that Naresh Grover had directed Pankaj Grover in writing not to submit the original invoices and the ledgers of the sundry creditors and debtors to the ED as well as to manipulate the records of the genuine creditors with other fictitious entries establishes that he was wilfully and knowingly trying to frustrate the proceedings under the Act and was also attempting to deflect the process of investigation In socio-economic offences proceed of crimes are larger and further, offenders are economically sound, therefore, in releasing them on bail/anticipatory bail probability of abscondance not within country but beyond country is more probable. Usually socio-economic offenders abscond to some other country and after that it becomes difficult to bring them back and complete the criminal proceeding against them. Further, their monetary sound condition particularly proceed of crime obtained not by honest working but by deceiving others causes more prone situation for influencing witnesses and other evidences. Furthermore, status and position of offender provides opportunity to influence investigation and prosecution - this Court finds no merit in the application under Section 438 Cr.P.C. filed by the applicant. The instant anticipatory bail application is rejected. Service Tax 2021 (9) TMI 58 Security Agency Service - Manpower Supply services - Cleaning Service - applicability of Section 11D of Central Excise Act, 1944 and Section 73A of the Finance Act, 1994 - extended period of limitation - HELD THAT:- It is found from the Adjudication Order that the appellant was engaged in providing services related to Security, Manpower Supply for Cleaning, Washing, Sweeping, Gardening, Up keeping, Watch Ward, Grass Cutting, Checking, Mechanised Cleaning, Driving, Office Assistance etc. They were registered with the Service Tax Department under the category of Security Agency which was introduced in the Service Tax net on 16.10.1998 vide Clause 94 of Section 65 of Chapter V of Finance Act, 1994 as amended. In the present case, the appellant in the statement during the investigation categorically stated that watch and ward service are for checking of tickets of the Metro Railways. But, no investigation was taken. Therefore, the Adjudicating authority passed the order on a conjecture that the appellant had also function not merely on watch and ward of checking tickets, which cannot be accepted. Extended period of limitation - HELD THAT:- It is found fhe Adjudication Order that the Adjudicating authority had merely observed that the applicant is a very old Registered Firm and they have not discharged their service tax liability properly and therefore the extended period of limitation would be invoked. There is no material available on record to invoke the extended period of limitation. Apart from that, a part of demand is liable to be dropped on merit and therefore the extended period of limitation cannot be invoked for the balance amount. Hence, the balance amount of tax is liable to be set aside on limitation. The expressions every person who is liable to pay duty under this Act or Rules made thereunder, and has collected any amount in excess of the duty in Section 11D of the Act make it clear that the said provision would be applicable where the person is liable to pay duty and collected any amount in-excess of the duty assessed. Apart from that Section 73A of the Finance Act, 1994 has been introduced with effect from 18.04.2006 and that according to Sub Section (2) of Section 73A, Service Tax collected on non-taxable service is demandable/payable to Government exchequer. The Learned Departmental Representative had not disputed the legal position - the present case is prior to insertion of Section 73A(2) of the Act 1994 and therefore the demand of the amount under Section 11D is not justified. Appeal allowed - decided in favor of appellant. 2021 (9) TMI 28 Refund claim of pre-deposit while appeal is pending - adjustment of amount which was paid in lieu of pre deposit for filing the appeal before this Tribunal - HELD THAT:- It is admitted fact that the order confirming proposal of three separate show cause notices for three different periods was confirmed by the common Order-in-Original as well as common Order-in-Appeal. While assailing the said Order-in-Appeal before this Tribunal ₹ 15 lakh were to be paid by the appellant as an amount of pre-deposit, pre-requisite for filing the appeal before this Tribunal in view of section 35F of Central Excise Act, 1944 and section 129E of the Customs Act, 1962. ₹ 9.23 lakh out of said ₹ 15 lakh is payment which was made by the appellant at the investigating stage and as such has been allowed to be considered as a payment towards pre-deposit. Remaining ₹ 5.77 lakh were paid by the appellant during the pendency of his Civil Miscellaneous Application before the Delhi High Court i.e. on 16.5.2016 - Both these amounts ( ₹ 9.23 lakh and ₹ 5.77 lakh) admittedly is an amount toward pre-deposit as was made by filing the appeal before this Tribunal. Since the demand is not yet been confirmed, the appropriation of money of pre-deposit against the proposed demand is highly unreasonable and is rather illegal. The order under challenge is set aside. Commissioner (Appeals) is directed to decide three show cause notices on merits in compliance of the order of remand order dated 20.11.2017 that too within two months from the date of receiving of this order - Appeal allowed. 2021 (9) TMI 23 Valuation - inclusion of notional value of the free residential accommodation, free vehicles provided and the actual amount of reimbursement claimed by CISF for expenditure incurred on petty imprest/medical/telephone, in the assessable value or not - reverse charge mechanism - revenue neutrality - HELD THAT:- The appellant is already depositing service tax on reverse charge basis on the cost of deployment, cost of arms and ammunition, cost of clothing items (uniforms), etc. which is not in dispute. The Allahabad Bench of the Tribunal in the case of CENTRAL INDUSTRIAL SECURITY FORCE VERSUS COMMISSIONER OF CUSTOMS, C.E. S.T., ALLAHABAD [ 2019 (1) TMI 1661 - CESTAT ALLAHABAD ], has already settled the issue in favour of the appellant to hold that expenses incurred towards medical Services, vehicles, expenditure on Dog Squad, stationery expenses, telephone charges, expenditure incurred by the service recipient for accommodation provided to CISF etc are not includible. Also, there is no dispute in the entire case proceedings that expenses have been reimbursed on actual basis. Hence, the contentions of the Revenue cannot be accepted. Extended period of limitation - HELD THAT:- There are no case of fraud or suppression and hence, the notice issued by invoking extended period is not sustainable. Appeal allowed - decided in favor of appellant. Central Excise 2021 (9) TMI 36 SSI Exemption - use of brand name of others - certain clearances of excisable goods chargeable to NIL rate of duty during the period 01.04.2004 to 29.10.2004 - clearance of non-excisable products in terms of N/N. 08/2003 - extended period of limitation - HELD THAT:- The appellants have been availing the exemption notification available for small-scale industries and have been filing intimations as required under Central Excise Rules. We find that they have filed Intimations dated 01.04.2003, 01.04.2004 under Rule 11 (6) and under Rule 173B. They have filed a declaration effective from 01.03.2001 indicating that they will be clearing bread, bun etc. falling under sub-heading 1985.90 of CETA chargeable to NIL rate of duty. There is no ambiguity in the wordings of the Notification. Therefore, there are no reason for the appellants to entertain any doubts regarding the notification. The appellant s submission that they had a bona fide belief that goods attracted NIL rate of duty was same as non-excisable goods. There is no merit in the argument. The appellant is a regular manufacturer and has been availing the very same benefit for quite some time. In such circumstances, it is difficult to accept that the appellants had a bona fide belief. The appellants have not given any declaration to the effect that they manufacture excisable goods which are chargeable to NIL rate of duty and they consider the same to be non-excisable goods. The only declaration given by the appellants that to with effect from 01.03.2001 is to the effect that they are manufacturing bread, bun etc. falling under CETA 1985.90 and chargeable to NIL rate of duty. It is not understood as to how the Department would be in the knowledge that the appellants are manufacturing same goods in 2004 and would treat them as non-excisable goods. Extended period of limitation - HELD THAT:- It is not the case of the appellants that their unit has been subjected to audit in between. Under the circumstances, the Department had no way to be in the knowledge of the activities of the appellants. Therefore, it can only be concluded that the appellants have suppressed material facts from the Department. In such circumstances, the extended period is rightly invokable. Appeal dismissed. 2021 (9) TMI 35 MODVAT Credit - inputs received and thereafter cleared them as such to a 100% EOU without reversing the Modvat credit availed - applicability of Exemption N/N. 1/1995-CE dt. 04.01.1995 - HELD THAT:- Hon ble High Court of Karnataka in the case of THE COMMISSIONER OF CENTRAL EXCISE, BANGALORE-II VERSUS M/S SOLECTRON CENTUM ELECTRONICS LTD. [ 2014 (10) TMI 596 - KARNATAKA HIGH COURT] and the ratio has been followed by this Bench in the case of M/S. EMERSON PROCESS MANAGEMENT CHENNAI LTD. VERSUS CCE, CHENNAI [ 2018 (3) TMI 252 - CESTAT CHENNAI] has held that the very same goods, which are cleared by the appellant to the EOU or towards supply of ICB, when such goods are cleared to the DTA, the department has accepted the payment of duty made by the appellant on the transaction value and on such DTA clearances have not demanded debit of the corresponding amount of CENVAT credit availed in respect of those good. The appellant is entitled to avail modvat credit / cenvat credit on inputs and entitled to clear the same without payment of duty to 100% EOU without reversing the input credit so availed - Appeal allowed - decided in favor of appellant. 2021 (9) TMI 29 Area Based exemption - inclusion of freight charges in the assessable value of goods - place of removal - FOR destination - benefit of Notification No. 32/99-CE dated 08.07.1999 correctly availed or not - recovery of refund already made - erroneous refund or not - extended period of limitation - Section 4(1) of the Central Excise Act, 1944 read with Rule 5 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - extended period of limitation - HELD THAT:- The contracts executed by the assessee were FOR contracts. The contracts/ purchase orders specified door delivery at all-inclusive prices. The purchasers reserved the right to inspection and to not accept the goods, in case the goods supplied were found to be sub-par. The assessee bore the risk of loss or damage to the goods during transit to the destination, as evident from the transit insurance policies and the documents relating to rejection of goods by certain buyers. Neither did the invoices reflect the transportation costs separately nor were such charges recovered separately from the buyers The invoices issued by the assessee incorporated details of the relevant purchase orders issued by the buyers and as the agreed upon price was as per FOR destination, there was no reason to charge any freight component separately. Under the Act, as per definition of sale, sale takes place only upon transfer of the possession of the goods by the manufacturer to the buyer, which occurred in the present cases at the buyers premises - in the present case, the parties intended that the sale of goods would take place at the premises of the buyers and that such premises would be considered to the Point of Sale, where the title and property in the goods were actually transferred. Invocation of Rule 5 of the Valuation Rules, 2000 by the Revenue - HELD THAT:- Invocation of this rule is misplaced. The said Rule applied to cases only where goods were sold at the place of removal but were to be delivered elsewhere, which condition could not have applied in the given facts and circumstances. The assessee s case fell within the purview of the exception to the aforesaid Rule 5. On the other hand, at the time of clearance of goods from the assessee s factory, no sale took place and the risk and ownership of the goods remained with the assessee - In view of Rule 7 of the Valuation Rules, 2000 read with Rule 11, the assessable value of the goods was the price charged by the assessee at the place of sale. The spirit of the said Rule 7 read with Rule 11 of the Valuation Rules indicates that all charges upto the place of sale are includible, including freight, etc. Applicability of Board s Circular No.59/1/2003-CX dated 03.03.2003 and Circular No. 988/12/2014-CX dated 20.10.2014 - HELD THAT:- The aforesaid circulars state that place of removal/ assessable value was ascertainable with reference to the place where the sale took place or where the property in the goods passed from the seller to the buyer in terms of the Sale of Goods Act, 1930. Therefore, where the terms and conditions of sale in the relevant contracts/ purchase orders unambiguously stipulated that the act of sale would be completed upon on-door delivery at the buyer s premises, as is the case of the assessee, the transportation costs would be included. Recovery of refund - erroneous refund or not - HELD THAT:- Looking from a perspective altogether different from the case of valuation of excisable goods, the entire proceedings in the instant case mainly relate to the recovery of amount already refunded claiming the same to be a case of erroneous refund under Section 11A of the Act. The whole basis of the Revenue that freight amount is not includible in the assessable value, as has subsequently been held by the Supreme Court in COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE, NAGPUR VERSUS M/S ISPAT INDUSTRIES LTD. [ 2015 (10) TMI 613 - SUPREME COURT] , to state that the buyer s place can never be said to be place of removal. In our view, the refund already sanctioned by relying on the judicial legal precedents holding the field then as well as the clarifications issued by the Board, the same cannot be termed as erroneous refund - In the present case, the Department by relying on the subsequent decision of the Supreme Court in Ispat Industries has proceeded to take a view that freight amount can never be included in the assessable value - The refund already sanctioned cannot be termed as erroneous refund more so in view of the fact that refund has been duly sanctioned by the Department as per the laws prevailing then duly supported by the CBEC clarifications at relevant point of time. The appeals filed by the assessee are allowed and the appeals filed by the Revenue are dismissed as withdrawn under the National Litigation Policy. 2021 (9) TMI 26 Clandestine removal - quantities of the finished goods shown as excess clearance in 3CD form on comparison with the same shown in ER 1 return by the Appellant - demand is based only on the figures reported in the annexure of the tax audit report - other substantive allegations or not - burden to prove - demand on the basis of assumptions and presumptions or not - HELD THAT:- In the instant case, it is seen that the Adjudicating Authority has confirmed the demand of excise duty only on the ground that there are differences in quantity of clearance of goods as per ER 1 and form 3CD as filed by the Appellant, even after accepting that the differences are on account of trading of goods which does not form part of clearance as per ER 1 return of the Appellant - The Appellant has produced their tax auditors certificate certifying the reconciliation which was also produced by the Appellant before adjudicating authority and we find that the said reconciliation clearly establishes the reconciliation between the figures of clearance as per 3CD and ER 1. Alternatively, it is also on record that the adjudicating authority has not given any cognizance to the submission of the Appellants as regards allegation of clandestine removal and the burden to prove the same - no investigation has been conducted by the department to prove the allegation of clandestine removal in the case and thus the demand of excise duty merely based on differences in figures of consumption cannot be sustained. The Department has failed to discharge the burden of proof to prove the allegation of clandestine removal in the case and thus, the demand of excise duty merely based on differences in figures of consumption, cannot be sustained - demand of excise duty only on assumption and presumptions in quantity of clearance of finished goods figures of tax audit form 3CD and ER 1 cannot be sustained on merits - Appeal allowed - decided in favor of appellant. 2021 (9) TMI 25 Recovery of CENVAT credit - Duty paying documents - credit availed on the basis of bills/photocopy of bills which were issued to the address of the head office - Rule 9 of the Cenvat Credit Rules, 2004 - CENVAT credit on bank advices - auxiliary insurance services - Extended period of limitation - Penalty - HELD THAT:- The only allegation leveled in the show cause notice was that bills/photo copies of bills produced were raised in the address of the head office at 5, Bentinck Street, Kolkata-700001 and the said office did not follow the procedure of getting registered as input service distributor as required under Rule 9 of the Cenvat Credit Rules, 2004 for distribution of credit on the documents in the name of the head office. In the first place it is pointed out that even the show cause notice in opening para stated that M/s. Jai Balaji Industries Ltd (Unit IV) was earlier known as Shri Ramrupai Balaji Steels Ltd. The Appellant in reply to the show cause notice has categorically stated that the present Appellant had taken over this unit only w.e.f. 23-07-2007. Upto that point there was only one head office and one manufacturing unit. So there is no justification to deny the Cenvat credit up to the said date. Even subsequent to 23-07-2007 there is neither any allegation in the show cause notice nor any finding in the Order-in-Original that the Cenvat credit on input services was utilized in more than one unit. CENVAT credit - bank advices - auxiliary insurance services - HELD THAT:- The Chartered Accountant in the certificates has certified that the said banking financial services as well as auxiliary insurance services were received and used by the Appellant. He has also certified that the Cenvat credit on such services had been availed only once as shown in their records. Despite the fact that the above Chartered Accountant s certificates are on record, the Commissioner has not rebutted or controvered the veracity of the same. Therefore, the case made out by the Department lacks sufficient reasons to deny the cenvat credit on input service in respect of banking financial services and auxiliary insurance services. Extended period of limitation - Penalty - HELD THAT:- Though the show cause notice was issued under extended period of limitation where there was a proposal to impose penalty on the Appellant of ₹ 2,000/- only in terms of Rule 15(3) of Cenvat Credit Rules, 2004 read with Section 11AC of the Act - having not imposed penalty either under Section 11AC of the Central Excise Act which was duly invoked in the show cause notice or under Rule 15(4) of Cenvat Credit Rules, 2004, the Commissioner has impliedly accepted that it was not a case of willful mis-statement or suppression of facts with intent to evade payment of duty - the demand of Cenvat credit beyond the period of one year is barred by limitation. Appeal allowed - decided in favor of appellant. 2021 (9) TMI 24 Violation of principles of natural justice - grant of refund of excess excise duty paid on the transaction value without seeking an adjustment for discounts to the Appellant - incidence of duty on discount not passed to its dealers - HELD THAT:- The law in this regard is well settled by the Hon ble Supreme Court in COMMISSIONER OF CENTRAL EXCISE, MADRAS VERSUS M/S ADDISON CO. LTD. [ 2016 (8) TMI 1071 - SUPREME COURT] that the onus is upon the person claiming refund of excise duty on post clearance discount to establish that the incidence of duty on such discount has not been passed on to any other person. The Hon ble Supreme Court in the Addison case has held in unequivocal terms that Credit Notes are valid instrument for the purposes of passing post clearance discounts and that an assessee is entitled for filing the claim for refund on the basis of Credit Notes raised by him towards discount. The CA certificate produced by the Appellant in the instant case goes to show that the Appellant has not passed on the incidence of duty on discount to its dealers. It is also found from the sample certificates issued by the dealers that such dealers were not registered under the Central Excise Law for the purposes of availing or passing of Cenvat credit. Therefore, the question of any double benefit in the form of refund of excise duty on the component of discount as well as Cenvat credit on the said component does not arise. Further, certificate from the dealers also confirms that the incidence of duty was not passed on by them to their buyers. These evidences establish that the duty element on the discount component was borne by the Appellant himself. Applicability of judgement in the case of COMMISSIONER OF CENTRAL EXCISE, MADRAS VERSUS M/S ADDISON CO. LTD. [ 2016 (8) TMI 1071 - SUPREME COURT] - HELD THAT:- The Hon ble Supreme Court had rejected the revenue s Civil Appeal No. 8488 of 2009 wherein the assessee had produced evidences in the form of CA certificate to show that the incidence of duty on discount was borne by the manufacture himself. Therefore, the decision of the Hon ble Supreme Court in the Addison case cannot be said to be against the Appellant. Appeal allowed - decided in favor of appellant. 2021 (9) TMI 22 Delay in the processing of refund claims filed by the Appellants - N/N. 33/1999 - grant of interest on account of delayed grant of refund - Section 11BB of the Central Excise Act - relevant date for claiming interest - whether the period of three months is to be reckoned from the date of the order sanctioning the refund or from the date of the application seeking refund? Whether there was any delay in the processing of refund claims filed by the Appellants under N/N. 33/1999?- HELD THAT:- Since the claim for refund/exemption filed by the Appellants in 2008 was eventually adjudicated in favour of the Appellants in 2019, it is evident that there was a delay in the processing of the refund in favour of the Appellants. The Original Authority and the Appellate Authority have proceeded on the premise that the communication dated 27 February 2019 is a claim for refund, which is factually incorrect - The said communication dated 27 February 2019 by the Appellants is only forwarding and inviting the attention of the jurisdictional refund sanctioning authority to the Final Order dated 9 July 2018 passed by this Tribunal and cannot be construed as a fresh claim. If there was a delay whether the Appellants are entitled to claim for interest under Section 11BB of the Central Excise Act? - HELD THAT:- The said issue has already been decided in favour of the assessee and against the revenue by the Hon ble Guwahati High Court in the case of Amalgamated Plantations [ 2013 (11) TMI 589 - GAUHATI HIGH COURT] where it was held that Petitioners, should, therefore be entitled to interest under Section 11BB of the Central Excise Act, 1944 on the excise duty refunded to them. The jurisdictional excise officers shall now determine the interest amount payable to the petitioners for the relevant periods. The amount found due shall be paid to the petitioners within three months from today. If the provisions of Section 11BB are applicable to the facts of the present case whether the period of three months is to be reckoned from the date of the order sanctioning the refund or from the date of the application seeking refund? - HELD THAT:- It is settled by the decision of the Hon ble Supreme Court in Ranbaxy Laboratories case [ 2011 (10) TMI 16 - SUPREME COURT] that the said period has to be reckoned from the date of the application for exemption/refund, which in the instant case is 10 January 2008, and not the date of the adjudication or appellate order sanctioning the refund - The learned Appellate Commissioner completely misdirected himself in inviting reference to Section 11B(5)(B)(ec) of the Act dealing with the relevant date in the context of refund claims, which has no manner of application in determining the Appellants eligibility to claim for interest required to be ascertained in terms of Section 11BB of the Act. Appeal allowed - decided in favor of appellant. 2021 (9) TMI 4 Validity of issuance of Input Service Distributors invoice by Parle to its contract manufacturing unit - the contract manufacturing is carried out in terms of N/N. 36/2011-CE (NT) dated 26.6.2011 - HELD THAT:- The Hon ble Larger Bench in the case of M/S. KRISHNA FOOD PRODUCTS, M/S. MARIAMMA R. IYER, M/S. PARLE BISCUITS PVT LTD. VERSUS THE ADDITIONAL COMMISSIONER OF CGST C. EX [ 2021 (5) TMI 906 - CESTAT NEW DELHI] has decided the said question in conformity in favour of the assessee by holding that the Parle Biscuit Products Ltd. was justified in distributing the credit on input services attributable to excisable products on pro rata basis proportionate to the turn over of each unit between the manufacturing plant of Parle Biscuits and its other manufacturing units. Appeal allowed - decided in favor of appellant. CST, VAT & Sales Tax 2021 (9) TMI 56 Validity of SCN issued by competent authority under Rule 58 - violation of Section 70(5)(b) of Jharkhand Value Added Tax Act, 2005 - HELD THAT:- After having said that the High Court ought to have kept the option to the competent authority open to issue a fresh show cause notice in conformity with the provisions of the Act and Rules concerning the subject matter of notice under Rule 58 for violation of Section 70(5)(b), which was set aside and thereafter the respondent would respond and contest the said proceedings. That liberty is not conferred by the High Court in the present case. Hence, to that extent, we need to modify the order of the High Court. The High Court having set aside the show cause notice should have given liberty to the competent authority to proceed with the matter in accordance with law afresh - Appeal allowed. 2021 (9) TMI 52 Grant of refund which was deducted from the petitioner s bills in course of execution of a work contract - assessment period 2010-11 to 2013-14 - HELD THAT:- One cannot lose sight of the fact that the failure or inability of the revenue to frame an assessment should not place the assessee in a more disadvantages position then what it would have been an assessment had been made. In a case where an assessee chooses to deposit by way of abundant caution advance tax or self assessment tax which is in excess of his liability on the basis of the return furnished or there is any arithmetical error or inaccuracy, it is open to him to claim refund of the excess tax paid in the course of assessment proceeding. Section 240 of the Act enjoins an obligation on the revenue to refund the amount to the assessee without his having to make any claim in that behalf. In appropriate cases it is open for the assessee to bring facts to the notice of the concerned authority on the base of the return furnished which may have a bearing on the quantum of the refund. In the present case, the assessee had not paid tax voluntarily. From the beginning the assessee had contested any collection of tax from its payments by KSS. The Superintendent of taxes however insisted that such deduction be made and the amount so deducted be deposited with the government revenue. The assessee had every right to dispute such collection and such dispute when raised in the return filed, had to be adjudicated by the Superintendent. The amount so collected cannot be retained without adjudication. Not framing the assessment till the return gets time barred cannot be the ground for retaining such tax. The Superintendent not having framed assessment, must refund the amount in question to the petitioner with statutory interest - the respondent No.4 shall refund the said sum of ₹ 24,21,007/- to the petitioner with interest as prescribed under the Act - petition disposed off. 2021 (9) TMI 42 Validity of reassessment order - excess input tax credit disallowed - time limitation - disallowance on the ground that same was not claimed in VAT 100 returns and the revised returns were filed belatedly beyond the period of 6 months prescribed under Section 45(4) of the Act - HELD THAT:- The respondent, for the tax period i.e. from April 2008 to March 2009, has reversed the input tax credit for an amount of ₹ 91,98,450/- @ 2.26% on stock transfer outward. The credit of excess input tax reversal cannot be rejected on the ground of non-filing of the revised return within the due date. It is pertinent to note that Section 35(4) of the Act which provides the revised return within a period of 6 months from the end of relevant tax period, is incorporated in the Act w.e.f. 01.04.2012 i.e. subsequently. The time limit prescribed for revised return does not apply to the case of the respondent as the tax period pertains to April 2008 to March 2009. Therefore, the revised return filed by the respondent cannot be said to be belated return in the light of Section 35(4) of the Act which has no application to the fact situation of the case. It cannot be held that Tribunal has failed to decide a question of law or has erroneously decided a question of law - Petition dismissed. Indian Laws 2021 (9) TMI 47 Dishonor of cheque - Insufficient Funds - prosecution under Section 141 of N.I. Act - Section 138 of Negotiable Instruments Act - HELD THAT:- It is not in dispute that the cheque has been issued on the account of Belagavi Liberal Credit Souhard Co. Operative Ltd., in favour of respondent. The said society has not been impleaded as accused. The petitioners who were working as General Manger and Branch Manager respectively were arraigned as accused. Petitioner No.1 is a General Manager of the said society had signed on the said cheque. As per provisions of Section 141 of N.I. Act, if the person committed offence under Section 138 is company, every person who at the time the offence is committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence, shall be liable to be proceeded against and punished accordingly. In the absence of company (society) arraigned as accused, a complaint against the petitioners was therefore not maintainable. The petitioners being employed as General Manager and Branch Manager have signed the cheque, therefore, the proceedings against the petitioners are liable to be quashed. The learned counsel for respondent sought liberty to file an application to add company (Society) as the accused. Whether such application if filed by the respondent, maintainable or not cannot be considered in the present petition. If such an application is filed, it is for the trial court to consider it on merits. Application allowed. 2021 (9) TMI 41 Dishonor of Cheque - insufficiency of funds - forged signature or not - rebuttal of presumption - accused did not lead any defence evidence but denied the incriminating evidence appeared against him at the time of recording his statement - offence punishable under Section 138 of the N.I. Act - HELD THAT:- Looking to the conduct of the accused, both the Courts below have clearly observed that the accused is in the habit of changing his signatures regularly and he has also signed in difference ways before the Courts below. Apart from that, the accused has not denied that Ex.P2 does not belong to him. He has simply asserted that the said cheque was taken by complainant from his house and his signature was forged, but the bank endorsement discloses that the cheque was not returned on the ground that the signature mismatch but it was returned for want of sufficient funds. If at all the signature on Ex.P2 is being disputed by him, nothing prevented the accused/appellant to produce his specimen signature available for the period from 1998 to 2003, but he did not do so. The presumption is a statutory presumption and when prima- facie material evidence is placed, the onus shifts on the accused to rebut the said presumption - when accused is making allegation regarding forgery of his signature, he would not have kept quiet and he would have intimated the bank and he would have also lodged a complaint in this regard, but his silence speaks lot of things. The conduct was also observed by the Trial Court as well as the Appellate Court wherein he protracted the proceedings for ten years, he absconded and jumped on bail on several occasions. Even before this Court he did not respond to notice and amicus curiae was also appointed by this Court which discloses his conduct. Both the courts below have specifically looking to the conduct of the accused have observed that he is in the habit of changing the style of his signature from time to time and he is in the habit of changing the advocates to defend his case with an intention to obstruct the proceedings and abuse the process of the Court. The statutory presumption under Section 139 of the Act is in favour of the complainant. Both the Courts below have in detail appreciated the oral and documentary evidence and arrived at a just decision of convicting the accused/appellant for the offence punishable under Section 138 of the Act. The orders of the courts below do not suffer from any perversity or illegality so as to call for any interference by this Court - Revision petition dismissed. 2021 (9) TMI 40 Dishonor of cheque - legally enforceable debt - rebuttal of presumption - preponderance of probabilities - summary of the case of the complainant in the Trial Court was that, the accused was known to him for the previous ten years to the date of the complaint and both of them were friends - HELD THAT:- Since the accused is expecting the complainant to produce some documents to prove the loan in question which is for a sum of ₹ 3,00,000/-, equally well, the accused is also expected to retain certain documents towards the alleged repayment of the previous alleged loan of ₹ 50,000/-. However, since it is the accused who has taken a contention that he has taken a previous loan from the complainant, which is ₹ 50,000/- and has repaid the said loan and also has taken a contention that the cheque in question was given as a security at that point of time, then, it is for the accused to produce cogent evidence, either oral or documentary and to make out a case at least on the case of preponderance of probabilities. However, the accused, except his statement in the form of suggestion to PW-1 and through his evidence as DW-1, has not produced any corroborative material or evidence - the sole defence of the accused that the cheque in question was given to the complainant as a security in 2006 and the same was misused by the complainant in the year 2008, does not stand established. Added to this, admittedly, the accused has not taken any further action for the recovery of the said cheque from the alleged date of repayment, till the said cheque is alleged to have been misused by the complainant which was in the year 2008. No legal notice has been admittedly given to the complainant from the accused's side. No action for recovery, including lodging of any Police complaint has been initiated by him - the contention of the learned counsel for the petitioner/accused that, the accused has issued the cheque in question as a security to the complainant towards an earlier loan transaction in the year 2006, does not gain support to believe the same. Both the Trial Court as well as the Sessions Judge's Court have rightly held that the complainant has proved the alleged guilt against the accused, whereas, the accused could not able to make out a case at least on preponderance of probabilities. Accordingly, the Trial Court has proceeded to convict the accused for the offence punishable under Section 138 of the N.I. Act, which was further confirmed by the learned Sessions Judge's Court. Since the said finding of the Trial Court and the Sessions Judge's Court has led them to convict the accused and also the order on sentence pronounced by the Trial Court, which is proportionate to the gravity of the proven guilt against the accused, the impugned judgments cannot be called as perverse, erroneous or illegal, warranting any interference at the hands of this Court. The Criminal Revision Petition stands dismissed as devoid of any merit.
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