TMI Tax Updates - e-Newsletter dated: August 8, 2024 (2024)

Case Laws in this Newsletter:

GSTIncomeTaxCustomsPMLAServiceTaxCentralExcise

Highlights / Catch Notes

GST

• Key GST amendments from Finance Act, 2024 now in effect! Section 13 from Oct 1, 2024; Sections 11 & 12 from Apr 1, 2025.

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• High Court overturns denial of input tax credit by petitioners. Cases remitted for fresh decision. Possible benefits if Finance Bill proposals enacted. Petitioners to deposit 25% disputed tax.

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• Court clarified that a writ of prohibition supervises courts from acting beyond jurisdiction. Distinction from certiorari noted. Writ petition dismissed.

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• Ruling: No GST on electricity delivery charges! Inward supplies not eligible for CGST and SGST credit.

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• Services provided to government under Jal Jeevan Mission are taxable at 18%. Exemption till 31-12-2021. After 01-01-2022, no exemption.

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• Goods like Pani Puri and services like serving cooked food at the counter are taxable at 5% GST rate.

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• Input tax credit available for second-hand luxury car business. Claim credit on evaluation, refurbishment, parts replacement expenses. No restrictions on credit claim.

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• Demo cars can get Input Tax Credit if used for future supply after demo period. Conditions apply: no depreciation claim, must be used for supply.

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Income Tax

• Assessment reopened with errors in notice, alleging non-filing of return. Court rules in favor of assessee, criticizes AO's inconsistent approach.

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• Reassessment challenged over late Form 10 submission. Disclosure more vital than digital filing rules. Court debates Section 11(2) relevance. Ruling emphasizes tax evasion proof.

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• TDS: District Inspector deducted too much tax from salary arrears, blaming tax confusion. Court orders inquiry into incompetence.

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• Legal reps of deceased can challenge proceedings, but must follow Section 159. Court set aside reopening notice against deceased.

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• Validity of order questioned after Settlement Commission abolished. CBDT's additional conditions for eligibility deemed unlawful. Petitioner eligible.

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• Is property income "house property" or "business income"? Tribunal favors consistency, rejects Revenue's interpretation.

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• Expat salary reimbursed not taxable as FTS. No agency PE/interrelated transaction. SanDisk India not assessee's dependent agent.

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• Assessee LLC providing web services held US tax resident, eligible for India-USA DTAA benefits. Tribunal remands taxability issue to AO.

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• Non-resident's foreign income not taxable in India. Stock options for foreign services not taxable. Tax treaty benefits allowed.

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• Penalty u/s 271(1)(c) not leviable if assessee voluntarily discloses & pays tax during reassessment without adjustment.

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• Non-resident Indian's challenge against ITO's jurisdiction upheld; reassessment notice invalid. Faceless Assessment Unit acknowledged NRI status.

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• Reassessment notice quashed due to time limit & lack of approval under new law. Appellant wins on legal grounds.

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  See Also

  IRS - Accepting Resumes from Individuals with Disabilities (Schedule A)SBI NRI Loan Against Deposit: Your Key to Financial StabilityVerdugo Ave, Burbank, CA property recordsPart 1 - Individuals - All Units Flashcards by Michael Smith

• Tonnage Tax Scheme: No FCCB premium deduction allowed. Expenditure against tonnage income prohibited. Free funds argument rejected. 60% depreciation on UPS.

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• Consultancy fees paid to director allowed if reasonable per business needs, complying with laws & not excessive as per market rates.

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• Penalty u/ss 271D & 271E for cash loans from directors rejected - no exemption, proceedings timely despite COVID delays. Urgent expenses at distant project sites allowed cash loans.

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• Annual letable value based on expected market rent, not actual rent. Provisioned expenses: If payer, payee, nature & liability identified, TDS due.

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• Reopening invalid; mere discrepancy in computation method & legal interpretation isn't 'information'. Lack of reason to believe income escaped assessment. Sec 50C inapplicable on stock-in-trade sale.

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• Corpus donations exempted u/s 11(1)(d), not 11(1)(a). No overlapping exemption. Separate incomes, separate exemptions. Assessee's appeal dismissed.

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• Faceless Assessment Unit delayed order, deactivated Response Button, violated natural justice. Order u/s 147 for AY 2018-19 set aside.

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Customs

• Malicious prosecution suit against government authorities barred for late notice, overruling HC's view. Notice must precede limitation expiry per precedents.

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• Imported medical monitor classified under 8529, not 8528; monitors lack distinction; proposed classification upheld.

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• Denial of concessional duty rate for 'waste paper' import, non-maintenance of separate books, concealment from excise authorities to obtain 'end-use certificate'.

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• Import allowed sans BIS cert, CESTAT orders provisional release. Test reports inconclusive on goods' nature/value. Final ruling awaited.

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• Reg 17 CBLR mandates cross-exam rights; denial requires reasons. Statements u/s 108 questionable, cross-exam vital. Customs Broker not liable for employee's acts.

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• Imported goods wrongly classified due to lack of testing evidence. Witness stance changed, further questioning denied.

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IBC

• Operational creditors' rights under Art. 300A upheld. Tribunal's revisional jurisdiction over CoC affirmed. Finality doctrine & fraud risks in IBC addressed.

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PMLA

• Arrest legal, court order, reasonable suspicion. Prosecution justified delay. Petitioner's influence, witness reluctance considered.

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SEBI

• New rule allows unitholders in Infrastructure Investment Trusts to nominate a director even if others have that right. Change aims to support business and follows industry requests.

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• New Master Circular for Infrastructure Investment Trusts (InvITs) consolidates SEBI circulars up to May 15, 2024. Compliance is key!

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• New rules for Real Estate Investment Trusts (REITs)! Issued by SEBI, these rules combine all past circulars. Stay compliant!

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• New amendment allows unitholders in Real Estate Investment Trusts to nominate a director on the Board of Directors of the Manager.

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Service Tax

• Service tax refund allowed on additional charges recovered from customers without availing CENVAT credit. Gross amount charged basis for service tax payable.

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• Flawed order due to vague notice alleging dual taxability impermissibly. No independent design services. Revenue failed to prove design as aim.

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• Service recipient's costs for CISF security like accommodation, medical, telecom not taxable as free supplies. Tribunal upheld Bhayana Builders ratio.

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Central Excise

• Electricity use evidence challenged; cross-exam denied, violating justice. Tribunal rejected quantification formula, but Revenue calculated averages. Case law argument rejected. Remanded for cross-exam opportunity.

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TMI Short Notes

• Money Laundering:

  PMLA and CrPC: Supreme Court's Interpretation on Summons, Appearance, and Arrest

• Income Tax:

  Royalty or Business Income? High Court Clarifies Taxation of Remittances against Software Purchase

Articles

• CHARITABLE PURPOSE

Notifications

• GST

• 16/2024 - dated 6-8-2024 - CGST
  Seeks to bring in force provisions of Sections 11, 12, 13 of the Finance Act, 2024 - Effective dates to the amendments to Central Goods and Services Tax Act, 2017

• GST - States

• 1202-F.T. - dated 29-7-2024 - West Bengal SGST
  Seeks to amend rule 109A of the West Bengal Goods and Services Tax Rules, 2017

Circulars / Instructions / Orders

• GST - States - Trade Circular No. 11T of 2024 - dated 4-7-2024
  Clarification in respect of GST liability and input tax credit (ITC) availability in cases involving Warranty/ Extended Warranty, in furtherance to Trade Circular No. 15 T of 2023 dated 21.07.2023
• GST - States - Trade Circular No. 12T of 2024 - dated 4-7-2024
  Entitlement of ITC by the insurance companies on the expenses incurred for repair of motor vehicles in case of reimbursem*nt mode of insurance claim settlement
• GST - States - Trade Circular No. 13T of 2024 - dated 4-7-2024
  Clarification regarding taxability of the transaction of providing loan by an overseas affiliate to its Indian affiliate or by a person to a related person

News

• Strengthening of National Sample Survey Office
• ECONOMIC SURVEY OF RURAL-URBAN POPULATION
• Shri Piyush Goyal calls for faster negotiations of BIMSTEC Free Trade Agreement
• CBDT relaxes provisions of TDS/TCS in event of death of deductee/collectee, before linkage of PAN and Aadhaar
• Boilers Bill, 2024 introduced in Rajya Sabha

Case Laws:

• GST

• 2024 (8) TMI 386

  Denial of input tax credit availed by the respective petitioners belatedly beyond the statutory period prescribed under Section 16(4) of the respective GST Enactments - HELD THAT:- Since the Parliament itself has come to the rescue of the assessees, the impugned orders passed by the Original Authority as also the Appellate Authority upholding the orders of the Assessing Officer in the batch of Writ Petitions are set aside and the cases are remitted back to the Assessing Officer to pass a fresh order on merits strictly in accordance with the Finance Act, 2024. In case, the proposals in Clauses 114 and 146 of the Finance (No.2) Bill, 2024 are accepted and enacted in the Finance Act, 2024, the benefit of these provisions may be extended to the respective petitioners. Regarding the demands confirmed in the impugned order, excluding the denial of input tax credit for the wrong availing of input tax credit, the respective petitioners shall also deposit 25% of the disputed tax. Subject to this condition, orders will be passed on merits and in accordance with law. Petition disposed off.

• 2024 (8) TMI 385

  Declining the application filed by the petitioner to rectify the error - Section 161 of the respective GST enactments - rectification application passed without providing an opportunity for personal hearing - Violation of principles of natural justice - HELD THAT:- The Court is of the view that as ordered in the case of TVL. PODHIGAI MOTORS, REPRESENTED BY ITS PARTNER RAJASEKARAN VERSUS THE ASSISTANT COMMISSIONER (ST) , PALAYAMKOTTAI [ 2024 (6) TMI 1249 - MADRAS HIGH COURT] , the order rejecting the rectification application should not have been passed without providing an opportunity for personal hearing. The impugned order also sans reasoning. In this case, both are absent. The impugned order is set aside and the case is remitted back to the respondent to pass fresh orders on merits and in accordance with law after hearing the petitioner - petition disposed of by way of remand.

• 2024 (8) TMI 384

  Challenge to order dismissing appeal as barred by limitation - section 107 of CGST Act, 2017 and the Circular No. 148/04/2021-GST dated 18th May 2021 - HELD THAT:- The legislative intentment in this regard is manifest in the provisions under Section 30 of the CGST Act. In the backdrop of such legislative intentment, the provisions under Section 107 of the CGST Act cannot be frustrated on mere technicalities. A right to appeal as provided under the statute must be decided on merits irrespective of some laches or delay on the part of the Assessee. This is by now too well-settled that the statutory provisions of limitation under Section 107 of the CGST Act would bind the statutory authority which cannot condone the delay except the circ*mstances envisaged thereunder but such limitations are not applied in a writ proceeding. The powers under Article 226 of the Constitution of India are founded on justice, equity and good conscience and are exercised for public good. This Court referred to the decision in ASSISTANT COMMISSIONER (CT) LTU, KAKINADA ORS. VERSUS M/S. GLAXO SMITH KLINE CONSUMER HEALTH CARE LIMITED [ 2020 (5) TMI 149 - SUPREME COURT ] wherein the Hon ble Supreme Court observed that if the Assessee did not avail the alternative remedy of statutory appeal even within the extended period of limitation by seeking condonation of delay then a writ petition shall not be entertained. The present writ petition is entertained and the order dated 13th June 2024 passed by the Joint Commissioner of CGST is quashed - petition allowed.

• 2024 (8) TMI 383

  Challenge to communication issued under Section 81 of the respective GST Act, 2017 - impugned order of attachment and notices are in gross violation of principles of natural justice - no notice was issued to the petitioner before the attachment was made - HELD THAT:- This Writ Petition is disposed of without notice on the private respondents and counter of the official respondent, as no adverse orders are proposed to be passed at this stage. Under Section 81 of the respective GST enactment, there is an embargo on the assessee, who is in default from transferring or alienating the assets with a view to defeat the interest of the Government Revenue. The proviso carves out an exception. It is similar to the provisions that prevailed under the erstwhile provisions under the TNVAT Act, 2006 as also TNGST Act, 1959. The petitioner has to establish the bona fide in the manner known to law. Mere reliance to encumbrance certificate is not sufficient - Further, the sale consideration of Rs. 3,96,600/- (Rs. 2,41,600/- and Rs. 1,55,000/-) for an extent of 1.25 acres of land appears to be far too low. It is therefore for the petitioner to file a suit to establish that the petitioner was a bona fide purchaser in accordance with the proviso to Section 81 of the respective GST enactment. The first respondent shall keep all the recovery proceedings in abeyance for a period of three months - Petition disposed off.

• 2024 (8) TMI 382

  Challenge to Assessment Orders and the consequential order passed under Section 161 of the TNGST Act, 2017 - rejection of request of the petitioner for rectification of the purported mistakes committed in the respective Assessment Orders - petitioner submits that the impugned orders in these Writ Petitions may be set aside and the cases be remitted back to the respondent to pass a fresh order in terms of the following orders for the respective Assessment Years. HELD THAT:- The submissions of the petitioner appears to be reasonable as there are two orders, one confirming the demand and one dropping the demand by two different authorities. Under these circ*mstances, the impugned orders are set aside and the cases are remitted back to the respondent to pass a fresh order in the light of the above mentioned orders passed by the Assistant Commissioner [ST] [IU]. Petition allowed.

• 2024 (8) TMI 381

  Maintainability of writ petition - issuance of writ of prohibition - whether this Court can exercise its jurisdiction to grant relief to the petitioner by issuance of a writ in the nature of prohibition notwithstanding, the writ petitioner not challenging the orders which he claims to have been passed erroneously? HELD THAT:- It would transpire that ordinarily a writ of prohibition is issued for exercising supervisory jurisdiction with an object to restrain courts or inferior tribunal from exercising a jurisdiction which they do not possess at all or to prevent them from exceeding the limits of their jurisdiction. In other words, to keep such courts/tribunals within their bounds. To emphasize the scope and jurisdiction as regards exercise of power to correct a final order passed by an inferior tribunal and the scope and exercise of jurisdiction to correct errors of jurisdiction committed by inferior courts and Tribunals, the learned Government pleader has placed reliance in the case of GENERAL MANAGER, ELECTRICAL RENGALI HYDRO ELECTRIC PROJECT, ORISSA AND ORS. VERSUS GIRIDHARI SAHU AND ORS. [ 2019 (9) TMI 1696 - SUPREME COURT] . It appears that the Hon ble Supreme Court after consideration of several authorities on the subject, including the case of SYED YAKOOB VERSUS KS. RADHAKRISHNAN [ 1963 (10) TMI 26 - SUPREME COURT ] had categorically identified the jurisdiction to issue a writ of certiorari and a writ of prohibition, and it is in that context the Hon ble Supreme Court held 'The High Court gave a further opportunity to the Appellate Tribunal to consider the claim of the first respondent. Though the High Court quashed the order of the Tribunal, the observation in the judgment clearly shows that the Tribunal could reconsider the matter. Indeed, learned counsel for the first respondent conceded that fact.' Though, both the writ of certiorari and prohibition may be issued for correcting errors of jurisdiction, however, a writ of certiorari is intended to correct a jurisdictional excess once, a decision is rendered, on the other hand a writ of prohibition could be issued while the Tribunal or Authority is yet to conclude the proceeding. Having regard thereto, it becomes explicitly clear that in the given facts wherein a determination has already been made by the appellate authority under Section 107 of the said Act, there may be little scope for exercise of jurisdiction by issuance of writ in the nature of prohibition. This is not a fit case for exercising discretion in favour of the petitioner, especially when the petitioner only insists for deferring the recovery proceeding without the petitioner seeking adjudication of its rights. The petitioner having not come forward to examine his rights, the writ petition fails and is accordingly dismissed.

• 2024 (8) TMI 380

  Challenge to impugned order passed u/s 73(9) of the TNGST Act, 2017 for the assessment year 2017-18 - petitioner failed to reply to notices stating that the petitioner was unaware of the same as the notices were posted on the GST common portal - violation of principles of natural justice - HELD THAT:- The Court is of the view that the petitioner may have a case on merits and therefore, the discretion is exercised partly in favour of the petitioner by setting aside the impugned order and remitting the case back to the respondent to pass fresh orders on merits and in accordance with law, subject to the petitioner depositing 25% of disputed tax to the credit of the respondent from its Electronic Cash Register within a period of 30 days from the date of receipt of this order. The impugned order, which stands quashed, shall be treated as addendum to the show cause notice that preceded the impugned order. Petition disposed off.

• 2024 (8) TMI 379

  Challenge to assessment order and recovery notice - Recovery of the disallowed ITC - Rejection of petitioner's claim of input tax credit on the ground that the claim is in violation of Section 16 (2) (c) of the KSGST Act - HELD THAT:- In the light of the judgment in M/S. M. TRADE LINKS, PUTHANANGADI INDUSTRIES, MKHK TECHSTREAM PRIVATE LIMITED, M/S. LALUKKAS MOBILES, M/S. ULTRAPRIME CEMENTS INDIA PVT. LTD., YOHANAN THYPARAMPIL EASOW, P.J. GEORGE (PROPRIETOR) M/S JANATHA AGENCIES, SALAHUDHEEN, CHALLIYIL VIJAYAN SHAN, M/S. MALL OF JOY PVT LIMITED, VERSUS UNION OF INDIA, CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS, STATE OF KERALA, COMMISSIONER OF KERALA STATE GST, CHIEF COMMISSIONER OF CENTRAL TAXES, ERNAKULAM, GOODS AND SERVICE TAX COUNCIL, GOODS AND SERVICES TAX NETWORK, INFINITE TECHNOLOGY SOLUTIONS, ASSISTANT COMMISSIONER (WC LT) WORKS CONTRACT, STATE GOODS SERVICE TAX DEPARTMENT. [ 2024 (6) TMI 288 - KERALA HIGH COURT] , it will be open to the petitioner to make a written request before the 1st respondent, Deputy Commissioner of State Tax, claiming the benefit of the circulars referred to above. If the petitioner makes such a request within a period of two weeks from the date of receipt of a copy of this judgment, the 1st respondent shall consider the same in the light of the judgment referred to above, as expeditiously as possible, at any rate, within a period of three months from the date of the request. For the said purpose, Ext.P1 order is set aside. Petition disposed off.

• 2024 (8) TMI 378

  Liability to pay Goods and Services Tax (GST) - intra state delivery of electrical energy - interstate delivery of electrical energy - In case the applicant is liable to pay Goods and Services Tax (GST), whether the applicant can claim and utilise the CGST and SGST paid at the instance of procurement of the solar power plant as input tax credit for payment of the GST liability? Whether on the basis of the facts the applicant is liable to pay Goods and Services Tax (GST)on intra state delivery of electrical energy? - HELD THAT:- In the invoices issued by applicant to its buyer, the applicant has invoiced charges for 'supply of Electricity' only and has not collected' delivery charges' (transmission charges). Supply of Electrical Energy is exempted from Tax vide Entry at Sr. No 104 of the Notification No. 2/2017-Central Tax-(Rate) dated 28 June 2017. Whether on the basis of the facts the applicant is liable to pay Goods and Services Tax (GST)on interstate delivery of electrical energy? - HELD THAT:- In the invoices issued by applicant to its buyer, the applicant has invoiced charges for 'supply of Electricity' only and has not collected' delivery charges' (transmission charges). Supply of Electrical Energy is exempted from Tax vide Entry at Sr. No 104 of the Notification No. 2/2017-Integrated Tax-(Rate) dated 28 th June 2017. In case the applicant is liable to pay Goods and Services Tax (GST),whether the applicant can claim and utilise the CGST and SGST paid at the instance of procurement of the solar power plant as input tax credit for payment of the GST liability? - HELD THAT:- As the output supplies of Applicant are exempted from tax, Applicant is not entitled to claim input Tax Credit on its inward supplies of goods or services or both or capital goods (procurement of the solar power plant)used in generation of Electricity as per provisions of Section 17 r.w. rules 42 and 43, which prescribe for calculation of Input Tax Credit.

• 2024 (8) TMI 377

  Classification of the services - HSN/ SAC Code - services supplied by the applicant to Maharashtra Jeevan Pradhikaran (MIP) as a part of Jal Jeevan Mission which is a mission of Government of India allotted - entry in Notification No. 11/2017-Central Tax (Rate) dated 28th June 2017 - Services provided to MJP for the Constitutional function of State Central Governments, for which these Governments are liable to pay the consideration of contract - Applicability of entry No. 3 in Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017 - Supply of services where Time of supply is on or before 31-12-2021 - Supply of services where Time of supply is on or after 01-01-2021. What is the classification of the services supplied to Maharashtra Jeevan Pradhikaran (MJP)? - HELD THAT:- The services supplied by the applicant are in nature of Technical Consultancy for Project Development and Management support services, and hence classifiable under SAC code 998399- Other professional, technical and business services n.e.c., under the head Business and Production Services covered at Sr No. 21 (ii) in the Notification No 11/2017-Central Tax (Rate) dated 28th June 2017 and are taxable at rate of 18% (9% CGST SGST each), wherever exemption is not applicable. Wherever exemption is not applicable. Whether Services provided to MIP for the Constitutional function of State Central Governments. for which these Governments are liable to pay the consideration of contract. and is made through PFMS. supplies are in fact made to the Central State Government? - HELD THAT:- Being creature of GST Law this Authority cannot comment on the submission that setting up MJP is entirely unlawful and contrary to the constitutional prescriptions and procedure, this is not appropriate forum to discuss such issue. However, it is clear that, as per the Constitution it is the function/ duty or responsibility of State/CentraI Government or local Government, and hence setting up MJP which is a body corporate owned by Government is entrusted with the function, is not prohibited but entirely expected, for development, implementation and regulation of such function - Property created under the Water supply schemes implemented by the MIP vests in MJP only, and not with the Government. Hence the argument being contrary to law is not accepted. The applicant has supplied only the Technical Consultancy for Project Development and Management support services which are pure services. No transfer of goods in any form takes place from the Applicant to the MJP. Whether these services are provided in relation to any function entrusted to a Panchayat under article 243G of the constitution or in relation to any function entrusted to the municipality under article 243W of the constitution? - HELD THAT:- Supply of services where Time of supply is on or before 31-12-2021. After Considering all the aforesaid facts, provisions of Law, issues and decision therein, we have no hesitation in holding the Technical Consultancy for Project Development and Management support services , provided by the applicant to the MJP for its Water supply schemes where time of supply is on or before 31-12-2021, are covered by the exemption entry at Sr No. 3 of the exemption notification No 12/2017-CentraI Tax (Rate), dated 28th June 2017 - Supply of services where Time of supply is on or after 01-01-2022. The Technical Consultancy for Project Development and Management support services , provided by the applicant to the MJP for its Water supply schemes where time of supply is on or after 01-01-2022, are not covered by the entry at Sr No. 3 of the Notification No 12/2017-CentraI Tax (Rate), dated 28th June 2017. As the words or a Government Authority or a Government Entity , are omitted from the aforesaid Entry at Sr. No. 3.

• 2024 (8) TMI 376

  Classification of supply - supply of goods or services - Pani Puri, Masala Chat, Punjabi Lassi, Sev Puri, Samosa Chat, Vada Pav, Pav Bhaji cooked and sold out without a brand name - falls under restaurant sales taxable @5% or not - applicable rate of GST on restaurant service - HSN code and tax rate. Classification of supply - supply of goods or services - Pani Puri, Masala Chat, Punjabi Lassi, Sev Puri, Samosa Chat, Vada Pav, Pav Bhaji cooked and sold out without a brand name - falls under restaurant sales taxable @5% or not - HELD THAT:- From the details provided by the taxpayer, it is found that they are engaged in counter sales of the above listed items in ready to eat condition to customers who consume at the counter. We also find that the supplied items carry no brand name. As per Annexure to Notification No 11/2017-Central Tax (Rate) dated 28-06-2017, Services provided by restaurants, cafes and similar eating facilities including takeaway services, room services and door delivery of food falls under HSN 996331. The apt classification for the service of serving of cooked items across the counter, which is provided by the applicant, is 996331. Applicable rate of GST on restaurant service - HELD THAT:- As per N/N. 11/2017-Central Tax (Rate) dated 28-06-2017, as amended by N/N. 46/2017-Central Tax (Rate) dated 14-11-2017, supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or drink, where such supply or service is for cash, deferred payment or other valuable consideration, provided by a restaurant, eating joint including mess, canteen, whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied, other than those located in the premises of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes having declared tariff of any unit of accommodation of seven thousand five hundred rupees and above per unit per day or equivalent is 5%, provided no ITC is taken on goods and services used in supplying the service - If the applicant falls within the above category, the rate of tax is 5%, without the option of availing input tax credit. However, in case the services are supplied from the premises of hotels, inns, guest houses, clubs, camp sites or other commercial places meant for residential or lodging purposes having declared tariff of any unit of accommodation of seven thousand five hundred rupees and above per unit per day or equivalent, then, the rate of GST applicable is 9% each towards both CGST and SGST. HSN code and tax rate - HELD THAT:- The question cannot be answered since they have not provided the HSN and tax rate under which they have classified the items. Further, no comments can be offered on the relevance of composition scheme without information on the total turnover of the applicant.

• 2024 (8) TMI 375

  Availability of input tax credit - inward supplies of goods or services which are in the nature of direct expenditures like spare purchases, repairs and refurbishment costs of vehicles, etc., except on purchase of old or used motor vehicles - inward supplies of other goods or services except on purchase of old or used motor vehicles - N/N. 8/2018-Central Tax (Rate) dated 25th January 2018. Admissibility of input tax credit of tax paid on various activities relating to the subsequent marginal sale of old and used luxury cars purchased from both registered and unregistered persons - HELD THAT:- The applicant is a regular taxpayer registered under the CGST/KSGST Act, engaged in the business of buying and selling of second hand goods such as old used luxury cars. When a used car is purchased from a customer, initially the applicant evaluates both external and internal condition of the vehicle by using both technology as well as the service of technically qualified persons. Then they decide the additional services such as refurbishment of the vehicle and replacement of spares or body parts, if any, for scaling up the value of the vehicle which are required for subsequent sale. The applicant either uses their own service station or external service stations to repair and refurbish such used vehicles. Where a registered person who is engaged in the supply of buying and selling of second hand goods such as used motor vehicles without availing any credit of input tax on the taxes paid at the time of purchase of such goods i.e, used motor vehicles, the GST at the rate as specified in the aforementioned notification shall be payable by such registered person on the value of supply that represents the margin of the registered person. Further, both sub-rule (5) of rule 32 of the CGST Rules, 2017 as well as the notification referred in this ruling not mandating the non availment of credit of input tax on the taxes paid for receipt of goods or services other than the credit of input tax on the taxes paid at the time of purchase of used cars to get the benefits available under the said rule and notification. Eligibility of input tax credit of tax paid on purchase of spare parts, refurbishment services of vehicles and professional charges for scaling up the sale value of such used vehicles - HELD THAT:- Sub-section (1) of section 16 of the CGST Act provides that subject to such conditions and restrictions and in the manner specified in section 49 of the CGST Act, a registered person is entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of business - The conditions for availment of credit of input tax charged on any supply of goods or services or both are prescribed in subsection (2) to sub-section (4) of section 16 of the CGST Act. Further, section 17 of the CGST Act provides restrictions and blocking of input tax credit for certain supplies on which tax has been charged. Neither sections 16 and 17 of the Act nor the notification No. 08/2018-CT (Rate) dt 25.01.2018 restricts the eligibility of input tax credit of tax paid on direct and indirect expenses incurred in the business of second hand sales of luxury cars engaged by the applicant. The applicant would be eligible to claim input tax credit of tax paid on both direct and indirect expenses such as repairs and refurbishment works of used vehicle, spare purchases, office stationary, telephone, rent, advertisem*nt, professional charges, etc, utilized in second hand business of luxury cars, subject to the conditions prescribed under section 16 to section 21 of the CGST Act and rules 36 to 45 of CGST Rules.

• 2024 (8) TMI 374

  Input Tax Credit - whether the cars used by the applicant for demonstration purpose are eligible for ITC or not? - HELD THAT:- The motor cars involved in the question are eligible for ITC only if these conditions are met. Therefore, the argument that demo cars are not used for transportation of persons doesn't make them eligible for ITC. However, it is found that the applicant intents to make a further supply of such cars after the demo period. The fact that the cars were used for demo purpose doesn't alienate the cars from its eligibility for ITC, if they are used for making further supply of the same, even if on a later date. Thus, the applicant can claim ITC on cars used for demonstration purposes, provided they are subsequently used for making supply. Thus, applicant are entitled to avail Input Tax Credit on inward supply of motor vehicles which are used for demonstration purpose. However, this ruling shall not be applicable if depreciation is claimed on the tax component of the cost of demo cars or if the cars are not used for making further supply of such cars.

• Income Tax

• 2024 (8) TMI 373

  Revision u/s 263 by CIT - under-assessment by virtue of the fact that the valuation that had been placed by the concerned authority for affixation of stamp duty was higher - As decided by HC [ 2023 (6) TMI 1133 - DELHI HIGH COURT] it was not the respondent/assessee who effectuated the sale of the subject land. The subject land was sold by the secured lenders to recover from dues owed by the respondent/assessee, that the Tribunal correctly concluded that the PCIT had failed to notice the underlying facts, while invoking his powers under Section 263 HELD THAT:- We are not inclined to interfere with the impugned judgment and order passed by the High Court. Hence, the Special Leave Petition is dismissed.

• 2024 (8) TMI 372

  Reopening of assessment u/s 147 - reopening on the base of a factual error pointed out by the audit party - Independent application of mind by AO or not? - As decided by HC [ 2023 (3) TMI 987 - GUJARAT HIGH COURT] AO without any conviction, when has issued the notice, this surely is not a case where the reopening of the case is on the basis of any factual error pointed out by the audit party - no material worth the name emerging that to indicate any independent application of mind could be noticed. On the contrary, there are glaring facts which have been pointed out that the AO had no subjective satisfaction while issuing the notice of reopening HELD THAT:- Heard learned counsel for the parties. As similar matter has already been dismissed, the instant petition also stands dismissed. Pending application(s), if any, shall stand disposed of.

• 2024 (8) TMI 371

  Validity of reopening of assessment - remittances purported to have been made to a non-resident or foreign company and a payment of more than INR 1,00,000/- for acquisition of shares - as argued original notice u/s 148A (b) never proceeded on the formation of a prima facie opinion by the respondents that the petitioner was disentitled from claiming benefits under the DTAA - HELD THAT:- We find that the notice u/s 148A (b) of the Act undoubtedly suffers from certain fundamental factual errors. SCN had proceeded on the premise that the petitioner had not filed its Return of Income for AY 2016-17. Once this was established to be factually incorrect, the respondent while passing the order under Section 148A (d) sought to overcome this mistake by observing that although a Return of Income had been submitted, it had not been subjected to assessment as contemplated under Sections 143 (3), 147 or 144 of the Act. It while passing the order disposing of the objections taken by the writ petitioner, also observed that the income relating to the transactions in question had not been offered to tax. It is on the aforesaid basis alone that the AO proceeded to observe that income earned in the concerned AY appeared to have escaped assessment. Aforesaid reasoning as adopted is rendered wholly unsustainable since undisputedly prior to the petitioner submitting its reply to the SCN, the AO was not only totally oblivious of a return having been submitted, it had not even examined the same in order to form an opinion that income liable to tax had escaped assessment. The original show cause notice was neither reflective of nor based on a due evaluation of the return as submitted. Merely because the petitioner had taken the position that the income was not taxable under the Act, would not constitute a basis for the respondent forming the opinion that income had escaped assessment. The question of income being voluntarily offered to taxation would ultimately depend upon an assessee conceding to its exigibility to tax. In order to sustain a proposed reopening, it was incumbent upon the respondent to have formed an opinion that the financial transaction was in fact liable to be taxed under the Act and thus, resulting in income having escaped assessment. However, and as is manifest from a reading of the original SCN, no such allegation stood levelled against the petitioner. Whether the petitioner would be entitled to the benefits of the DTAA was one which came to be alluded to only in the order framed under Section 148A (d) of the Act ? - Suffice it to note that the original notice u/s 148A (b) was not even founded on the allegation that the petitioner was not entitled to claim the benefit of that Article. It was only in the course of framing of the final order under Section 148A (d) that the respondent ultimately sought to draw sustenance from a separate order of assessment which had come to be framed for AY 2014-15. The material on the record further establishes beyond a measure of doubt that not only did the respondents fail to base the original show cause notice on a purported ineligibility of the petitioner to treaty benefits, even the order impugned in this writ petition is not based on any independent evaluation of whether the petitioner could be said to be disentitled to claim the exemptions contemplated under Article 13 (4) of the DTAA. The order, in this regard, is based entirely upon the findings and conclusions which underlie the order of assessment for AY 2014-15. This was also not a case where the order of assessment for AY 2014-15 was non-existent on the date when the original notice u/s 148A (b) came to be issued. Allotment of shares pursuant to the Scheme of Arrangement - Undisputedly the original show cause notice had neither noticed nor taken into consideration the Scheme in terms of which the allotment of shares came to be made in favour of the petitioner. We also find sufficient merit in the contention of the writ petitioner addressed in this respect, bearing in mind the provisions contained in Section 47 (vii) of the Act and which in unequivocal terms excludes a charge of capital gains in case of transfer of shares pursuant to a Scheme of Arrangement that may come to be approved. While we desist from rendering any definitive opinion in this regard, we do deem it apposite to observe that the ultimate order under Section 148A (d) fails to either examine or render any finding in this respect. The statutory scheme of reassessment neither sanctions vacillation nor can a decision to trigger reassessment be sustained based upon an attempted supplementation aimed at bolstering or buttressing the original opinion. The reasons on the basis of which a reassessment is proposed to be initiated is not a field of shifting sand and which authorises the AO to continually alter the basis on which the action is sought to be initiated. While the original SCN had proceeded on the basis that the petitioner was a non-filer and the subject income constituting remittances made to a foreign entity, it was clearly established that a return had in fact been filed and duly acknowledged. The petitioner had not made any remittances to third parties. In fact it had earned revenue from the sale of shares which were claimed exempt from taxation by virtue of Article 13 (4) of the DTAA. Once the aforesaid explanation was proffered, the AO then proceeded to hold that the petitioner was not entitled to treaty benefits, a charge which was not even laid in the original SCN or which could be said to have constituted the basis for the formation of opinion that reassessment was warranted. Stand enunciated in respect of the authority to reassess cannot sustain. Decided in favour of assessee.

• 2024 (8) TMI 370

  Validity of reassessment proceedings - delayed digital submission of Form 10 - importance of due disclosure as opposed to adherence to the mere procedural requirements of the digital filing of a form - Applicability of Section 11(2) - Form 10 having not been submitted within the time prescribed u/s 139 (1) and the petitioner having failed to obtain condonation of delay on account of a belated filing of Form 10 - whether digital submission of Form 10 was merely a procedural requirement? - HELD THAT:- We note that Section 11 (2) speaks of a statement in the prescribed form (which in this case is Form 10) being furnished to the AO. The change in the prescribed manner under Section 11 (2) (a) for the submission of Form 10 and which moved to a digital filing was introduced for the first time by virtue of the 2015 Act and the 2016 Amendment Rules. As was noticed by us hereinbefore, prior to those amendments, all that Section 11 (2) (a) required was for the assessee to apprise the AO, by a notice in writing, of the purposes for which the income was sought to be accumulated and the mode of its investment or deposit in accordance with Section 11(5). The requirement of Form 10 being furnished electronically was undisputedly introduced for the first time by way of the 2016 Amendment Rules. There thus clearly appears to exist plausible cause for the petitioner having been unable to effect an online filing. More fundamentally, we note that the action for reassessment is not founded on income liable to tax having escaped assessment. The respondents also do not question the acceptance of the accumulations in terms of Section 11 (2) in the assessment order dated 01 December 2018. The entire action for reassessment is founded solely on Form 10 having been submitted after 17 October 2016 and which was the due date in terms of Section 139 (1). In our considered opinion, an action for reassessment would have to be based on the formation of an opinion that income chargeable to tax has escaped assessment. That primordial condition would clearly not be satisfied on the mere allegation of a delayed digital filing of Form 10. We also bear in mind the underlying intent of Section 11 (2) and the submission of Form 10 in connection therewith which were aspects succinctly explained by the Supreme Court in Commissioner of Income-tax vs. Nagpur Hotel Owners Assn. [ 2000 (12) TMI 99 - SUPREME COURT] held that it is mandatory for the person claiming the benefit of Section 11 to intimate to the assessing authority the particulars required, under Rule 17 in Form 10 of the Act. If during the assessment proceedings the Assessing Officer does not have the necessary information, question of excluding such income from assessment does not arise at all. As a matter of fact, this benefit of excluding this particular part of the income from the net of taxation arises from Section 11 and is subject to the conditions specified therein. Therefore, it is necessary that the assessing authority must have this information at the time he completes the assessment. We, accordingly, allow the instant writ petition and quash the impugned order u/s 148A (d) and the consequent initiation of reassessment proceedings through notice u/s 148 - Assessee appeal allowed.

• 2024 (8) TMI 369

  Higher Deduction of income tax @ 30% from the arrears paid on salary on a misunderstanding of the applicable tax rates - responsibility of District Inspector of Schools - as submitted it is a bonafide mistake resulting from a misinterpretation of an income tax provisio - Finance and Accounts Officer has also stated that income tax was deducted on a misunderstanding but has informed the Court that her duty was merely to give suggestions to the District Inspector of Schools and she has not made the final decision for deduction of the amount and it is the District Inspector of Schools, who is responsible for making deduction towards income tax HELD THAT:- The aforesaid conduct of the concerned officers in first declining to pay arrears of salary to the petitioner for the period July, 2010 to October, 2021 and after this Court entertained the writ petition, making payment of the petitioner after deducting income tax at the rate of 30%, against the provisions contained in Section 192(1) of the Income Tax Act, 1961, prima facie indicates their vindictive approach against the petitioner. It also prima facie reflects incapability of the aforesaid officers in proper performance of their duty, regarding which a final finding can only be arrived at by the competent authority by holding a detailed inquiry. Accordingly, the opposite party no. 1-Additional Chief Secretary, Secondary Education, Government of U.P. is directed to get an inquiry conducted through some competent officer in the aforesaid matter regarding conduct of the aforesaid officers, in accordance with law, and to ensure suitable action as per the outcome of the inquiry. As prima facie a case of deliberate harassment of the petitioner at the behest of the authorities of the State has been made out in the present case, the Director of Education (Secondary Education), U.P. is directed to file his personal affidavit within a period of four weeks from today showing cause as to why interest be not awarded to the petitioner for the period of delay in payment of arrears of salary to the petitioner. List this case in the week commencing 02.09.2024.

• 2024 (8) TMI 368

  Validity of order passed by Faceless Assessment Unit - assessment order was passed beyond the expiry of seven days from the date of issuance of the show-cause - Violation of principles of natural justice - HELD THAT:- It is not in dispute that the Submit Response Button on the portal, for submission of response to the show-cause was deactivated on the expiry of the period for filing of the response. This prompted the petitioner to file the response with the Help Desk Grievance Cell. Although, the Faceless Assessment Unit may not have an opportunity to go through the response filed by the petitioner but the order passed by the Faceless Assessment Unit stands vitiated on the ground of violation of principles of natural justice as also failure to comply with the SOP as noted. In view thereof, the order passed u/s 147 r.w.s. 144B of the said Act for the AY 2018-19 is set aside. The matter is remanded back to the Faceless Assessment Unit. Since, the response filed by the petitioner is already on record, the Faceless Assessment Unit is directed to take note of such response and to dispose of the proceeding.

• 2024 (8) TMI 367

  Reopening notices addressed in the name of assessee expired - validity of proceedings against the legal representatives - Application of Section 159 - HELD THAT:- The legal representative stands conferred with not just the right to contest those proceedings, but also assert the extent to which the ultimate liability is liable to be liquidated. This reinforces the requirement of a notice being formally issued to the legal representative of the deceased assessee. We are, however, in this particular batch faced with a situation where the respondents neither adopted any corrective measures nor did they consciously take a decision to invoke the aforenoted statutory provision to continue proceedings against the legal representatives. The impugned action appears to have been mechanically continued in ignorance of the salutary provisions which stand embodied in Section 159. Reopening notice against deceased assessee setaside - We, however, accord liberty to the Revenue to proceed further and against the legal heirs of the assessees, if otherwise permissible in law.

• 2024 (8) TMI 366

  Validity of order passed by the Interim Board of Settlement - Settlement Commission as abolished by the Finance Act, 2021 - eligibility conditions in regard to extending the cut-off date to make an application u/s 245C - IBS passed final/impugned orders on the Petitioner s application which held that the Petitioner was not eligible for applying for settlement. HELD THAT:- As noted in Sar Senapati Santaji Ghorpade Sugar Factory Ltd. [ 2024 (4) TMI 204 - BOMBAY HIGH COURT] Notification dated 21st September, 2021 issued by the CBDT u/s119 (2) (b) of the Act, although was issued within the powers as conferred on the CBDT, however, to the extent it laid down additional conditions in Para 4 that the assessee should be eligible to file an application for settlement on 21st January, 2021, was held to be beyond the scope of powers of the CBDT under Section 119 of the Act. The Court observed that there was no provision in the Act empowering the CBDT to impose such eligibility conditions in regard to extending the cut-off date to make an application under Section 245C of the Act. Hence, such condition in the impugned notification which offered the statutory mandate was held to be invalid and bad in law. It was held that the assessee in such case, therefore, had become eligible to make an application The impugned order passed by the Interim Board of Settlement rejecting the Petitioner s application on the ground that the conditions as incorporated in Para 4 of the CBDT s Order dated 28th September, 2021 issued under Section 119 (2) (b) of the Act would become applicable, is required to be held illegal and will be required to be quashed and set aside. The Petitioner certainly was eligible for its Settlement Application to be considered by the Interim Board of Settlement for appropriate orders to be passed on it in accordance with law.

• 2024 (8) TMI 365

  Correct head of income - income received by assessee from the property owned by it be accepted as income from house property or business income - HELD THAT:- Revenue s reading of Section 22 differently to those who are in the business of letting out properties as in the present case namely in combination of a property of assessee s ownership and also to have income from properties which are not of assessee s ownership from which rental income is derived, would amount to reading something into Section 22, than what the provision actually ordains. The legislature does not carve out any such categorization/exception. Thus, we do not find that the Revenue is correct in its contention that, in the circ*mstances in hand, a straight jacket formula is required to be applied, namely, that Section 22 is unavailable to an assessee, who is in the business of letting out properties. In the prior Assessment Years, the AO had accepted the assessee s treatment of such income as an income from house property, which is one of the factors which has weighed with the Tribunal to allow the Appeals filed by the assessee, on the principle of consistency. We are of the opinion that such principles are appropriately applied by the Tribunal. The Supreme Court has held it to be a settled principle of law that although strictly speaking res judicata does not apply to income tax proceedings, and as such, what is decided in one year may not apply in the following year. Thus, when a fundamental aspect permeating through different assessment years has been treated in one way or the other and that has been allowed to continue such position ought not be changed without any new fact requiring such a direction. (See - M/s. Radhasoami Satsang, Saomi Bagh, Agra [ 1991 (11) TMI 2 - SUPREME COURT] - No substantial question of law.

• 2024 (8) TMI 364

  Validity of reopening of assessment u/s 147 - notice issued more than four years after the expiry of the relevant assessment year and assessment proceedings u/s 143(3) - HELD THAT:- Reasons for reopening of assessment makes it clear that the basis for reasons to believe are the financials of petitioner company - As by no stretch of imagination, it can be stated that there has been failure on the part of the assessee to truly and fully disclose material facts. Therefore, the reopening notice issued u/s 148 of the Act cannot be sustained and is hereby quashed and set aside. Decided in favour of assessee.

• 2024 (8) TMI 363

  Addition being cash deposits during the demonetization period in specified bank notes (SBNs) - assessee was unable to prove the source of cash deposits - HELD THAT:- Cash was available with the assessee as on the date of announcement of demonetization and this should have been accepted as explained cash out of the total cash deposits during the demonetization period of Rs. 11.24 lakhs. Hence to that extent, the cash available with the assessee during the demonetization period has explained. For the balance cash deposits, the claim made by the assessee was that out of the cash sale or realization from debtors. But the assessee could not produce any evidence before me during the course of hearing or there is no evidence in the Paper Book which can co-relate the balance cash that it has come from the realization of debtors or from the cash sales. In the absence of any evidence, confirm this balance cash and to that extent, addition is sustained. Accordingly, this ground is partly allowed. Estimation of net profit @5% on the total turnover - A reasonable profit fate should be estimated as historical data shows that the assessee s profit rate at a lower rate but as admitted by assessee, the profit rate in the line of business is 1 to 2%. Hence we estimate the profit rate at 2%. Accordingly, this ground of appeal is also partly allowed.

• 2024 (8) TMI 362

  Delay of 1528 days in filing of the appeal - CIT(A) dismissed the quantum appeal as the reasons furnished by the assessee for the condonation of delay do not constitute sufficient cause and because the appeal was filed with such delay long after the sue motu extension of time limit due to Covid-19 as allowed by the Hon ble Supreme Court - as pleaded before the CIT(A) that immediately after receipt of the copy of the order in the quantum appeal, the assessee met his counsel and due to the professional preoccupations of the counsel the appeal could not be drafted and filed at once - HELD THAT:- Ordinarily the delay of 1528 days require proper explanation in respect of the sufficient cause for the delay occurred. In this case according to the assessee the moment he received the copy of the order he approached his counsel, but due to the professional preoccupations of the counsel the appeal could not be filed at once but due to the intervening pandemic, believing the words of the counsel, the assessee rest assured and when he realised that the appeal was not filed as promised by his counsel, the delay occurred. Hon ble Supreme Court also extended the time for filing of the appeals from the date of lockdown till expiry of 3 months from 1/3/2022. Having regard to the ordinary human conduct, do not find anything suspicious in the submissions made by the assessee that believing the words of his counsel that the appeal would be filed in due course, the assessee rest assured and due to the long period of pandemic it escaped his mind causing the abnormal delay. The assessee does not stand to gain by not preferring the appeal in time and as a matter of fact, such a conduct is detrimental to his interest and therefore unless there are convincing reasons, an individual would not sleepover the matter. Thus, if the request of the learned AR is granted affording an opportunity to the assessee to prosecute the appeal before the CIT(A) by condoning the delay, the highest that would happen is that a cause could be decided on merits. When the technicalities are pitted against the delivery of substantial justice, the former must give way to the later. Thus, set aside the impugned order and restore the appeal to the file of the learned CIT(A) to pass an order in compliance with the provisions under section 250(6) of the Act, and direct the assessee to co-operate with the first appellate authority in getting the matters disposed of on merits without seeking any adjournments.

• 2024 (8) TMI 361

  Denial of grant of approval u/s. 80G(5) - appellant trust had not filed the application within the prescribed time limit under clause (iii) of first provision to sub-section (5) of section 80G - HELD THAT:- Undisputedly, the appellant trust commenced its actual activities on 16.03.2011 and in view of the above construction of clause (iii) of proviso to section 80G(5) the appellant trust is entitled to file the application for regular approval prior to six months of expiry of the provisional approval, i.e., on or before 31.03.2024. Therefore, it cannot be said that the application filed by the appellant trust for grant of regular approval is barred by limitation prescribed under the proviso to section 80G(5). CIT(Exemptions) is not justified in denying the grant of approval u/s. 80G(5) to the appellant trust on the ground of delay in submission of Form No.10AB. In the circ*mstances, we remand the matter to the file of CIT(Exemptions) with a direction to dispose of the denovo application on merits.Appeal by appellant trust stands partly allowed.

• 2024 (8) TMI 360

  Exemption u/s 80P(d)(a)(i) - interest income earned from cooperative banks/commercial banks - HELD THAT:- Referring to cleavage of judicial opinion among several High Courts on the issue of eligibility of this kind of income for exemption u/s. 80P(2)(a)(i) of the Act the interest income earned on fixed deposits with cooperative bank/scheduled bank partakes character of the business income, which is eligible for deduction u/s 80P(2)(a)(i) of the Act. Therefore, we direct the Assessing Officer to allow the exemption u/s. 80P(2)(a)(i) and section 80P(2)(d) of the Act. Thus, the grounds of appeal filed by the assessee stand allowed.

• 2024 (8) TMI 359

  Reopening of assessment - unexplained money u/s 69A - cash repayments of loan by the assessee was came newly on records from Ld. ITO (Inv) and consequently to the knowledge of the Ld. AO - HELD THAT:- During the course of proceedings before the tax authorities below the assessee could neither prove that the information of cash repayments were incorrect/wrong nor that facts came to the knowledge of the Ld. AO was not new, hence mere challenge of the assessee is bald and without any merit. Once the assessee fails to establish on record that, the information is not newly came on record or to the knowledge of Ld. AO, or the information is incorrect or else the transactions sought to trigger re-opening have duly considered in the returns of income previously filed by him, then reopening on the basis of prima facie material cannot be faulted with as it passes through the test of section 147 of the Act. This finds support from the decision of Raymond Woollen Mills Ltd. [ 1997 (12) TMI 12 - SUPREME COURT ] Respectfully following the same, we do not see any cogent reasons in not upholding the re-opening of assessment and in not dismissing the legal ground raised thereagainst. This answers the first ground of the present appeal. Addition u/s 69A - Besides making bald statements in the impugned orders the Revenue could hardly place any material on record to dismantle the appellant s plea that; the cash repayment of loan were exclusively out of excess of cash withdrawal nor it could able to demonstrate concretely with cogent evidence that the entire cash withdrawal were fully utilized for construction activities, thus leaving no cash balance with assessee for repayments. The addition in these cases in our considered view were merely based upon the conjectures guesswork, hence good reasons for reversing the actions of both the tax authorities in view of the decision of Umacharan Shaw Bros. [ 1959 (5) TMI 11 - SUPREME COURT ] Respectfully following the same without multiplying the authority on the issue of we set-aside the impugned orders and delete the additions.

• 2024 (8) TMI 358

  Accrual of Income In India - dependent agency/PE of assessee in India or not? - salary as paid by SanDisk India to its AE on behalf of the seconded employees - HELD THAT:- Addition in the hands of assessee for year under consideration as FTS in the case shear non-application of mind by the revenue authorities as it is reimbursem*nt of expat salary expenses. As noted that, the authorities have tried to make out a business connection between assessee and SanDisk India for the year under consideration by concluding that the marketing support services rendered by SanDisk India constitutes an agency PE of assessee in India. Authorities failed to appreciate for assessment year 2016-17, as there has been no transaction in any manner whatsoever between assessee and SanDisk India, there is no question of creation of an agency PE of assessee in India through SanDisk India. The revenue has miserably failed to establish by way of any documentary evidence that for A.Y. 2016-17, SanDisk India was acting on behalf of assessee in India in order to constitute a deemed permanent establishment under Article 5(4) of India-u/s. DTAA. Revenue has not brought any interrelated transaction between assessee and SanDisk India on record to establish that assessee and SanDisk India were associated enterprises during the financial year relevant to AY 2016-17. Therefore in our considered opinion, the observations of the AO in attributing 30% of business profits of SanDisk India in the hands of assessee for the year under consideration do not have any legs to stand in the eyes of law. Thus, SanDisk India cannot be held to be a dependent agency PE of assessee in India for the year under consideration and no addition could be made in the hands of assessee as FTS or any attribution of profits earned by SanDisk India could be made in the hands of assessee for the year under consideration as there is no relation or there do not exist any transaction that has been brought on record between assessee and SanDisk India. Decided in favour of assessee.

• 2024 (8) TMI 357

  Disallowance on account of payment of employees' contribution to National Pension Scheme - As argued entire payment is made before due date of filing return of Income - HELD THAT:- On perusal of the Tax audit report, it is seen that the contribution is made under NPS before due date of filing Return of Income. NPS is regulated by Pension Fund Regulatory and Development Authority and PFRDA Act, 2013. There is no due date prescribed by the PFRDA as to when the payment is required to be made to the NPS account. Further section 12[3][iii] of the PFRDA Act, 2013 clearly prohibits the provisions of this Act shall not apply to the Employees Provident Funds and Miscellaneous Provisions Act, 1952. Thus the impugned adjustment made on the payment under NPS by CPC is not justified as there is no due date prescribed in the respective PFRDA Act, 2013 and all the payment has been duly made before filing of the Return of Income as per section 139[1]. Therefore the amount as treated to be allowable u/s.43B[b] of the Act and therefore the addition made by CPC is liable to be deleted. CPC is not correct in ignoring the reply and making the disallowance in the 143[1] proceedings. - Decided in favour of assessee.

• 2024 (8) TMI 356

  Accrual of income - benefit of India USA DTAA - taxability of tax transparent entities such as single member LLCs being eligible to avail treaty benefits - assessee is a foreign company incorporated in USA engaged in the business of providing facilitation of domain name registration, web hosting, web designing, SSL certification services and other services to resellers across the world - Whether assessee does not qualify as a tax resident under Article 4 of India USA DTAA? - HELD THAT:- As observed from the TRCs issued by the Department of Treasury Internal Revenue Service, Philadelphia it was certified that the assessee Limited Liability Company (LLC) is a branch, division or business unit of US partnership. As also certified that the partnership has filed an information return in Form 1065, US partnership return of income and each of the partners listed in the TRC i.e. GD Subsidiary Inc. and GoDaddy Inc. are residents of the United States of America for purposes of US taxation. Therefore, in our view these TRCs issued by Department of Treasury Internal Revenue Service, Philadelphia USA clearly recognizes the assessee Limited Liability Company having two partners are residents of United States of America filing US partnership return of income. Therefore, the observation of the AO that the assessee has furnished a copy of TRC for only part of the year for which it was not an LLC appears to be not correct. In the case of Sarva Capital LLC [ 2023 (11) TMI 692 - ITAT DELHI] the coordinate bench as following the decision of Azadi Bachao Andalon [ 2003 (10) TMI 5 - SUPREME COURT] held that the tax exemption granted under the domestic tax laws does not lead to the conclusion that the entities availing such exemption are not liable to taxation. The term liable to taxation must be distinguished actual payment of taxation and thus, the contention of the revenue that the LLC in the present case is not liable to taxation was rejected. Taxability of tax transparent entities such as single member LLCs being eligible to avail treaty benefits - Mumbai Bench of the Tribunal in the case of Linklaters LLP[ 2010 (7) TMI 535 - ITAT, MUMBAI] in the context of eligibility of LLP to avail the benefit of India UK Tax Treaty, the Tribunal has held that the India UK Tax Treaty would apply to a UK Limited Liability Partnership even though it was a pass through entity for UK tax purposes. We hold that the assessee is a tax resident of USA and is entitled for the benefit of DTAA between India-USA. Ground no.2 of grounds of appeal of the assessee is allowed. Taxability of income from domain name registration, web hosting, web designing, SSL certification services, etc - As in the final assessment order the AO held that income is in the nature of technical services and is taxable in the hands of the assessee company as fees for included services under India-USA DTAA - HELD THAT:- AO very cryptically and without examining the nature of services and how make available clause in Article 12 of India-USA DTAA is applicable to the assessee with respect to the nature of various services rendered by the assessee held that income of the assessee is in the nature of technical services and is taxable in the hands of the assessee company as Fees for Included Services (FIS) under India-US DTAA. AO held that the treaty benefits are not available to the assessee and in coming to such conclusion the AO has not gone in detail in respect of the nature of services rendered by the assessee and the applicability of clause 4 of Article 12 of India- USA DTAA. Order of DRP that this issue was not gone into in detail by DRP on the submissions made by the assessee on the nature of services rendered by it. Therefore, having held by us that the assessee is entitled for the treaty benefits under India-USA DTAA, we restore this issue to the file of the AO to examine the applicability of the provisions of DTAA viz-a-viz various services rendered by the assessee and the income received thereon under the provisions of India-USA DTAA and pass a speaking order after providing adequate opportunity of being heard to the assessee. Ground no. 3 of grounds of appeal of the assessee is partly allowed.

• 2024 (8) TMI 355

  Assessing of income of the appellant - period of stay in India - Addition of the foreign allowances to the total income of the appellant which was received outside India for services rendered in United Kingdom - HELD THAT:- Appellant qualified as a Non-resident in India during the Previous 2015-16 as evident from his stay in India during the relevant PY. A non-resident would be taxable in India only in respect of income received/deemed to be received in India or the income accrued / deemed to accrue in India. In the present case the Appellant being a Non-Resident, has received the foreign allowances in United Kingdom for services rendered in United Kingdom. Hence we are in this view that the foreign allowance does not fall within the scope of total income u/s 5(2) of the Act. Thus taxable income of the appellant as made by the AO confirmed by the CIT(A) is unjustified and accordingly, the same is deleted. Addition of receipts of stock option prerequisites - value of stock option prerequisites accrued to the appellant for the services rendered outside India from the date of grant to the date of vesting hence, the same does not form part of the scope of the total income of the non-resident and accordingly it is not taxable in India. Disallowance of exemption claimed by the appellant in this context, we find that Section 90(2) of the Act purely attracts in this case as we have already held that appellant satisfied the requisite condition to be eligible to claim the exemption as per the DPS Clause of India-UK DTAA. Appellant has filed copy of tax residency certificate and in this way, appellant qualified to be a tax resident of United Kingdom during United Kingdom tax year and accordingly, we are of this opinion that salary income as claimed be exempted under Article 16(1) of the India-UK DTAA. Disallowing the deduction claimed under Chapter VI-A and disallowing the long-term capital gain exemption u/s 10(38) of the Act have been allowed by the ld. CIT(A) in appeal subject to the above verification and directed the AO to verify the matter. So, it is needless to discuss the above grounds.

• 2024 (8) TMI 354

  Penalty u/s 271(1)(c) - return of income in response to the notice u/s. 148 filed by the assessee - Assessee argued no difference in the returned income and assessed income - HELD THAT:- Assessee has offered the income by filling the correct returned of income upon issue of notice and the assessment is completed on that returned income filed by the assessee without any change. Thus, the assessee though surrendered the income at the time of re-assessment notice by filling the return of income and has paid the tax due thereon along with the interest, thus, the said disclosure hold valid without any adjustment and made good faith voluntarily. Respectfully following the finding of the binding decision of Jurisdictional high court in the case of Pushpendra Surana [ 2013 (8) TMI 969 - RAJASTHAN HIGH COURT] and Cheldas Khushalas Patel [ 1992 (1) TMI 72 - GUJARAT HIGH COURT] wherein the similar view is taken that if the assessee filed correct income at the time of the re-assessment proceeding and such disclosure accepted by the revenue without any change, then in that case it does not hold liable the assessee for any penalty u/s. 271(1)(c) of the Act. Decided in favour of assessee.

• 2024 (8) TMI 353

  Validity of reassessment proceedings - Income Tax officer, Ward 2(2), Ajmer's jurisdiction in terms of S.120 r/w 124 to issue notice - assessee is a non-resident Indian residing outside India since last almost more than 25 years - HELD THAT:- Assessee for the year under consideration has not filed any income tax return. The revenue was in possession of the information that the assessee had sold an immovable property for a sale consideration of Rs. 69,90,000/-. Since there was no ITR filed the transaction remained unverified. The assessee in the paper book filed submitted copy of pass port which was valid from 16.03.2015 to 13.03.2025 and place of issue is Dubai the details of old passport and place of issue shows Dubai. At page 17 of the paper book the jurisdictional details of the assessee is filed it shows the Circle (Intl.Tax), Jaipur. Thus, the ld. AO while sending this report based on the submission has not controverted this aspect of the matter which establishes that the residential status of the assessee is undisputedly NRI as on the date of issue of notice u/s. 148 of the Act. Thus, based on this evidence placed on record and the same being not controverted we are of the considered view that when the assessee is non-resident as on the date of issue of notice u/s. 148 of the Act. The bench further noted from order sheet entry dated 16.03.2023 that Faceless Assessment Unit (FAU) requested through NaFAC to transfer out this case from them because the case is of non-resident individual or of a foreign company and can be assessed only at international charge. Thus, the contention raised by the assessee has already been observed by the FAU in the assessment proceeding when the case was transmitting from ITO, Ajmer to FAU. We are of the considered view that the ITO, Ward-2(2), Ajmer has no jurisdiction when the notice u/s. 148 was issued on 30.03.2022. Therefore, the in order to sustain the validity of the reassessment, a reassessment notice is required to be issued by an Assessing Officer having proper jurisdiction over the assessee to whom such notice has been issued. Based on the evidence placed on record and after giving sufficient time to the revenue to rebut the contention based on the set of evidence placed on record, but revenue could not demonstrate that when the notice issued on 30.03.2022, ITO, Ward 2(2), Ajmer, has valid jurisdiction. We quash the order of the assessment and ground no. 1 2 raised by the assessee is allowed. Considering the entire sale consideration as the Long Term Capital Gain (LTCG) - Additional evidence filed by the assessee has already been admitted by the ld. DRP and ld. AO did not consider even the original cost of the property sold for which all the evidence placed on record and the assessee has provide before the ld. DRP that there is no income left to charge the tax by filling the computation of capital gain but the ld. AO in the draft order taken one stand and after the direction of the ld. DRP added the sum without considering the fact and without issuing any fresh show cause notice. Thus, the order of the assessing officer is perverse and required to be quashed.

• 2024 (8) TMI 352

  Validity of reassessment proceedings as barred by period of limitation - HELD THAT:- The impugned notice u/s 148 dated 15.04.2021 to re-open the assessment for AY 2015-16 is barred by limitation u/s 149(1)(b) of the Substituted Act of 2021 i.e; Finance Act, 2021. Hence, all consequential reassessment proceedings pursuant to the impugned notice u/s 148 dated 15.04.2021 are set aside. AO had no sanction or approval for issuance of notice u/s 148 as per newly substituted Finance Act, 2021. Therefore, appellant succeeds on the legal issues. Decided in favour of assessee.

• 2024 (8) TMI 351

  Validity of revision order passed u/s 263 ex-parte - order passed qua the assessee without even service of show cause notice - denial of Principles of natural justice - HELD THAT:- SCN or other notices alleged to be issued by the Id. PCIT through the online portal, were neither served on the registered email-id nor on any other address given in the ITR or in personal profile of the appellant assessee in ITBA portal as per the provisions of section 282 of the Act. Decision relied by the Ld. PCIT, do not apply to the peculiar facts of the present case, as the appellant was not served any notice, message or email for initiating the revisionary proceeding and thereafter and even show cause notice (SCN) was not served upon the appellant assessee. Meaning thereby that the Ld. PCIT has passed the 263 order ex-parte qua the appellant assessee in gross violation of principles of natural justice without even service of the SCN. In the present case, there was no service of SCN as it was not sent on the petitioner's email as evident from the downloaded copy of SCN as the email of the appellant was not reflected on photo print of the SCN copy generated from the e-portal/ITBA portal of the Department, although the appellant has mentioned updated email addresses in its ITRs and personal profile on the ITBA portal of the respective Assessment Years as above. PCIT before any action is taken, a communication of the SCN notice and other notices shall be ensured in terms of the provisions as enumerated under the provisions of law as per the rule 17 and section 282 of the income tax act 1961. The provisions do not mention that communication to be presumed by placing notice on the e-portal. Thus, in the absence of the assessee being aware of the show cause notice issued by the Ld. PCI T, the assessee cannot be faulted for not responding to the queries raised by the Ld. CIT (E) as in absence of service, because it is considered that it was never conveyed to the assessee. Therefore, the revisionary action-initiated u/s 263 of the Act by the Ld. PCIT is bad in law and it would be liable to be quashed. PCIT has committed a gross error in not providing effective/reasonable opportunity of being heard to the assessee before passing the impugned order. Assessee appeal allowed.

• 2024 (8) TMI 350

  Rejection of the application Form No. 10AB u/s 12AB 80G(5) - HELD THAT:- Assessee institute had remained divested of sufficient opportunity to put forth its case and furnish the requisite details in the course of the proceedings before the CIT(E), therefore, the matter requires to be revisited by the latter. Accordingly, we herein restore the matter to the file of the CIT(Exemption), Bhopal with a direction to re-adjudicate the same. Needless to say, the CIT(Exemption), Bhopal shall pass a fresh order after affording a reasonable opportunity of being heard to the assessee institute. Thus, the Ground of appeal raised by the assessee institute is allowed for statistical purposes in terms of the aforesaid observations. As we have restored the matter to the file of the CIT(Exemption), Bhopal with a direction to re-adjudicate the same, therefore, we refrain from adverting to and therein adjudicating the contentions advanced by the Ld. AR as regards the merits of the case before us. Appeal of the assessee institute is allowed for statistical purposes.

• 2024 (8) TMI 349

  Addition of deemed dividend u/s 2(22)(e) - nature of transaction between the assessee and shareholder - assessee along with other 5 Directors has received a loan and advance which was shown by the company as an advance for the purchase of property - whether the amount in question given by the company to the directors was representing the commercial transactions? - HELD THAT:- No adverse inference can be drawn against the assessee merely on the reasoning that when the money was advanced there was no formal agreement between the directors and the company - the company has not taken the 1st and 2nd floor on lease of the building which was constructed by the directors of the company. Thus, the excess amount received by the directors from the company roughly 30 lakhs of rupees which was shown as rental deposits again represents the commercial transaction between the assessee directors and the company. The directors including the assessee in the present case were acting in dual capacity as director and in personal capacity. As such there was no reason for the directors which prevented them to enter into the formal agreement at the time of giving the advances and therefore the money receipts, proposed agreement, minutes of the Board of Directors cannot be ignored while deciding the issue whether there was a commercial element between the transaction discussed above. Thus, we hold that there was a commercial transaction between the directors and the company. Hon ble Delhi High Court in CIT v. Raj Kumar [ 2009 (5) TMI 17 - DELHI HIGH COURT] observed that Trade advances which are in the nature of money transacted to give effect to a commercial transaction would not fall within the ambit of the provisions of section 2(22)(e) of the Act. Thus, we hold that the transaction in dispute was a commercial transaction and therefore the same is outside the ambit of the provisions of deemed dividend as provided u/s 2(22)(e) - Decided in favour of assessee.

• 2024 (8) TMI 348

  Disallowance being pro-rata premium on Foreign Currency Convertible Bonds (FCCB) - assessee has opted for the Tonnage Tax Scheme as applicable for section 115VG(6) - as argued entire premium is allowable as expenditure as FCCB's were issued for obtaining finance for general purposes of the entire appellant's business and the proceeds were used for all the business activities - HELD THAT:- Law is clear and unambiguous, which provides that once specified provisions deal with the subject and have been accepted by the assessee, the assessee is precluded from taking the deduction of any other expenditure under any other provisions of the Act against the Tonnage income. In our view, the provisions of section 115 VG of the Income Tax Act, 1961 are complete, and once the assessee opts for the Tonnage Tax Scheme, the assessee cannot take the shield of taking the deduction of any other expenditure. Hence, we are of the opinion that the assessee is not entitled to deduction as claimed by the assessee towards interest paid being the pro rata term paid on FCCD. Argument of the assessee is that the assessee was having free funds is devoid of any merit, as it was not a case before the ld.CIT(A) that the investments were made out of free funds available within it on account of liquidation of the part of the FCCD Bonds Once the specific provision which prohibits the assessee from claiming any deduction, then the question of allowing the deduction of interest on the pretext of availability of mixed funds does not arise. In so far as the case laws relied upon by the assessee, those case laws are not applicable to the present case, as they are on different facts. In light of the above, the ground Nos.2 and 3 raised by the assessee are dismissed. Depreciation on UPS - @ 60% or 15% - HELD THAT:- In the present case, with respect to depreciation on computer is clearly covered in favour of the assessee by the decision of Ushodaya [ 2014 (12) TMI 7 - ITAT HYDERABAD] wherein depreciation on UPS at 60% allowed.

• 2024 (8) TMI 347

  Reopening of assessment u/s 147 - second subsequent reassessment on same issues - Unexplained purchases - information received from sales tax department that assessee has made purchase from one party which has been blacklisted by Sales Tax Department - HELD THAT:- As none of the lower authorites despite bringing this fact on record have been bothered to look into this matter that already assessment order u/s. 147/143(3) has been made on the addition of alleged bogus purchase and this addition has attained finality. This shows casual approach and complete non application of mind and callousness. Reopening the case again and sending notice u/s 148 twice in a gap of a year and dragging the assessee to the litigation and creating another demand simply because both the AO and appellant authority have not bothered to examine the facts which has been brought on record and harassing the assessee for unwanted litigation for several years as first appeal has been decided after more than 7 years. Be that as may be, the impugned assessment order passed by the AO u/s. 144/147 is here by quashed, because already earlier assessment order was passed u/s. 143(3)/147 on 19/03/2015 making the same addition. Decided in favour of assessee.

• 2024 (8) TMI 346

  Deduction u/s 80P (2) (a) (i) and 80P(2) - AO was of the view that deduction u/s 80P(2)(d) is not available to any co-operative society when investment was made in any cooperative bank except two cooperative bank mentioned in the sub-section (4) of Section 80P - HELD THAT:- In the case of Kaliandas Udyog Bhavan Premises Coop. Society Ltd. [ 2018 (4) TMI 1678 - ITAT MUMBAI] it is held that though the cooperative bank pursuant to the insertion of subsection (4) of Sec. 80P is no more be entitled for claim of deduction u/s 80P of the Act, but however, as a cooperative bank continued to be a cooperative society registered under the Cooperative Society Act, therefore, the interest income earned by a cooperative society from its investment held that cooperative bank would be entitled for claim of deduction u/s 80P (2) (d). We direct the AO to allow the alternative claim of deduction u/s 80P (2) (d) to the assessee in respect of interest earned/dividend from investment made with the cooperative bank, therefore, the appeal of the assessee is allowed.

• 2024 (8) TMI 345

  Unexplained jewellery and cash u/s. 69A - jewellery found during the search - HELD THAT:- The jewellery to the tune of 2110 gms has been duly declared in aggregate in the respective Wealth Tax return of the assessee and his wife. The jewellery declared in the Wealth Tax Return override the jewellery found in the course of search of 1903.97 gms and therefore, the jewellery found is broadly explained by direct and circ*mstantial evidences, Credit of jewellery of belonging to married daughter to the extent of 500 gms in any case, is available to the assessee in terms of CBDT Instruction. It is common knowledge that a married daughter do at times, keep her jewellery and other belongings at the maternal place to safeguard and protect her interest. It is thus the case of the assessee that the entire jewellery is explained. On being inquired by the bench, assessee fairly submitted that once the credit for jewellery relatable to married daughter namely, Priya Sethi is given in terms of CBDT Instruction to the extent of 500 gms, the grievance of the assessee would be broadly redressed and therefore, urged for granting relief to the extent of 500 gms without any riders. In respect of remaining 103.97 gms, in order to avoid the protracted allegation, circ*mstances has given the concession to treat the 103.97 gms as unexplained jewellery - As further hastens to add that no adverse inference however shown drawn for 103.97 gms in penalty proceedings etc. Such concession is being given to bring an end to ongoing litigation. We are convinced with the assertions raised on behalf of the assessee that jewellery are, at times, kept by the married daughters with the maternal family. There is no warrant to deny credit of 500 gms on account of married daughter in terms of CBDT Instruction No. 1916 dated 11th May, 1994. The assessee thus gets the relief to the extent of 500 gms as against aggregate 603.97 gms for which the additions were sustained before the CIT(A). Ground No.1 of the appeal of the assessee is allowed in part. Unexplained cash - counsel fairly submitted that the paper book giving evidence in relation to source of cash was never confronted to the AO and no remand report was obtained either - Keeping in mind, the salutary principles of natural justice on which Rule 46A of the Income Tax Rules is founded upon, we consider it expedient to restore the matter to the file of the AO rather than the CIT(A) for examination of such facts afresh as may be placed on behalf of the assessee. The assessee shall be at liberty to adduce such evidences as may be considered expedient in corroboration of source of cash in question and may make such submissions as may be advised. Reasonable opportunity shall be given by the AO to the assessee to justify its case. AO shall take into account all evidences as may be placed and pass speaking order in this regard. Ground No.2 of the appeal of the assessee is allowed for statistical purposes.

• 2024 (8) TMI 344

  Delay in filing the appeal before the CIT(A) - negligence of previous CA leading to delay - HELD THAT:- As it appears that the fault was on the part of the earlier CA who has been engaged by the assessee and due to the negligence of earlier CA the assessee suffered. But from the perusal of the records, it appears that when the assessee came to the knowledge of the order with the help of subsequent CA, the assessee within 15 days has filed the appeal before the CIT(A). Due to Pandemic, the subsequent CA expired and that is why the assessee s delay condonation application was filed later. CIT(A) who has taken this aspect for condoning the delay. Though the delay is exorbitant the peculiar facts and circ*mstances which is exceptional in nature in the present case cannot be treated as contrary to the assessee s right to contest the appeal on merit. Therefore, in the interest of justice, it will be appropriate to condone the delay in filing the appeal before the CIT(A). CIT(A) will decide the matter on merit as per due process of law. Appeal of the assessee is partly allowed for statistical purpose.

• 2024 (8) TMI 343

  Allowability of business expenditure - assessee has claimed deduction towards salary paid to his son only against taxable part of benefit, i.e. Remuneration from the firm - HELD THAT:- This expenditure will be reasonable if allowed proportionately. We, therefore, allow Salary to the extent of Rs. 5,39,520/- (i.e. 56.20% of Rs. 9,60,000/-). Thus, Ground No.1 of assessee s appeal is partly allowed. Disallowance in respect of insurance premium of son of the assessee u/s 80C - Legitimate claim for deductions under the provisions of section 80C of the Act should not be disallowed without proper justification. Therefore, the ground of the assessee is allowed. Expenses of Salary, Car Expenses, Depreciation , Office and Other Expenses - HELD THAT:- While allowing such claim as business expenditure u/s. 37 of the Act, provisions of section 40A(3) of the Act should not be ignored. We have observed that entire amount of salary is paid in cash (Rs.16000/- per month). Also, Car expenses to the extent of Rs. 21,800/- (Rs. 10,500/- and Rs. 11,300/-) are incurred in cash. When the assessee is claiming any expenditure against the business income provisions related to such claim need to be adhered to. In light of the provision of section 40A(3) of the Act, we, therefore, upheld the addition and delete the remaining addition confirmed by the Ld. CIT(A). Ground of the assessee s appeal is partly allowed.

• 2024 (8) TMI 342

  Disallowance of consultancy charges paid to one of the directors - Addition invoking Section 40A (2) - said payment was justified considering the expertise and experience of the said director and it was commensurate and reasonable compared to the size of the assessee s business - HELD THAT:- AO could not sit on the armchair of the businessman so as to judge the reasonableness of the expenditure to the incurred by the assessee for its business purposes unless it is shown that the said expenditure was excessive having regard to the market price of the goods or services so procured by the assessee. The Hon ble High Court of Madras in the case of Computer Graphics Pvt. Ltd [ 2006 (2) TMI 117 - MADRAS HIGH COURT] held that the reasonableness of the expenditure for the purpose of business had to be adjudged from the view point of a businessman and not that of the Revenue while invoking Section 40A (2). Unless there is proof of excessive / unreasonable payment, no disallowance could be made u/s 40A (2) of the Act. During this year, the project of the assessee has started generating revenues and the payee director has been involved in day to day affairs of the assessee-company which quite justify the increased payment in this year. The payment so made is stated to be in conformity with the provisions of the Companies Act. Another fact brought to our knowledge by Ld. AR is that the assessee has deducted due TDS against such payments and the payments so received by the assessee has ultimately been offered to tax by that director in his return of income. AO has not brought on record any material to demonstrate that the payment is actually excessive or unreasonable having regard to the market rates of services so procured by the assessee or the business need of the assessee or benefits derived by the assessee there-from. AO has merely disallowed differential of remuneration in two years without establishing the reasonableness of the payment. In the absence of such an exercise, no case of excessive expenditure could be made out against the assessee. Thus the impugned disallowance stand deleted. Decided in favour of assessee.

• 2024 (8) TMI 341

  Levy of penalty u/s 271D 271E - default u/s 269SS and 269T -assessee received cash loans from certain directors and related concerns and certain loans were also repaid in cash - assessee submitted that the cash was received from the directors to meet the urgent expenses at the project site when the company did not have funds to meet the expenditure and that the directors were having sufficient sources HELD THAT:- First and foremost argument of Ld. AR is that receipt / repayment of cash loans from directors would not be covered under the provisions of Sec.269SS and 269T is to be rejected at the outset considering the fact that no such exception has been carved out in either of these statutory provisions. When the statutory mandate is clear, applying the doctrine of literal construction, no violence could be done to the explicit language of statute. Therefore, we reject these arguments of Ld. AR. Limitation argument - We find that the assessment was framed on 30-12-2019 wherein Ld. AO made reference to appropriate authority for imposition of impugned penalties. JCIT issued show-cause notice to the assessee on 26-05-2022 and completed penalty proceedings on 29-11-2022 which is well within the prescribed statutory limit. Argument that there was inordinate delay between the date of reference and issue of show-cause notice is to be rejected considering the fact that substantial period falls within lockdown situation arising out of Covid-19 Pandemic and therefore, this period is to be excluded for all limitation purposes. Therefore, this argument also does not find favor with us. Levy of penalty - As undisputed fact that the assessee is in the business of construction of resorts apartments at Courtallam whereas the assessee is located at Chennai. Both the places are at substantial distance. The nature of assessee s business is such that it would require frequent / regular labor payment and other expenditure at project sites. Though the assessee may be having sufficient bank balances, it may not have been always possible to arrange funds through banking channels at the project site. In such a case, it was quite possible that cash loans were taken from directors and the same were repaid as and when the funds were made available with the assessee. All these loans are not from any third-party but are only from the directors and related concerns which lend credence to the argument of business exigency as taken by the assessee before lower authorities. Therefore, this is not a fit case for levy of impugned penalties. By deleing both the penalties, we allow the appeals of the assessee.

• 2024 (8) TMI 340

  Addition to the account of annual let out value of the property - determine the annual retable value - flat given on rent to Deutsche Bank is deriving the monthly rent of ₹ 3,12,500/-, whereas the rent charged from the Tata Sky is ₹ 1,92,500/- and difference in rent is only because of the security deposit - HELD THAT:- According to Section 23 the annual value of let out property is to be determined on the basis of the same for which the property is expected to let out from year to year therefore, it has to be the market rate of the rent. As in case of assessee s own case for earlier years the co-ordinate Bench has resorted the matter back to the file of the learned Assessing Officer to determine the annual letable value, we also restore this matter back to the file of the learned Assessing Officer for reason being that he has compared the rent of F.Y. 2010-11, received from Deutsche Bank with rent received in F.Y. 2013-14 from Tata Sky. DR also relied upon the decision of Moni Kumar Subba [ 2011 (3) TMI 497 - DELHI HIGH COURT] to submit that the rateable value is not binding on the AO if the rateable value as per Municipal record does not represent the correct fair rent. The learned Assessing Officer may consider the same and after giving an opportunity to the assessee decide the issue afresh. Accordingly, ground no.1 of the appeal is allowed with the above direction. Expenses provided at the end of the year which were reversed at the beginning of the year and no tax is deducted thereon at the time of making provision - HELD THAT:- As the payer and the payee are identified, the nature of services is also ascertained and the amount of liability is also determined, there is no reason why the tax should not have been deducted thereon. Only in those circ*mstances provisions of Section 40a(ia) of the Act applies. However, it is apparent that if the assessee has paid such tax on or before the due date specified under Section 139(1) of the Act, no disallowance can be made. It is the claim of the assessee before AO also that even if it is accepted that the tax should have been deducted, assessee has subsequently deposited the impugned amount of TDs on or before the due date u/s 139(1) for the year in which provision is made, so no disallowance should have been made. As the assessee has complied with that condition, for different reasons we hold that the addition cannot be sustained - Decided in favour of assessee. Addition on account of shortage in stock - HELD THAT:- We find that the average stock of the assessee is ₹ 13,284/- lacs against this shortage of ₹ 78,000/- has arisen. This too is on account of half yearly physical verification of raw material, chemicals and also finished goods. The assessee s closing stock and opening stock is in the range of Rs. 13,200 lacs. The difference arisen in the stock is only ₹ 78,000/- hence, this is a normal occurrence in such account of engineering producing company having multi state operations. CIT (A) look to the totality of the facts has deleted the addition correctly. Even otherwise in absence of any adverse material if on physical verification shortage of stock is found, it is an ordinary loss in case of a manufacturer, same could not have been disallowed. Addition for sale of scrap - AO has computed the average sale scrap generation per day and then made the addition for last four days of scrap sale - CIT(A) deleted addition - HELD THAT:- No logic and methodology in making the above addition. Sale of scrap is a continuous process in a manufacturing industry, the sale of scrap is accounted as and when it is sold, therefore, it is unfair and against established trade practices to determine the average sale of scrap per day and make an addition thereof, despite scrap is not sold. Accordingly, we confirm the order of the learned CIT(A) and dismissed ground of revenue.

• 2024 (8) TMI 339

  Reopening of assessment u/s 147 - method of computation of income by the assessee was erroneous and the provisions under section 50C of the Act are applicable in respect of the sale transaction held on 21/01/2009 - HELD THAT:- Hon ble Apex Court in the cases of P.V.S. Beedies (P.) Ltd [ 1997 (10) TMI 5 - SUPREME COURT] and R.K. Malhotra, Income-tax Officer [ 1977 (8) TMI 3 - SUPREME COURT] held that the audit department was the proper machinery to scrutinise assessments made by the ITO and to point out errors of law contained therein, but such a view was disapproved in a subsequent decision in the case of Indian Eastern Newspaper Society [ 1979 (8) TMI 1 - SUPREME COURT] wherein it was held that the expression information is an indispensable ingredient and it shall be in respect of either fact or law, and if it is in respect of law, it must flow from a formal source. AO himself must interpret and determine the law applicable to the facts of the case, but any interpretation of law from any external source cannot constitute the requisite information for the purposes of section 147 of the Act. Other than the Revenue Audit Report, there is no new material as to the fact or law. Revenue audit pointed out the discrepancy in the method of computation of the long term capital gains. Revenue audit party was obviously referring to the applicability of section 50C of the Act to the sale that took place on 21/01/2009. The report of the Revenue Audit Party on the question whether or not section 50C of the Act is applicable to the sale dated 21/01/2009 is only its interpretation and opinion on that aspect and never will it partake the character of law and, therefore, such an interpretation of Revenue Audit Party is not information of law, but it is only its interpretation of law. Interpretation of law is no basis for reopening of proceedings u/s 147 of the Act. Knowledge gained by the AO about a law from a formal source subsequent to the conclusion of the assessment proceedings, stands on a different footing than the interpretation of the existing law by the Revenue Audit Party. We, therefore, find it difficult to agree with the learned DR that the internal audit report constitutes the information under section 147 of the Act. The reasons recorded by AO further show that the issue requires verification through scrutiny proceedings by reopening the assessment also further shows that the basis for reopening is not the reason to believe, but it is only a reason to suspect as has been held in the case of Mukesh Modi [ 2015 (2) TMI 640 - RAJASTHAN HIGH COURT] held that action of reopening by the AO per se, founded on mere change of opinion and the same cannot satisfy the legislative intent that the learned AO had reason to believe that any income chargeable to tax had escaped. Applicability of section 50C - According to the assessee, prior to its conversion into stock in trade on 02/01/2008 such an asset was capital asset in nature, but it was converted into stock in trade - HELD THAT:- Section 50C of the Act has no application to the sale of the property after its conversion into stock in trade in view of the binding precedents reported in the cases of Thiruvengadam Investments Pvt. Ltd [ 2009 (12) TMI 48 - MADRAS HIGH COURT] and Inderlok Hotels Pvt. Ltd. [ 2009 (2) TMI 235 - ITAT BOMBAY-I] and, therefore, on merits also, the assessee succeeds. Grounds are answered in favour of assessee.

• 2024 (8) TMI 338

  Exemption u/s 11 - corpus funds/Donation receipts - disallowance of capital expenditure - HELD THAT:- Corpus donations, being identified and recognized in law as distinct and separate from Incomes derived from property held under Trust and both being granted exemption separately u/s 11(1)(a) and 11(1)(d) of the Act, there arises no question of overlapping exemption. Different incomes recognized for exemption have been separately granted exemption in law. There arises no question therefore of corpus donations claiming exemption in law both under sub-clause (d) and sub-clause (a) of section 11(1) of the Act. The above interpretation of law was confronted to the assessee during the course of hearing before us who was unable to point out any infirmity in the same. As when asked whether any of the said decisions had interpreted the position of law considering section 11(1)(a) r.w.s. 12(1) of the Act, as above, he was unable to point out any. The decisions relied upon by assessee, we have noted are all either distinguishable on facts or have been rendered without considering the clear provision of law as noted above by us. The decisions therefore are of no assistance to the assessee. No reason to allow the ground raised by the assessee before us, seeking exemption u/s 11(1)(a) of the Act of corpus donations received - Appeal of the assessee is dismissed.

• 2024 (8) TMI 337

  Cash deposits made during the demonetization period - AO observed that there was an abnormal increase in cash sales from 1.11.16 to 8.11.16 which was not matching with the trend of cash sales in other months as submitted by the assessee - HELD THAT:-Sales made by the assessee are duly subjected to VAT and assessee had duly suffered sales tax and had filed VAT returns accordingly. VAT returns for all the branches of the assessee are enclosed. Stock statement had been duly furnished by the assessee for the whole financial year 2016-17. The purchases made by the assessee in order to keep sufficient stock of goods in hand is not doubted by the revenue. The goods purchased had been duly reflected as goods inward in the stock register. The goods sold by the assessee (both cash and credit) had been duly reflected as goods outward in the stock register with quantity and value. There is no allegation leveled on the assessee that he had received cash in demonetized currency during the period 9.11.2016 to 31.12.2016. Hence the entire cash deposits made by the assessee stands clearly explained by proper sources drawn from the books of accounts itself. While this is so, there is absolutely no reason to disbelieve the cash sales reported by the assessee for the period 1.11.16 to 8.11.16 in the return of income by restricting it to the cash sales reported during the corresponding period in earlier year. We are unable to comprehend ourselves to accept to the aforesaid basis of addition by the AO. The basis of cash sales made in the earlier financial year cannot be adopted as a parameter for accepting the cash sales made during the year - no hesitation to hold that the basis of addition made by the AO is wholly misconceived and devoid of merit. Decided in favour of assesee.

• 2024 (8) TMI 336

  Penalty imposed u/s 271(1)(c) - Estimation of trading addition - HELD THAT:- AO is required to record his specific satisfaction as regards the existence of any one of those grounds on which he is satisfied that penalty proceedings are attracted and this satisfaction should be made known to the assessee through the SCN u/s 274. For one single item of income being the estimated trading addition, legally there cannot be a charge viz. concealment of income as also of furnishing of inaccurate particulars. This does not meet with the requirement of law. As in the case of CIT vs. M/s Manjunatha Cotton Ginning Factory Ors.[ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] held that sending printed form where all the grounds mentioned in S. 271 would not satisfy the requirement of law. The assessee should know the ground which he has to meet specifically, otherwise, the principle of natural justice is offended on the basis of such proceedings, no penalty could be could be. We hold that the notices issued u/s 274 r.w.s. 271(1)(c) is not valid and the same is quashed. Decided in favour of assessee.

• 2024 (8) TMI 335

  Disallowance on account of business and promotion expenses claimed by assessee u/s 37(1) - assessee had arranged a party at Taj Mahal Hotel and paid hotel bill consisting of cot of Buffet dinner, liquor and Government taxes etc - HELD THAT:- The expenditure incurred is revenue in nature and hence the same is fully allowable. The reasoning is not just fair and reasonable. Since the matter was regarding launch of new medium food product and promote a new line of business. Therefore the assessee was entitled to get allowable expenses. Likewise the assessee had spent Rs. 1,04,318/- to Golf Club for food and liquor business meeting in DLF Club Gurgaon. The assessee was entitled to get deduction of Rs. 1,04,318/-. In view of abovesaid material facts and well settled principle of law the order of AO is liable to be set aside and order of the CIT(A) is modified by holding that the assessee is entitled to get allowable expenses - Appeal of the assessee is allowed

• 2024 (8) TMI 334

  Validity of revision u/s 263 - main reason written by the ld. PCIT in his revision order was that though the case of the assessee was converted from limited scrutiny to full scrutiny, however, the Assessing Officer failed to examine these issues - HELD THAT:- We note that neither the ld. PCIT has mentioned in the order about any document, whereby, the limited scrutiny was converted into full scrutiny, nor the ld. DR could produce on file any such document or approval for converting the limited scrutiny into full scrutiny in the case of the assessee. Therefore, under the circ*mstances, the impugned order passed by the ld. PCIT u/s 263 of the Act was bad in law and accordingly consequential proceedings were also bad in law. Assessee has not filed appeal against the section 263 order itself but has challenged the validity of the same in the consequential proceedings/order passed pursuant to the said order passed u/s 263 of the Act - As decided in case of Valiant Glass Works Pvt. Ltd [ 2016 (7) TMI 1418 - ITAT MUMBAI] jurisdiction or the legality of the proceedings can be agitated in a subsequent proceedings or even in a collateral proceedings or an execution proceedings also. If, the original order is illegal or without jurisdiction, the subsequent or collateral proceedings arisen out of such orders or proceedings, cannot be held to be valid. Since the exercise of revision jurisdiction in this case by the ld. PCIT was wrong and illegal, therefore, the consequential order passed u/s 143(3) of the Act was also not sustainable in the eyes of law and the same is accordingly quashed. Appeal of the assessee stands allowed

• Customs

• 2024 (8) TMI 333

  Valuation - related party transaction - comparable prices - import of foreign scotch - HELD THAT:- The appellant is permitted to furnish Bank Guarantee to the satisfaction of the Assessing Officer.

• 2024 (8) TMI 332

  Maintainability of suit filed by the plaintiff claiming damage for malicious prosecution against the Directorate of Revenue Intelligence and their Officer - suit is filed within the period of limitation prescribed for such suits or not - Section 132 135 of the Customs Act, 1962 - HELD THAT:- In EXECUTIVE ENGINEER, IRRIGATION DIVISION, PURI VERSUS GANGARAM CHHAPOLIA [ 1983 (10) TMI 291 - SUPREME COURT OF INDIA ] it is clearly specified that suit against the Government or public officer to which the requirement of a prior notice under Section 80 CPC is attracted, cannot be validly instituted until expiration of period of two months next after the notice in writing has been delivered to the authority concerned in the manner prescribed. In STATE OF GUJARAT VERSUS KOTHARI AND ASSOCIATES [ 2015 (10) TMI 2806 - SUPREME COURT ] the Court has clearly held that the notice under Section 80 should have been issued before the suit became time barred. In the present matter, the time for filing the suit admittedly expired on 11.04.2008 and only thereafter the suit came to be re-filed after issuing the notice under Section 80 CPC. The High Court erred in declaring that the suit was maintainable. The view is found to be unacceptable and is set aside and quashed. In other words, it is declared that the suit is barred by time. With such declaration, the appeal stands allowed.

• 2024 (8) TMI 331

  Classification of imported goods - medical grade monitor - to be classified within heading 8529 of First Schedule to Customs Tariff Act, 1975 or heading 9018 of First Schedule to Customs Tariff Act, 1975? - benefit of concessional rate of duty under N/N. 50/2017-Cus dated 30th June 2017 - Penalty u/s 114A of Customs Act, 1962 - HELD THAT:- The show cause notice proposed that the description corresponding to tariff item 8528 5900 of First Schedule to Customs Tariff Act, 1975 was more apt and to be adopted as mandated in terms of rule 3(a) of General Rules for Interpretation of the Import Tariff appended to Customs Tariff Act, 1975. Notwithstanding the limited scope of the notice, the adjudicating authority has proceeded to classify the goods with reference to rule 1 of General Rules for Interpretation of the Import Tariff appended to Customs Tariff Act, 1975 besides touching upon rule 2 as well as rule 3A. There can be no doubt that monitors of every kind are covered under heading 8528 of First Schedule to Customs Tariff Act, 1975 and comprises four tariff lines of which two pertain to cathode-ray tube monitors while the other covers every other type of monitors including the impugned goods. It is not that the cathode-ray tube monitors were further divided as that connecting to, and designed for use with, automatic data processing machines and others. With the lack of distinction between monitors used with automated data processing machines and others being so palpable, it is not conceivable that the adopted heading was residual - In the light of the comprehensiveness of the adopted heading to discredit, summarily enough, the claim of the appellant that residuary entry within a heading intended for instruments and appliances is more specific, there are no reason to disturb the classification proposed in the show cause notice and confirmed in the impugned order. The impugned order has traversed beyond the show cause notice in attempting to classify the goods exclusively by resort to rule 1 of General Rules for Interpretation of the Import Tariff appended to Customs Tariff Act, 1975. Probably conscious of the sequence, the adjudicating authority did, nonetheless, go on to test the applicability of other rules which, in the light of the proposal in the show cause notice was unnecessary as the proceedings did not have to go beyond examining the validity of the proposal in the show cause notice - The affirmation of rule 3 of General Rules for Interpretation of the Import Tariff appended to Customs Tariff Act, 1975 does not permit such a finding as the classification declared by the importer was not inapt but only loses out in comparison by the degree of specificity. Penalty u/s 114A of Customs Act, 1962 - HELD THAT:- There is no finding on the manner in which there has been a misdeclaration or willful misstatement with intention to evade payment of duty. It would, therefore, be appropriate for the original authority to apply its mind to a specific finding on a manner in which section 114A of Customs Act, 1962 could have been invoked for imposition of penalty in the light of the proposal in the show cause notice. Thus, while upholding the classification confirmed in the impugned order, the dispute is remanded back to the original authority for this limited purpose.

• 2024 (8) TMI 330

  Denial of benefit of concessional rate of duty under notification no. 21/2002-Cus dated 1st March 2002 - import of waste paper which, instead of having been used in manufacturing of newsprint , was found to have been deployed in production of paper - non-maintenance of separate books, was concealed from central excise authorities to obtain the end use certificate - proceedings under the Insolvency and Bankruptcy Code, 2016 - penalties u/s 112 of CA - HELD THAT:- There is no doubt that the Insolvency and Bankruptcy Code, 2016 has stipulated its dominance over the other laws in the event of inconsistency. Not even a glimmer of inconsistency is perceptible as the issue before us is not recovery of unpaid levies but determination of duty liability on past clearances being legal and proper. The consequence of such order may be recovery of dues, interest and penalty which could well be barred by operation of the Insolvency and Bankruptcy Code, 2016; that, however, arises in a different jurisdiction and not that of chapter XV of Customs Act, 1962 governing appeals. It was always open to the appellant to withdraw its appeal or allow it to be dismissed for non-prosecution. Penalties u/s 112 of CA, imposed on Shri Murli Shobhagamal Maloo and Shri Nandlal B Maloo arising in consequence of confiscation of goods of appellant-importer ordered by the lower authorities - HELD THAT:- It is on record that the importer-appellant had furnished the und-use certificate issued by the central excise authorities and that the findings against the individual-appellants in the impugned order does not specify the manner in which they had contributed to the furnishing of the end-use certificate as it is the unacceptability of evidence of end use that prompted invoking of section 111 of Customs Act, 1962. It is only their overall role in the managerial team of the importer-appellant that appears to have influenced the imposition of penalty on the two individuals. It is observed that the goods have been held liable for confiscation under section 111 (m) of Customs Act, 1962 and that the original authority had held them liable to confiscation under section 111(d) of Customs Act, 1962. Fastening of liability to penalty under section 112 should, therefore, have been a consequence of determination of the manner in which the two individuals were responsible for import and filing of the bill of entry. No exercise has been undertaken to that end by the lower authorities. Consequently, imposition of penalty under section 112 of Customs Act, 1962 on Shri Murli Shobhagamal Maloo and Shri Nandlal B Maloo are not legal and, therefore, set aside. Appeal disposed off.

• 2024 (8) TMI 329

  Seeking provisional release of seized goods - import of goods without BIS - old and rejected goods - circular dated 20.10.2023 vis- -vis the FTP 2023 - HELD THAT:- The jurisdictional Commissioner of Customs had sent the samples of the impugned goods for testing at the CRCL, Mumbai. In the test reports submitted by the said agency, with respect to the query, as to whether the same is end cut, rejected CR strip in coil form or not , it has been answered that the same could not be ascertained by them, and accordingly returned the sealed remnant samples to the department. By referring to the report submitted by CRCL, the Chartered Engineer had confirmed the estimated market rate of the impugned goods and also stated that the goods do not match / fall in the standard chemical composition range of any one specific grade of SS. On examination of the reports submitted by CRCL and the Chartered Engineer, it is found that no definitive inference was drawn, so as to conclude about the exact nature/composition of the product and the true market value of such products. The appellants should be entitled for provisional release of the goods in question, without insisting for submission of the BIS certificate. It is made clear that this order has been passed only in context with provisional release of the impugned goods. Appeal disposed off.

• 2024 (8) TMI 328

  Revocation of Customs Broker License - forefeiture of security deposit - levy of penalty - import of 1792 MT of Black Papper (CTH 0904) into KASEZ - neither the Inquiry officer nor the Ld. Commissioner gave an opportunity to Appellant to bring the correct facts on records by way of cross-examination of the persons whose statements were relied upon by the Department - violation of principles of natural justice - HELD THAT:- Regulation 17 of CBLR, 2018 prescribes the procedure for revoking the license or imposing penalty. It is found that department in the present matter relies upon the statements of witnesses. The right of cross-examination has been recognized under Regulation 17(4) of the CBLR Regulations, 2018, which requires Inquiry Officer to give reasons if he intends to deny such right to the Customs Broker. Recognizing the right of cross-examination, in the case of FLEVEL INTERNATIONAL VERSUS COMMISSIONER OF CENTRAL EXCISE [ 2015 (9) TMI 1151 - DELHI HIGH COURT] held that ' This would include circ*mstances where the person who had given the statement was dead or cannot be found or is incapable of giving evidence or is kept out of the way by adverse party or whose presence cannot be obtained without an amount of delay or expense which, under the circ*mstances, the Court considers unreasonable. It was held by the Court in BASUDEV GARG, ARUN GUPTA, ANIL GOEL VERSUS COMMISSIONER OF CUSTOMS [ 2013 (5) TMI 350 - DELHI HIGH COURT] that it is clear that unless such circ*mstances exist the noticee would have a right to cross-examine the person whose statements are being relied upon even in quasi judicial proceedings.' In the present case, the Appellant questioned the integrity of the statements of the persons recorded under Section 108 of the Customs Act, 1962. Such statements were required to be tested through cross-examination. Despite specific request by the Appellant to cross examine such witnesses, no attempt was made to secure their presence in the adjudication proceedings - Provisions of Regulation 17(4) were given a complete go-by. Not allowing the Customs broker an opportunity to cross-examine the persons examined in support of the grounds forming the basis of these proceedings has resulted in serious prejudice to the Appellant. There are force in argument of appellant that Customs Broker and his employee are two different legal entities, hence a customs broker cannot be held responsible for the act or omissions of his employee where there is no appointment to act as Customs Broker - In the present there is no dispute on the fact that license under the CBLR, 2018 is issued to the Appellant and not Shri Pankaj Thakkar, who is a different legal entity. The impugned order revoking the Customs Broker Licence under Regulation 14 of CBLR, 2018 is legally not sustainable - the impugned order set aside - appeal allowed.

• 2024 (8) TMI 327

  Classification of imported goods - import of a mixture of petroleum products under the guise of Naphtha - benefit of Entry No. 74 of exemption N/N. 21/2002-Cus., dated 1-3-2002 as amended - method (ASTM D86) of testing to ascertain the nature and classification of the goods - Whether the goods imported by the appellant is Naphtha or other ? HELD THAT:- It is found that Tribunal had remanded the matter back for conducting fresh cross-examination of the witness/ Chemist Assistant Grade-I, who was directed to produced the lab records to prove his assertions. From the records of the cross examination so conducted on 22.12.2022 it is apparent that in the reports and lab records there was no mention of the prescribed test having been followed while testing the subject goods and the witness orally insisted that the prescribed test was carried out while testing the subject goods. In the present matter Appellant also strongly argued that the witness during the cross examination changed his stand while answering the questions so asked to him and further cross examination of the witness was abruptly stopped by the Ld. Commissioner. Appellant has pointed out that further questions need to be asked, amongst others, in view of the order dtd. 25.08.2020 [ 2020 (8) TMI 656 - CESTAT AHMEDABAD ] passed by Hon ble Tribunal and on ASTM D86 method on different aspect to show that the tests were not conducted as per the said prescribed method. But the said request was declined by the Ld. Commissioner, however time was given to file submission in writing in regard to the above aspect/request for further cross-examination. It was mandatory to ask the said witness questions on different aspects of the prescribed test and also to confront the lab records to him and it was for him to prove his assertion that the said prescribed test method i.e ASTM D86 method was followed while testing the subject goods. It is found that as per the standard test method for distillation of Petroleum products at Atmospheric Pressures published by ASTM International, United States prescribes specific condition in relation to testing items - it is apparent that in the reports and lab records so produced there was no mention of the prescribed test having been followed. Appellant has placed on record the quality certificate dated 25-7-2004. Test report is of the port of loading. The said test report categorically states that the method of testing was ASTM D 86 which meets the requirement of sub hearing note 4, chapter 27. Certificate of Quality produced by them was issued by M/s. Atlas Inspection Services Ltd., Iran and full specifications were exhibited containing 12 parameters in the said certificate of quality. The test report produced by the department does not indicate the procedure adopted. The finding of the adjudicating authority that the goods in question are not Naphtha , agreed upon. The impugned order is set aside - appeal allowed.

• Insolvency & Bankruptcy

• 2024 (8) TMI 326

  Maintainability of section 7 application - effect of approval of Resolution Plan in the CIRP of the Principal Borrower on the guarantee which was given by the Corporate Debtor to ICICI Bank - it was held by NCLAT that 'The Adjudicating Authority after considering all relevant aspects of the matter has admitted the Section 7 application against the Corporate Guarantor, in which there are no infirmity' - HELD THAT:- There are no good ground and reason to interfere with the impugned judgment and, hence, the appeal is dismissed.

• 2024 (8) TMI 325

  Seeking to quash the demand notice of the respondents (TANGEDCO) for arrears of unpaid electricity charges - direction to the respondents to provide the electricity connection - electricity connection disconnected for non-payment of current consumption charges, prior to the commencement of insolvency proceedings - Regulation 17 of the Electricity Supply Code. IBC Scope for Misuse - Is the petitioner liable to pay the arrears of electricity charges which has arisen prior to the commencement of the insolvency proceedings, and will it survive after the successful completion of the resolution process? - HELD THAT: - Having understood the scheme of the IBC, it is now time to navigate through the authoritative pronouncements of the Hon ble Supreme Court. It is neither about the creation of two broad categories of creditors the financial creditors and the operational creditors by the IBC, nor about the differential criterion which IBC has employed to define the character of both these categories of creditors, whose alleged inequality of status the Supreme Court has rejected on its way to uphold the constitutionality of the IBC in the Swiss Ribbons Case [ 2019 (1) TMI 1508 - SUPREME COURT] . It is about the protection and the assurance the IBC offers to the operational creditors and the role of the Adjudicating Authority. This exercise is both inevitable and mandatory since this Court has to ensure that the petitioner, with or without the collaboration of its financial creditor, has not been converted the IBC into mechanism to deny the respondent of their dues by a shrewd manipulation of the process it provides. Operational Creditors Right to Property - HELD THAT:- The object of the IBC evidently is to minimize the loss of various categories of creditors even as it attempts to salvage the corporate debtor from its commercial extinction. Appreciable it is, but it may not be let to gloss over the fact that every claim of the operational creditors involves a right to their property under Article 300 A of the Constitution, which the Supreme Court now reads it as a facet of human right and as integral to the right to life under Article 21 of the Constitution vide the ratio in Lalaram Vs Jaipur Development Authority [ 2015 (12) TMI 1866 - SUPREME COURT] read alongside the ratio in Tukaram Kana Joshi Vs MIDC [ 2012 (11) TMI 1234 - SUPREME COURT] , and approved in VIDYA DEVI VERSUS THE STATE OF HIMACHAL PRADESH ORS. [ 2020 (1) TMI 1691 - SUPREME COURT] . This is the major premise. Ordinarily, a person with a claim has the right of action to enforce the claim before a neutral arbiter, be it the Court or a tribunal, both of which are positioned equidistantly from opposing claims. This is the minor premise. IBC Neutral Tribunal - HELD THAT:- It could now be derived that where a substantive right to property is in peril, the right of action before a neutral tribunal springs into action for obtaining justice in the cause. This is fundamental to Constitutional jurisprudence - the scheme of IBC provides for a two-tier mechanism for approval of a resolution plan first by the CoC and next by the Adjudicating Authority. Now, unless the Adjudicating Authority is treated as a neutral tribunal for the operational creditors to defend and secure its right to property which they have in their claims against any perceived unfair and inequitable treatment meted out to them by the CoC, even if the CoC has acted bonafide, there is a lurking danger of IBC straying into the zone of unconstitutionality for breaching the dictum of the Constitution Bench in the Madras bar Association case [ 2010 (5) TMI 393 - SUPREME COURT] . What then is the role which the Adjudicating Authority is expected to play? - HELD THAT:- From the Essar Steel case to the Rainbow Papers case [ 2022 (9) TMI 317 - SUPREME COURT] and other decisions, the Adjudicating Authority has been told that its duty is limited to satisfying itself of the due compliance of Sec.30(2) requirement by the CoC when the latter approved the resolution plan. The Essar Steel in particular has held that the Adjudicating Authority shall not substitute its sense of fairness and equity to replace the commercial wisdom of the CoC. The Rajagopalan effect, it must be stated, does not stop with bringing in clarity in understanding the expression commercial wisdom of the CoC, but also has interfered to realign the understanding of the duty of the Adjudicating Authority. Therefore, even though the Adjudicating Authority may not sit in appeal over the commercial wisdom of the CoC, still it is required to exercise a jurisdiction, akin to a revisional jurisdiction, to ascertain the correctness of what has been done before and by the CoC. Finality of the Resolution Plan the CST - HELD THAT:- In the case of disclosed creditors, CST will definitely apply, if any of the aggrieved creditors did not opt to challenge the resolution plan as approved under Sec.31 before the Appellate Authority, the NCLAT. So far as the undisclosed creditors are concerned if CST is applied, they become instant victims of the callousness of the IRP and the RP as well as the deliberate silence of the suspended board in not revealing them - the corporate debtors themselves must be classified into two: The MSME corporate debtor who had the opportunity to participate in the resolution process effectively to the extent of presenting a resolution plan; and (b) non MSME corporate debtor. What the Petitioner may anticipate? - HELD THAT:- Fraud has to be unearthed through inferences from attending circ*mstances. It is hence, mandatory not to eschew the attending circ*mstances from judicial purview while evaluating the bonafides of a resolution plan, more significantly the fairness expected of it as there is an obligation on the CoC to protect the interests of the operational creditors. While the legislative intent to save the corporate debtor as a going concern may be appreciable, should it be at the cost of others, more so when IBC offers adequate space for engineering manipulation? The larger question therefore, is why should the Parliament bend backwards to protect one corporate debtor at the risk of exposing the public interest to peril? The present case, a case-study merely, illustrates how IBC could be manipulated to defeat the interests of the undisclosed creditors of the corporate debtor. This petition is dismissed and given the nature of questions it raised, there will no order as to costs.

• PMLA

• 2024 (8) TMI 324

  Legality of arrest of the Petitioner - arrest on the material that was in possession of the respondent/CBI prior to 04.06.2024 - Insurance arrest - Compliance of Section 41(1) Code of Criminal Procedure for Arrest without Warrants - Compliance with S.41(2) Cr.P.C. for Arrest with Warrants. Compliance of Section 41(1) Code of Criminal Procedure for Arrest without Warrants - HELD THAT:- From the bare perusal of this Section 41(1), it is evident that the Police in cognizable offences where the person accused of an offence punishable with a term which may be less or extend to seven years with or without fine, can be arrested without warrants by the Police Officer. However, this power to arrest without warrants is circ*mscribed by Section 41 (1) (b) which provides that the arrest without warrants can only be on the satisfaction of the existence of three circ*mstances i.e., (i) the credible information (ii) reasonable complaint or (iii) reasonable suspicion. However, such power of arrest is further subject to five circ*mstances described in Section 41 (1) (ii) (a) to (e). The reliance has been heavily placed by the Ld. Senior Advocate on the decision of Apex Court in Arvind Kejriwal v. Directorate of Enforcement [ 2024 (7) TMI 760 - SUPREME COURT] wherein under similar circ*mstances the arrest of petitioner in the PMLA case has been held as illegal. However, this judgement is distinguishable as the arrest was made under Section 41 (1) Cr.P.C. without warrants, which is not the case herein involving the arrest of petitioner by the CBI with the Orders of the Court. Compliance with S.41(2) Cr.P.C. for Arrest with Warrants - HELD THAT:- Section 41(1) Cr.P.C. gets attracted only when the arrest is made without the warrant of the Court. Pertinently, in the present case, the I.O. after having interrogated the petitioner on 24.06.2024 with the permission from the Court, moved another Application on the next day i.e. 25.06.2024 seeking permission to arrest the petitioner. The said Application though again did not mention the Section in which it was filed, but from its title as well as the contents, it is evident that it was an application filed not under Section 41(1) but under Section 41(2) of Cr.P.C. 1973. It is on record that the arrest was not solely based on ambiguous terms of non-cooperative attitude and evasive replies but these terms were duly qualified and explained. It was pointed out the aspects on which the petitioner was not forthcoming. It is not a case where he was being compelled to be a witness against himself in contradiction to his valuable rights enshrined and protected under Article 20 (3) of Constitution of India, but it was his specific non-cooperative attitude, which was also borne out from the case diary, that hampered the collection of relevant evidence that prompted the arrest. In the present case, while permitting the arrest, the only factors to be considered by the Court were whether there is a reasonable suspicion or credible information about the commission of the offence. These factors were clearly detailed in the Application for arrest dated 26.04.2024 and it is not the argument of either party that there were no suspicious circ*mstances against the petitioner in regard to the conspiracy to commit the offence. In the present case, it is not in dispute that initially, after registration of FIR on 17.08.2022, the petitioner was examined on 16.04.2023 for 9-10 hours after service of summons under Section 160 CrP.C. dated 14.04.2023 since at that stage he was identified only as a person, who was acquainted with the facts and circ*mstances of the case. The prosecution has explained that respecting his position as a Chief Minister of NCT of Delhi, the police treaded with trepidation and caution and proceeded to collect the evidence from other persons suspected to be the accused. Consequently, extensive investigations were carried out across India to ascertain the entire web of conspiracy involving numerous persons - The reasons for not proceeding immediately against the petitioner, after registration of the FIR is thus, well explained by the CBI and does not reek of malice. It is correct and true that the petitioner herein is not an ordinary citizen of this country but is a distinguished holder of Magsaysay Award and a convenor of Aam Aadmi Party. The control and the influence which he has on the witnesses, is prima facie borne out from the fact that these witnesses could muster the courage to be a witness only after the arrest of the petitioner - Also, it establishes that the loop of evidence against the Petitioner got closed after collection of relevant evidence after his arrest. No malice whatsoever, can be gathered from the acts of the respondent. Thus, it cannot be said that the arrest was without any justiciable reasons or was illegal - Petition dismissed.

• Service Tax

• 2024 (8) TMI 323

  Refund claim of service tax paid - additional service tax paid on the additional charges recovered from customers - case of Revenue is that appellant have already recovered service tax amount paid from their APM (Administered Price Mechanism) Gas customers and therefore the service tax has rightly been paid by them - HELD THAT:- There is no denying of the fact that appellant have issued credit notes to its customers for the additional charges along with service tax charged thereon and it is also clear that the appellant s customers did not take Cenvat credit of additional service tax paid by them on the additional service charge - from the perusal of the sample contract that the appellant being a nominee of Government of India for sale of natural gas under APM to its buyers to whom the gas was allocated by Government of India under a contract. The appellant was required to transmit the gas through pipeline upto the buyer s premises. It is matter of record that for transmission of gas through pipe line during the period from October 2008 to July 2009m, the appellant have charged additional amount over and above the portion fixed by the regulatory authority and such additional charges were not approved by the Ministry of Petroleum and Natural Gas. As per the provisions of Section 67(1)(i) of the Finance Act, 1994, the service tax is payable on the gross amount charged by the service provider for rendering a particular service. Since gross amount charged by the appellant from the buyers of natural gas was less by the additional service charge recovered by them therefore, service tax paid on the additional service charges cannot be recovered as the service tax payable under Section 67 of the Finance Act, 1994. The appellant are rightly eligible for the refund of service tax paid by them on the additional charges recovered by them from their customers and same have been refunded by way of credit notes - the impugned order-in-appeal is without any merit - appeal allowed.

• 2024 (8) TMI 322

  Levy of service tax - Business Auxiliary Service (BAS) - agreement with M/s. Indian Oil Corporation Limited for operation of the Company Owned Company Operated outlet - Department considered the services rendered by the appellant as promotion, marketing or selling of the products of the company - HELD THAT:- The appellant has been appointed by IOCL for the purpose of operation of the Company Owned Company Operated outlet. From the Clauses of agreement, it is apparent that the appellant has been engaged for the purpose of maintenance and handling of a retail outlet of IOCL - from the Terms and Conditions of the Agreement, we observe that the Maintenance and Handling Service rendered by the appellant would not come within the ambit of 'Business Auxiliary Service'. The Department considered the services rendered by the appellant under the category of 'Business Auxiliary Service', on the allegation that they have promoted the sales and/or marketing of the products manufactured by IOCL - the activities undertaken by the appellant would not fall under any of the clauses of definition of business auxiliary service. None of the Clauses of the Agreement talk about promoting the sales or marketing the goods manufactured by IOCL. At the maximum, the services rendered can be categorized as Management and Maintenance Service', but there is no demand of service tax under this category in the impugned Notice. Thus, the demand of service tax confirmed in the impugned order under the category of 'Business Auxiliary Service' is not sustainable. Since the demand of service tax is not sustainable, the question of demanding interest and imposing penalties does not arise. The impugned order is set aside - appeal allowed.

• 2024 (8) TMI 321

  Liability to pay service tax - amount of transportation cost paid to the transporters and later recovered from the cane growers - HELD THAT:- The issue is no more res integra and covered by the judgment of this Tribunal in the case of M/S SHREENATH MHASKOBA SAKHAR KARKHANA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-III [ 2016 (12) TMI 732 - CESTAT MUMBAI] . In the said case also, transportation cost has been borne by the farmers which was initially paid by the manufacturer of sugar and later deducted from the price of the sugarcane from the farmers. In the present case also, the transportation cost has been borne by the farmers and therefore, the appellant cannot be saddled with the liability to discharge service tax. Hence, there are no reason to deviate from the above said decision of the Tribunal. The impugned order is set aside - Appeal allowed.

• 2024 (8) TMI 320

  Liability to pay Service Tax under reverse charge basis - manpower supply services or not - services received from the contractor M/s. Bhola enterprise, who was engaged in undertaking misc. jobs such as preparation of scaffolding for cooler, intel duct for welding, removal of spillage material, housekeeping etc. for the appellant - HELD THAT:- On the similar issue relying on various Judgments, this Court in the own matter of the appellants as reported GUJARAT SIDHEE CEMENT LIMITED VERSUS C.C.E. S.T. -BHAVNAGAR [ 2024 (5) TMI 134 - CESTAT AHMEDABAD] has held ' the matter is no more res Integra and the impugned service cannot be held as Manpower Recruitment und Supply Agency Service simply because of the basis of making payment to the contractor.' Thus, as held by the Division Bench of this Tribunal only, the mode of payment is not relevant and impugned order in this case also has period involved from July 2012 to March 2013. Since the activities of the labour was for miscellaneous jobs and labour was under control of contractor. Therefore, same cannot be said to be man power supply - Appeal allowed.

• 2024 (8) TMI 319

  Levy of service tax - Design Services on the remittances made by the Appellant to certain foreign entities - reverse charge mechanism - validity of SCN. Vague SCN or not - HELD THAT:- The impugned order is unsustainable in law in as much as the SCN itself was vague, non-specific and invalid. As is evident from the perusal of paragraphs 5 and 9 of the SCN, the design charges paid by the Appellant were considered liable to be taxed under reverse charge simultaneously under two taxable categories, viz. Design Services and Commercial and Industrial Construction services. Service tax on Design services - reverse charge mechanism - HELD THAT:- There was no provision or supply of any independent services of Design and Drawings by M/s. Corus to the Appellant in terms of the contract. The separate consideration in the form of foreign remittances paid by the Appellant to M/s. Corus was not only for any independent supply or provision of any Design or Drawings services. Moreover, the consideration so paid was also for the provision of a gamut of services as described above, including design and drawings, and which were an integral part of the entire contract, incapable of being segregated or vivisected. The Revenue has also not brought any evidence on record nor has been able to establish before us that the design and Drawings covered within the scope of the Contract constituted an independent aim of the contractual arrangement between the contracting parties, and that the entire consideration described as 'Design Charges' paid by the Appellant was only for the provision/supply of Design and drawings - the attempt of the Revenue to artificially vivisect the supply of Design and Drawings from the above indivisible contract cannot be sustained, and the demand of service tax raised and confirmed on this basis cannot be upheld. The Department, however, failed to discharge this burden cast upon it in the present case. The SCN was vague, non-specific and void ab initio as it simultaneously alleged the classification and taxability of the said service under two specified table categories viz. Design Service and Commercial and Industrial Construction Service which was not permissible in law. The observations and findings are also beyond the scope of the SCN dated 22.04.2014 in as much as no such basis was laid down in the notice for alleging the classification of the services under 'Design Services'. The impugned order passed by the Commissioner holding the services under dispute under the taxable category viz. Design Services and confirming the demand of service tax under reverse charge thereunder cannot be sustained in law. The impugned order cannot be sustained - Appeal allowed.

• 2024 (8) TMI 318

  Classification of services - works contract service or not - Construction or Renovation. Commercial/Industrial Buildings/Pipelines/Conduits Services and 'Management, of Maintenance repair Services - Time Limitation. Classification of services - HELD THAT:- The service provided by the appellant falls under the definition of Works Contract Service because the certificate produced by the appellant issued by the Punjab Mandi Board dated 09.04.2013 clearly shows that the allotted work to the appellant was inclusive of cost of material and no material was supplied by the Punjab Mandi Board; therefore, once it is a Works Contract than as per the judgment of the Hon ble Supreme Court in the case of M/S. LARSEN TOUBRO LIMITED ANOTHER VERSUS STATE OF KARNATAKA ANOTHER [ 2013 (9) TMI 853 - SUPREME COURT] ; the appellant is not liable to pay service tax under Commercial or Industrial Construction Service even prior to 01.06.2007 or after that date also. Time limitation - HELD THAT:- There is no specific allegation against the appellant that they have not paid the service tax with intend to evade payment of service tax. In fact, the appellant were providing services to organizations which are not engaged in any commerce, industry or any other business or profession; therefore, the extended period of limitation is not invokable. The impugned order is not sustainable in law and the same is set aside - Appeal allowed.

• 2024 (8) TMI 317

  Valuation of service - various facilities given to the service provider namely M/s. Central Industrial Security Force by the appellant such as barrack accommodation, medical expenses, lease accommodation, telephone charges, vehicle and vehicle hiring charges, stationary, miscellaneous expenses etc. - whether the cost of the said facilities should be included in the gross value of security service provided by M/s. Central Industrial Security Force to the appellant? HELD THAT:- In the very same issue much water has flown as this Tribunal has passed the order wherein it was held that the cost of various facilities provided by the service recipient to M/s. Central Industrial Security Force in the course of providing security service will not be included in terms of Section 67 of the Finance Act, 1994. Consequently, no demand of service tax in such a case will sustain. In the case of Central Industrial Security Forcev. Commissioner of Central Excise ST; CESTAT Ahmedabad [ 2024 (5) TMI 565 - CESTAT HYDERABAD] , it was held that 'the Hon ble Supreme Court in the case of Bhayana Builders Pvt Ltd [ 2018 (2) TMI 1325 - SUPREME COURT] , have held that free supplies would not form part of the total value for charging of Service Tax.' The issue is settled in as much as the expenses on various facilities provided by the appellant being a service recipient to the service provider M/s. Central Industrial Security Force is not includible in the gross value for charging service tax in terms of Section 67 of Finance Act, 1994 - the impugned order is set-aside - Appeal allowed.

• Central Excise

• 2024 (8) TMI 316

  Applicability of ratio of the judgment in GHANASHYAM MISHRA AND SONS PRIVATE LIMITED THROUGH THE AUTHORIZED SIGNATORY VERSUS EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED THROUGH THE DIRECTOR ORS. [ 2021 (4) TMI 613 - SUPREME COURT] - respondent/company has been subjected to CIRP proceedings under the provisions of the Insolvency and Bankruptcy Code, 2016 - NCLT, Ahmedabad admitted the respondent to CIRP proceedings - resolution plan was approved and an amount of Rs.157 Lakhs was provided towards making the payments to operational creditors including Government dues, which have been claimed/lodged - no claims of the appellant(s)/Department made in respect of the Assessment Years under consideration in these appeals. HELD THAT:- These Civil Appeals stand disposed of in terms of the aforesaid judgment of this Court. The question of law on the merits of the case is, however, left open.

• 2024 (8) TMI 315

  Fixation of special value addition rate for the Financial Year 2010-11 - area-based exemption under N/N. 32/99-CE dated 08.07.1999, as amended by N/N. 17/2008-CE dated 27.03.2008 and N/N. 31/2008-CE dated 10.06.2008 availed - whether fixation of special rate can be rejected merely because the sale value is arrived at from the audited financial statements of the Company by apportioning the same to respective units on the basis of their stock transfer ratio or not? HELD THAT:- This issue is no longer res integra as this Tribunal has decided the same issue in the case of M/S HINDUSTAN UNILEVER LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, DIBRUGARH [ 2023 (10) TMI 991 - CESTAT KOLKATA] - in the decision cited, the methodology for arriving at the sale value from the audited financial statements of the company by apportioning the same to the respective units on the basis of stock transfer ratio has been accepted and special rate has been fixed accordingly. Therefore, by relying on the above decision, it is held that the impugned orders rejecting the special rate are legally not tenable and accordingly, the same is set aside. The impugned order set aside - appeal allowed.

• 2024 (8) TMI 314

  Clandestine removal - demand based on the electrical consumption - average electricity consumption was worked out for four months - period August 2009 to November 2009, May 2010 to October 2010 and December 2010 to February 2011 - cross-examination of officials was sought, but no opportunity provided - violation of principles of natural justice - HELD THAT:- The Tribunal and High Court have consistently taken the view that what has been given as a electricity consumption based on a formula by Dr. Batra cannot be applied to all the manufacturers having various capacities and different machineries to arrive at the quantification of production. Therefore, this method of ascertaining the clandestine manufacture based on the electricity consumption was discarded by the Tribunals and the High Court. In the present case, the Revenue has not applied any formula given by Dr. Batra, IIT professor, but has actually worked out the electrical consumption for the five months period starting from November 2010 to March 2011 and then worked out the average consumption. This consumption has been used to arrive at the quantification of manufacture for the other period under question. Therefore, the appellant cannot be agreed that the cited case law of R.A. Castings would be applicable in the present case. There are force in the appellant's argument that the statements recorded by various officials have been relied upon by the Revenue while framing their allegations and also while confirming the demand. It is also on record that the Appellant has asked for crossexamination of certain persons which was not granted at the time of adjudication proceedings. The Hon ble Punjab and Haryana High Court in the case of M/S G-TECH INDUSTRIES VERSUS UNION OF INDIA AND ANOTHER [ 2016 (6) TMI 957 - PUNJAB HARYANA HIGH COURT] held ' it would be open to the assessee to seek permission to cross-examine the persons who have made the said statements, should it choose to do so. In case any such request is made by the assessee, it would be incumbent on the adjudicating authority, i.e., on Respondent No. 2 to allow the said request, as it is trite and well-settled position in law that statements recorded behind the back of an assessee cannot be relied upon, in adjudication proceedings, without allowing the assessee an opportunity to test the said evidence by cross-examining the makers of the said statements.' Thus, the appellant should be given an opportunity to cross-examine the persons who had recorded their statements before the investigating officials. Hence, the matter is remanded to the Adjudicating Authority.

• 2024 (8) TMI 313

  CENVAT Credit - capital goods or not - MS Sheets, Plates, Angles, Technological Structures, foundation bolts and nuts and railway sleepers falling under Chapter 72, 73 68 - period May 2008 to January 2013 - time limitation. CENVAT credit on storage bunker - HELD THAT:- The definition of capital goods includes storage tank. Merely because, the bunker is used for temporarily holding the raw materials, it cannot be said that it does not serve the purpose of storage - the credit in regard to storage bunker is eligible. CENVAT Credit on certain items used in the nature of support structure for Bag Filters, Hoppers for Spark Arrestor and structure for dust silos - HELD THAT:- It can be seen that pollution control equipment falls within the definition of capital goods. The said equipment cannot be put into effective use without being embedded to earth. There are various parts which have to be assembled and connected at site using steel structures. The items which are used for holding and connecting the various parts of the pollution control equipment and other machines which is eligible for credit. CENVAT Credit on Cable tray - HELD THAT:- The cable trays are used for holding electrical cables of the machines and are accessories of capital goods. The credit is eligible. CENVAT Credit on sub-station electrical equipment - HELD THAT:- Certain items have been used for sub-station electrical equipment which is not eligible for credit. CENVAT Credit on Earthing Material - HELD THAT:- This is also used for electrical protecting wiring and therefore not eligible for credit. CENVAT Credit on Galvanised Structure - HELD THAT:- The end use of this item is for electrical equipment in main receiving sub-station. The said invoice is not eligible for credit. CENVAT Credit on electrical power and main receiving sub-stations - HELD THAT:- These items are not eligible for credit. CENVAT Credit on GI earthing wire - HELD THAT:- The items in the nature of GI earthing wire used for electrical protective earthing which is not eligible for credit. CENVAT Credit on DCS System Spares - HELD THAT:- The description of item is DCS System Spares which is used for electrical equipment in main receiving sub-station is not eligible for credit. Duplication of invoice - HELD THAT:- It is noted that it is a duplication of Sl.No. 289 and for this reason, this invoice dated 03.04.2010 is not eligible for credit. CENVAT Credit on GI Earthing Strip - HELD THAT:- The items described are GI Earthing Strip which is used for protective wiring and electric equipment which is not eligible for credit. CENVAT Credit on items used are for electrical installation and protective wiring, etc. - HELD THAT:- The items used are for electrical installation and protective wiring, etc., is not eligible for credit. CENVAT Credit on on railway sleepers - HELD THAT:- In the present case, the appellant has availed credit on railway tracks as well as concrete sleepers. The credit availed on concrete sleepers would not be admissible. In Annexure 1 of the Chartered Engineer Certificate, the details of the credit availed in respect of railway sleeper and concrete sleeper has been given. On perusal, the concrete sleeper in this Annexure is not eligible for credit. On merits, the issue of eligibility of credit on concrete sleepers is held in favour of revenue and against the assessee. The Tribunal in the case of Singhal Enterprises Private Limited [ 2016 (9) TMI 682 - CESTAT NEW DELHI] had occasion to consider the issue of eligibility of credit wherein the user test was put into application to allow the credit. The Tribunal relied upon the decision in the case of Rajasthan Spinning Weaving Mills Ltd. [ 2010 (7) TMI 12 - SUPREME COURT ] and held that when steel plates, MS Channels, Sheets are used for fabrication of capital goods or for putting the capital goods into effective use, the credit is eligible. Time Limitation - HELD THAT:- On perusal of the Show Cause Notice, apart from a vague allegation that appellant has suppressed facts with intention to evade duty, there is no positive act of suppression established against the appellant. The appellant has filed periodical returns disclosing the credit availed. Several audits were conducted. The appellant being a Public Sector Undertaking there cannot be any wilful intention to evade payment of duty as decided in the case of CISF Unit [ 2019 (2) TMI 1175 - CESTAT NEW DELHI] - The decision in the case of Uniworth Textiles Ltd. [ 2013 (1) TMI 616 - SUPREME COURT] has held that there has to be wilful suppression with intent to evade payment of duty. On the totality of facts, and following the decision, the demand raised invoking the extended period cannot sustain. Appeal allowed in part.

• 2024 (8) TMI 312

  Classification of goods - HDPE pipes - classifiable under Chapter heading 3917 or not - applicability of exemption under N/N.6/2006-CE dt. 01.03.2006 upto 16.03.2012 and under N/N.12/92-CE dt. 17.03.2012 - HELD THAT:- The earlier show cause notice issued to the appellant with the detailed facts alleging that the appellant is not eligible for exemption as per Notification No.6/2012-CE or 12/2012-CE has been decided by the Tribunal holding that the appellant is eligible for the benefit of exemption. The said decision passed by the Tribunal in M/S JAIN IRRIGATION SYSTEMS LTD VERSUS COMMISSIONER OF CENTRA EXCISE, COIMBATORE [ 2015 (10) TMI 1336 - CESTAT CHENNAI ] where it was held that ' The notification had flown under clause (6) of CTH 9801. Reference to CTH 9801 finds place in Notification No.6/2006-CE, dated 1-3-2006 as well as Notification No.12/2011-C.E., dated 7-3-2012. Reading of the customs notification, tariff heading, nature of goods cleared and Central Excise notifications enables to hold that the goods cleared by appellant were meant for drinking water supply project only. The goods so used was certified by the appropriate authority. Therefore in absence of any contrary evidence, the goods cleared by appellant cannot be denied exemption.' The demand cannot sustain - The impugned order is set aside - The appeal is allowed.

• 2024 (8) TMI 311

  Refund in cash of service tax paid under reverse charge mechanism post 01.07.2017 under the existing law - Section 142 (3) of CGST Act, 2017 - HELD THAT:- Reliance placed by DR on the judgment of Hon ble High Court of Jharkhand in the case of M/S RUNGTA MINES LIMITED VERSUS THE COMMISSIONER OF CENTRAL GOODS SERVICE S TAX AND CENTRAL EXCISE, THE COMMISSIONER (APPEALS) , CENTRAL GOODS SERVICES TAX AND CENTRAL EXCISE, 2, THE ASST. COMMISSIONER, CENTRAL GOODS SERVICES TAX AND CENTRAL EXCISE, DIVISION I, JHARKHAND [ 2022 (2) TMI 934 - JHARKHAND HIGH COURT] is appropriate to appreciate the applicability and the scope of Section 142(3). A plain reading of Section 142(3) evidences that Section 142(3) does not confer a new right, which never existed under the existing law, if the person is not entitled for any right including refund under the existing law. The ratio of the above judgement squarely applicable to the facts of the instant case as regards Section 142(3) of the Act. In the above judgement it was held that provisions of CGST Act do not cover any such situation relating to any consequences due to inter parte acts and omissions. It was also held that in that case as per the petitioner, the entire problem has cropped up due to non-receipt of invoice in original from port authorities although the port services were availed and payments for the same were made. In the present case also i.e. JSW Cement Pvt Ltd., the issue has cropped up because of late receipt of invoices bills in the last week of July 2017 in respect of input services received during the period March 2017 to June 2017 as admitted by the appellant. Therefore, as held in the Rungta Mines the late receipt of invoices is essentially between the appellant and its service provider and the tax collecting authorities had nothing to do in the matter. It was also held in Rungta Mines, that appellant never had a right to claim refund under the existing law. Thus, the Rungta Mines decision is exactly applicable to the instant case. There is no infirmity in the order passed by the Commissioner (Appeals), upholding the order of the Original Authority, who had rejected the claim of refund in cash filed by the appellant - the appeal filed by the appellant is liable to be dismissed - Appeal dismissed.

• 2024 (8) TMI 310

  CENVAT Credit - capital goods or not - Chartered Engineer s certificate submitted by the appellant is sufficient to discharge the responsibility placed on appellant under Rule 9(5) of CCR 2004 or not - whether the case is no longer res-integra in view of the order passed by the Tribunal in their own case M/S. BERRY ALLOYS LIMITED VERSUS COMMISSIONER OF CENTRAL TAX, VISAKHAPATNAM-I [ 2022 (5) TMI 797 - CESTAT HYDERABAD] ? - levy of penalty. HELD THAT:- There is some force in the arguments made by the Learned DR that the rules applicable for the period in the present appeal were not same and therefore on that ground alone said order should not be made applicable to the present appeal. It is further found that the Tribunal has observed that receipt of goods and thereafter their use for fabrication as per Chartered Engineer s certificate is not contested, whereas, in the present case, the use is being doubted in the Order-in-Original upheld by the Commissioner (Appeals), in as much as the said certificate was considered as not sufficient to prove whether they were actually utilised in the fabrication of the capital goods or otherwise. Therefore, Rule 9(5) of CCR 2004 has not been considered. The facts of the case are more or less identical bearing few items the grounds taken for confirming demand, grounds and reasons for grant of relief by Tribunal are different. Firstly, in their order Tribunal had not examined applicability of Rule 9(5) of CCR. Also, though it was claimed as input in the relevant period, in the present appeal it has been claimed as capital goods . Admittedly, the declaration of capital goods was under different rules during the said period and apparently because of that it was claimed as input and not as capital goods. The format of Chartered Engineer s certificate perused by the Tribunal was also different than the one relied upon by the appellant in present appeal - the judgment in M/S. BERRY ALLOYS LIMITED VERSUS COMMISSIONER OF CENTRAL TAX, VISAKHAPATNAM-I [ 2022 (5) TMI 797 - CESTAT HYDERABAD] cannot be applied in totality for deciding the present appeal where facts and submissions are slightly different as well as the rule position is also different. Therefore, this ground of the appellant is not tenable. Whether these items can be considered as capital goods or not? - HELD THAT:- It is not the case, nor disputed by Department that various capital goods were fabricated/manufactured at site within the factory and that they were not falling under Chapter 82, 84, 85, 90 etc., or Pollution Control Equipment. In fact, the impugned order has tacitly accepted that these items could be considered as components. What is being disputed is whether these items were actually used as components of the capital goods covered within the definition of capital goods under Rule 2(a) within the factory in view of insufficiency of evidence adduced by the appellant. In so far as the issue whether such components would still be eligible for input credit on account of the fact that the goods were embedded to earth and thus not goods at all, the appellants have relied on plethora of judgments and it is observed that in various judgments it has been held that the goods which are embedded to earth and therefore not excisable, cannot be the ground for denial of Cenvat Credit as capital goods. The ground taken by the Revenue that since these items were used as components, spares etc., for fabrication of various capital equipments/goods embedded to earth would debar it from being considered as capital goods is not tenable. Thus, such goods would still be considered as components etc., if used in fabrication or construction of capital goods within the factory where such capital goods etc., are further used in the manufacture of excisable goods - apparently, what is being now disputed is whether the usage criteria has been clearly satisfied to consider as component. Thus, impugned items, except when used for making foundation etc., would fall within the definition of capital goods under category 2(a)(A)(iii). Whether in the given facts of the case, appellant has been able to specify the usage of such components in the capital goods fabricated within the factory of production or otherwise? - HELD THAT:- From the description given by the Chartered Engineer, it is also not clear as to when and how such items were actually issued for fabrication of the intended main equipment. It also does not show what documents were verified and whether they had verified issue register, technical feasibility of utilisation of such items in the intended capital equipment, drawings, designs etc., to satisfy whether such items were required for manufacturing of final goods etc. This becomes more important especially when most of these items have multiple uses and can be used for various purposes and some of these items cannot be used for the intended purposes if they are not having specified technical parameters compatible with such use because of the high temperature etc., where only a specified variety of sheets, plates etc., can be used. Therefore, though theoretically these items can be considered as components, parts etc., for these equipments but were they actually used for such fabrication or uses as detailed in the Chartered Engineer certificate needs further corroboration to the satisfaction of the Competitive Authority. There are much force in the argument of the Department that in the present appeal, the appellants have failed to satisfy the lower authorities as regards its actual use which is crucial to decide usage and the extent of it s usage. Thus, in the fact of the case and statutory provisions what is needed is the verification and corroboration of the Chartered Engineer s certificate with the internal records by the Adjudicating Authority so as to satisfy him about its actual use in those intended capital equipments/goods etc. Imposition of penalty - HELD THAT:- It is found that Original Authority has imposed penalty under Section 15(1) of CCR read with Section 11AC(1)(a) of Central Excise Act on the grounds that appellant has violated provisions of Rule 9(5) by not disclosing the actual usage, which came to their knowledge only when they informed the Department on being asked. However, this aspect would have to be redetermined in view of discussions in foregoing paras where admissibility of the entire demand would have to be re-determined. The matter is remanded to the Original Authority to go through the corroborative documents supporting the Chartered Engineer s certificate supporting actual use of such goods in fabrication/construction of capital goods as claimed by appellant and to allow credit to the extent they are proved to have been actually used in fabrication of those equipments / capital goods etc. Similarly, imposition of penalty would need to be redetermined - Appeal disposed off by way of remand.

• 2024 (8) TMI 309

  Excisability of residual Zinc Ash - captive consumption - appellant did not avail option under Rule 6(2) and under Rule 6(3) of the Cenvat Credit Rules, 2004 and did not maintain separate register for quantity of Zinc Ash used in the manufacture of their dutiable products and their exempted products - Supression of facts or not - extended period of limitation. Excisablity - HELD THAT:- The entire proceedings in this case was initiated on the investigation conducted by the DGGI and the same was based on the judgment of Hon ble Supreme Court in the case of UNION OF INDIA VERSUS DSCL SUGAR LTD. [ 2015 (10) TMI 566 - SUPREME COURT] and subsequent Board Circular No. 1027/15/2016-CX dated 25.04.2016, wherein it has been clarified that the products including bagasse, dross and skimming are non-excisable goods. Further, as per the explanations 1 2 inserted w.e.f. 01.03.2015, exempted goods shall include non-excisable goods cleared for consideration from the factory. As per the Circular dated 25.04.2016, it was provided that Zinc Ash and Skimming are non-excisable goods and need to be treated as exempted goods for the purpose of reversal of the credit of inputs or input services in terms of the Rule 6 of the CCR, 2004. As per the department, the appellant did not avail the option under Rule 6(2) and under Rule 6(3) and further did not maintain separate register for quantity of Zinc Ash used in the manufacture of their dutiable products and their exempted products. The department has confirmed the demand solely relied upon the judgment of Hon ble Supreme Court in the case of Union of India Vs. DSCL Sugar Ltd and subsequent Board Circular No. 1027/15/2016-CX dated 25.04.2016. It is also noted that subsequently the same issue came up before the Hon ble Supreme Court in the case of UNION OF INDIA ORS. VERSUS M/S INDIAN SUCROSE LIMITED [ 2022 (7) TMI 353 - SC ORDER] wherein the Hon'ble Supreme Court has held that Circular dated 25.04.2016 is unsustainable in law as bagasse is non-excisable goods to which cenvat credit has no application. It is pertinent to note that subsequent to the decision of the Hon ble Supreme Court in the case of Union of India Vs. Indian Sucrose Limited the Board has issued fresh Circular No. 1084/05/2022-CX dated 07.07.2022 and has rescinded the Circular dated 25.04.2016 on the basis of which, the entire demand was created. Further, it is found that when the appellant imported the Zinc Ash, they paid CVD and SAD and once they have paid CVD, they are entitled to avail the Cenvat Credit and utilize the same for payment of duty on sale of Zinc Ash; and once CVD is charged treating Zinc Ash as manufacture, there was no illegality on the part of the appellant to pay duty on sale of Zinc Ash - the duty amounting to Rs.1,61,30,759/- paid by the appellant is sought to be appropriated under Section 11D(1A) whereas Section 11D is applicable to excisable goods which are exempt or chargeable to nil rate of duty, but in the present case, Zinc Ash as per the department is non-excisable goods; therefore, Section 11D is not applicable in this case. Extended period of limitation - Suppression of facts or not - HELD THAT:- The appellant has not suppressed any information from the department. Each and every fact was recorded in books of accounts and on the basis of the same records, demand has been quantified - As the appellant has not suppressed any material fact from the department with intent to evade payment of tax and was subject to internal audit from time to time as cited above; therefore, invoking extended period of limitation is not warranted. Further, in the present case, the period involved is from March 2015 to June 2017 whereas the show cause notice was issued on 20.05.2019, which is entirely time barred. The impugned order is not sustainable in law - Appeal allowed.