Chewing Tobacco Packed In High-Density Polyethylene Bags Are 'Wholesale Package'; Cannot Be Taxed As Retail Product Under Excise Act : Supreme CourtThe Supreme Court recently held that pouches of chewing tobacco packed in High-Density Polyethylene (HDPE) bags would be considered a 'wholesale package' and could not be considered for imposing excise duty as per the provisions relating to...
The Supreme Court recently held that pouches of chewing tobacco packed in High-Density Polyethylene (HDPE) bags would be considered a 'wholesale package' and could not be considered for imposing excise duty as per the provisions relating to retail sale price in the Central Excise Act, 1944.
The bench of Justices AS Oka and Pankaj Mithal upheld the decision of the Central Excise Appellate Tribunal which observed that chewing tobacco in HDPEs qualified as wholesale packages as they were sold only to intermediaries like distributors and dealers under Standards of Weight & Measures (Packaged Commodity) Rules, 1977 (Rules of 1977). Thus the HDPEs cannot be taxed as a retail product.
The Telangana High Court has held that the 10% duty is leviable on Himani Navaratan Oil and Himani Gold Turmeric Ayurvedic Cream as they are classified as ayurvedic medicine and not cosmetics.
The bench of Justice P.Sam Koshy and Justice N.Tukaramji has observed that the rapper in whom the cream is sold very emphatically highlights it as an ayurvedic medicine. The rapper also clearly indicates that the cream is highly effective for cracked skin, pimples, boils, and numerous other skin blemishes. Nowhere did the rapper claim it to be a cosmetic product or a product that could enhance the complexion or fairness. The licensing authority having granted a license for the product as an ayurvedic drug, the manufacture, sale, and distribution of the product as a drug and not a cosmetic are established, and it is being marketed only as a drug and not as a cosmetic.
Assessment Order Downloaded From Common Portal Amounts To A Valid Service: Kerala High Court
The Kerala High Court has held that the assessment order downloaded from the common portal amounts to a valid service.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. has upheld the decision of the Single Bench in which it was held that the petitioner had downloaded the assessment order from the very same portal, and therefore, the delay occasioned in retrieving the assessment order from the portal was a predicament that the appellant found himself in because of his own latches.
The Kerala High Court has held that the disallowance operates against erring employer assessee when employees' contribution to EPF/ESI not made within the due date.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. has observed that where the employees' contribution to EPF/ESI was not made over by the employer to the statutory authorities within the due date prescribed for making those payments under the respective statutes, the disallowance under Section 36(1)(va) would operate against the erring employer assessee.
The Kerala High Court has held that the South Indian Bank is entitled to the deduction envisaged under Section 36(1)(viii) of the Income Tax Act in respect of the long-term finance provided by it for the construction and purchase of houses in India for residential purposes.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. has observed that a view has been expressed that the National Housing Bank was not entitled to the benefits of the unamended Section 36(1)(viii), on the ground that it was not engaged directly in the long-term financing for the construction or purchase of houses in India for residential purposes. The amendment was therefore deemed necessary to extend the benefit even to the National Housing Bank.
It follows therefore that the amendment was intended to widen the scope of the deduction in relation to Financial Corporations specified in Section 4A of the Companies Act, Financial Corporations that were Public Sector Companies, Banking Companies, and Corporative Banks other than Primary Agricultural Credit Society or Primary Corporative Agricultural and Rural Development Banks, and to confine the benefit available to a Housing Finance Company only in relation to the provision by it of long-term finance for the construction or purchases of houses in India for residential purposes.
The Bombay High Court at Goa, while upholding the order of the Income Tax Appellate Tribunal (ITAT), has held that the assessee cannot be expected to deduct tax at source from payments that became taxable owing to a retrospective amendment.
The bench of Justice M.S. Karnik and Justice Valmiki Menezes has observed that it is not open to the department to take a divergent view on the expenditure for renovation and construction of schools or temples when it has allowed the expenditure on the purchase of ambulances, which was allowed by CIT(A), based only on the reason that the expenditure was huge.
The Delhi High Court has held that the loans and advances extended by the New Okhla Industrial Development Authority (NOIDA) are not commercial activities and are eligible for exemption under Section 10(46) of the Income Tax Act.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that the respondent department has erred in holding that the loans and advances extended by the petitioner would fall within the ambit of commercial activity. The conclusion not only fails to take into consideration the directives of the state government that prompted and facilitated the action, but the grant of those loans has also not been established to have been motivated with a view to profiteering.
TPO Lacks Jurisdiction To Question Commercial Expediency Or Genuineness Of Need: Delhi High Court
The Delhi High Court has held that the statutory authority conferred upon the Transfer Pricing Officer (TPO) can only extend to an examination of the appropriateness of the method adopted for the purposes of determining arm's length pricing (ALP) or evaluating the enlistment of comparables. However, the TPO would neither be justified nor could it be countenanced to have the jurisdiction to question commercial expediency or genuineness of need.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav, while upholding the Tribunal's order, held that the assumption of the respondent-assessee being a contract manufacturer as well as the premise of payment of royalty “to itself” could not be sustained.
The Kerala High Court has held that the non-filing of returns even after receipt of the assessment order is fatal for the assessee.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. has observed that it may be true that the respondents did not issue a formal notice as required under Section 62(1) of the Income Tax Act before completing the assessment on a best judgment basis under the said provision, but the fact remains that the appellant could have obtained a nullification of said assessment order if he had filed the return at least within thirty days of the receipt of the assessment order.
The Allahabad High Court has held that a registered dealer cannot withhold the tax realised by him from a purchasing dealer only because he had deposited an excess amount of tax at the time of the transaction.
The Court held that he cannot escape the liability of depositing the tax realized under the U.P. Trade Tax Act, 1948 because a refund is due to him from assessment proceedings.
“The registered dealer after realizing the tax cannot withhold the same on the pretext that some excess amount of tax was deposited. The amount realized on the strength of Act, must be deposited and in case any amount found excess, the same will be refunded to the actual person from whom the same amount was realized as tax. The revisionist cannot get the benefit of any refund of amount while passing the assessment order,” held Justice Piyush Agrawal.
Bombay High Court Quashes Customs Duty Reassessment Against Patanjali Foods On Crude Palm Oil Import
The Bombay High Court has quashed the customs duty reassessment against Patanjali Foods on the import of crude palm oil for home consumption.
The Bench of Justice K. R. Shriram and Justice Jitendra Jain has observed that the rate in force would be the rate that was in force on the date and time of presentation, and in Patanjali's case, since self-assessed bills of entry were already presented before the enhanced rate came into force, the rate payable would be USD 1163 PMT. The said notification enhancing duty applied only to bills of entry presented after 21:24:11 hours on May 13, 2021, and since Patanjali's four ex-bond bills of entry were presented even before 21:00 hours, the enhanced rates would not apply to Patanjali's case.
The Bombay High Court has held that the breakwater wall or accropode that are essential certainly do not qualify as plant and machinery. The breakwater wall can hardly be called “plant or machinery." Accropodes lose their identity when a breakwater wall is constructed using accropode.
The bench of Justice K. R. Shriram and Justice Jitendra Jain has observed that Explanation to Section 17 also provides that “plant and machinery” should be used for making outward supply of goods or services. The breakwater wall is used for protecting the vessel from tides while unloading the LNG received and not for making outward supplies of goods or services. Therefore, the petitioner does not satisfy the condition provided in the Explanation to Section 17 to be eligible for ITC.
SAD Refunds Can't Be Denied For Taking Away Facility Of Re-Crediting DEPB Scrips: Kerala High Court
The Kerala High Court has held that if the appellant/assessee satisfies the conditions in Notification No.102/2007-Cus dated 14.09.2007 for the purposes of refund of the 4% Special Additional Duty (SAD), then merely because the facility of re-crediting the Duty Entitlement Pass Book (DEPB) scrips has been taken away, the refund that the appellant is entitled to by virtue of the notification cannot be denied.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. has observed that since the Delhi High Court has already annulled the Circular dated April 29, 2013, the respondent-department is now legally obliged to consider the refund application preferred by the appellant independently, on its merits, to see whether the conditions specified in Notification 102/2007-Cus dated September 14, 2007 have been satisfied by the appellant.
Investment Allowance Available On Exchange Rate Fluctuation: Bombay High Court
The Bombay High Court has held that investment allowance is available on exchange rate fluctuations.
The bench of Justice G. S. Kulkarni and Justice Somasekhar Sundaresan has relied on the decision of the Supreme Court in the case of Commissioner of Income-Tax vs. Ambika Mills Ltd., in which it was held that investment allowance, consequent to exchange rate fluctuation, would be allowable.
AO Can't Review Its Own Order: Delhi High Court
The Delhi High Court has held that the Assessing Officer (AO) cannot review its own order.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed in the extract of the impugned corrigendum that no new material has been found by the department, which would warrant reopening the assessment. The corrigendum has been issued merely on the basis of a change of opinion, as two different conclusions are being drawn on the basis of the same material, i.e., the audited final accounts of the petitioner. Thus, the AO has apparently reviewed its own decision, which is not permissible as per the settled law.
Transfer Of Depreciable Capital Assets Attracts Capital Gains Tax: Kerala High Court
The Kerala High Court has held that the transfer of the depreciable capital assets attracted capital gains tax under Section 45(4) of the Income Tax Act, in the absence of distribution of any capital asset among the partners following a dissolution of the appellant firm.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M., while upholding the order of the tribunal that the charge of short-term capital gains had to be in accordance with the provisions of Section 45(4) of the Income Tax Act, observed that the Appellate Tribunal did not, however, proceed to determine the tax effect, if any, that would follow pursuant to its finding as regards the charge of short-term capital gains.
ITSC Empowered To Make Income Tax Addition: Delhi High Court
The Delhi High Court has held that the Income Tax Settlement Commission (ITSC) does not lack jurisdiction to make an addition, which has also been duly recorded in the terms of settlement.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that the objective of the settlement provisions is to strike a balance between the voluntary disclosure of income by the assessee and the income escaping assessment in order to expedite the closure of tax disputes.
Order Of ITSC Final And Conclusive For AY For Which Application Has Been Filed: Delhi High Court
The Delhi High Court has held that the order of the Income Tax Settlement Commission (ITSC) is final and conclusive for a particular assessment year (AY) for which the application has been filed.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that the order of the ITSC is deemed to be conclusive for all the matters pertaining to the concerned AY for which the settlement application has been accepted and processed by the ITSC. If the Income Tax Department is not satisfied with the computation of income by the ITSC for the relevant AY, the same could only be assailed in accordance with the provisions contemplated under Section 245D(6) and Section 245D(7) of the Income Tax Act.
The Allahabad High Court has admitted the writ petition stating that the IGST Act lacks provision for appeals provided against an order passed by the state GST Officer.
The bench of Justice Saumitra Dayal Singh and Justice Anish Kumar Gupta while admitting the writ petition noted that order passed under the IGST Act, the appeal shall lie before the Central Tax Officer. However, Section 6(3) of the UPGST Act, 2017, specifically excludes the jurisdiction of the Central Tax Officers to entertain the appeal against an order passed by an officer appointed under the UPGST Act. Therefore, the Central Tax Officer does not have the jurisdiction to entertain the appeal against an order passed by an officer appointed under the UPGST Act, 2017.
The Delhi High Court has held that services provided by International Management Group (IMG) are utilized by the Board of Control for Cricket in India (BCCI) outside India, so the income determined as Fee for Technical Services (FTS) cannot be deemed to accrue in India and therefore cannot be taxed in India.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav observed that the Tribunal clearly erred in holding that the advice and consultancy services rendered by IMG enabled BCCI “to absorb and apply the information and advice." It clearly failed to bear in mind the distinction that must be acknowledged to exist between the mere utilization of technical or consulting services in aid of business and the transfer, transmission, and enablement that must occur in order for the twin conditions of Article 13 of the DTAA to be satisfied.
The Telangana High Court has held that deductions cannot be availed on expenditures incurred for overseeing the project of holding a company.
The bench of Justice P. Sam Koshy and Justice Laxmi Narayana Alishetty has observed that, as per Section 37 of the Income Tax Act, 1961, the prerequisites for allowing deduction are that the expenditure should have been incurred in respect of a business carried on by the assessee and should be spent wholly and exclusively for its own business.
The Calcutta High Court has held that the cellular mobile service providers are not obliged to deduct the tax at source (TDS) on income received by distributors/franchisees from customers.
The bench of Justice Surya Prakash Kesarwani and Justice Rajarshi Bharadwaj has relied on the decision of Supreme Court in the case of Bharti Cellular Limited Vs. Assistant Commissioner of Income Tax Circle-57, Kolkata and Anr. In Which It Was Held That The Assessees Would Not Be Under A Legal Obligation To Deduct Tax At Source On The Income/Profit Component In The Payments Received By The Distributors/Franchisees From The Third Parties/Customers, Or While Selling/Transferring The Pre-Paid Coupons Or Starter-Kits To The Distributors.
Admission Fee Charged From Students Forms Part Of Corpus Donation: Gujarat High Court
The Gujarat High Court has held that the admission fee charged by the students forms part of the corpus donation of the trust.
The bench of Justice Bhargav D. Karia and Justice Niral R. Mehta has observed that the donation is bound to have been given for material gain in securing admission; the same cannot be characterised as a donation towards a charitable purpose, and the appellant would not be entitled to have the benefit, but in the facts of the case, in the absence of any material on record, such a view cannot be taken in the circumstances. The Tribunal has committed an error by treating the admission fee charged from the students as not forming part of the corpus of the Trust.
The Gujarat High Court has upheld the decision of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) allowing the refund of Special Additional Duty (SAD) on betel nuts. The court observed that there is no distinction between industrial grade betel nuts and edible supari.
The division bench comprising Justices Bhargav D. Karia and Niral M. Mehta ruled, “Considering the facts of the case which is not in dispute that there is no distinction between the areca nuts betle nuts as certified under CTH 0802090 of HSN at the time of importation as edible goods which are not suitable for immediate consumption.”“It is also the case of the respondent-assessee that such imported goods were required further processing to make them edible. The Commissioner (Appeals) and the Tribunal has also referred to and relied upon the information available on DGFT website wherein also areca nut and supari has been considered as the same product in the minutes of ALC meeting No. 02/2007 held on 20.4.2006,” the bench added.
While pointing that scheme of faceless assessment is applicable from the stage of show cause notice u/s 148 as well as 148A, the Punjab & Haryana High Court ruled that notice u/s 148 cannot be issued by Jurisdictional Assessing Officer after introduction of faceless assessment scheme.
Since the Revenue Department had issued show-cause notice u/s 148 relying on the Board's Memorandum and Instructions, the High Court clarified that circulars, instructions and letters issued by Board or any other authority cannot override statutory provisions.
Interest Can't Be Levied When No Taxable Due Is Found: Gauhati High Court
The Gauhati High Court has held that once the assessment order of the authorities is set aside and the matter is remanded back and assessed, no taxable interest can be levied.
The bench of Justice Arun Dev Choudhury has observed that in a judicial system that is administered by the court, one of the primary principles to keep in mind is that the court under the same jurisdiction must have similar opinions regarding similar questions, issues, and circumstances. If opinions given on similar legal issues are inconsistent, then instead of achieving harmony in the judicial system, it will result in judicial chaos.
Not Permissible For TPO To Engage In Restructuring Of Transaction: Delhi High Court
The Delhi High Court has held that it is not permissible for the Transfer Pricing Officer (TPO) to engage in the restructuring of a transaction.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that it would also not be permissible for the TPO to engage in the restructuring of a transaction unless the economic substance of the transaction differed from its form, and if the form and substance of the transaction were the same but the arrangements relating to the transaction, when viewed in totality, differed from those that would have been adopted by independent enterprises acting in a commercially rational manner.
The Supreme Court recently held that any vendor who buys liquor from state manufacturers without obtaining it through auction and sells in retail at a fixed price would be excluded from the definition of 'buyer' under Section 206C of the Income Tax Act. Such a trade would be exempted from TCS (Tax Collected at Source).
"If the buyer is a public sector company or it has obtained the goods in further sale or if the goods are not obtained by him by way of auction and where the sale price of such goods to be sold by the buyer is fixed by or under any state enactment, then such a person would not come within the ambit of “buyer” as per the definition in Explanation(a) of Section 206C," the Court stated.
The bench of Justices BV Nagarathna and Ujjal Bhuyan observed that a twin test is to be applied to be excluded from the definition of 'buyer' under S. 206 C of the Income Tax Act 1961 as provided under explanation (a)(iii). This includes (a) obtaining the goods without auction and (b) selling the goods at a price fixed by the state government.
The Court went a step further to observe that an auction of the right to sell the liquor (goods in this case) would not be considered as the auction of the liquor itself.
The Kerala High Court has held that the petitioner/assessee has paid tax at the prescribed rate on the materials procured by him from the Travancore Devaswom Board, and since this amount has already been paid over to the State Exchequer, any denial of credit to the assessee solely on the ground that the Travancore Devaswom Board/Truvabharanam Commissioner was not registered under the KVAT Act would be unjust.
The bench of Justice Gopinath P. has observed that the definition of 'casual trader' under Section 2(xi) of the KVAT Act will also indicate that the Travancore Devaswom Board may not even fall within the definition of a casual trader for the purposes of the KVAT Act. The provisions of Section 3(2)(c) of the KVAT Act indicate that the Commissioner shall have superintendence over all officers and persons employed in the execution of the Act, and the Commissioner may issue such orders, instructions, and directions to such officers and persons as he may deem fit for the proper administration.
The Delhi High Court has held that the revoking suspension of license cannot restrict the customs department from inquiring for imposition of penalty.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that the mere fact that the suspension of license had come to be revoked cannot possibly be viewed as restricting the respondents from proceeding further in accordance with Regulation 17 of the Customs Broker Licensing Regulations, 2018. As is manifest from the provisions made for the suspension of license, it is liable to be invoked where the authorities are of the opinion that immediate action is warranted.
The Andhra Pradesh High Court has held that the trade notification issued by the Directorate General of Foreign Trade (DGFT) prohibiting export of non-basmati white rice cannot have retrospective effect.
The bench of Justice Ninala Jayasurya has observed that the Foreign Trade (Development and Regulation) Act-1992 does not confer any right to the authorities/department or enable them to issue any notification that has the effect of imposing prohibition with retrospective effect or take away the vested rights accrued to the petitioners by virtue of the Foreign Trade Policy, 2023, prior to the issuance of the notification.
The Rajasthan High Court, Jaipur Bench, has quashed the AAR's order rejecting the application for the advance ruling as not maintainable on the grounds that the applicant was not the supplier.
The bench of Justice Avneesh Jhingan and Justice Ashutosh Kumar has observed that the appeal against the advance ruling is provided under Section 100 of the CGST Act. The concerned officer, the jurisdictional officer, or the applicant can prefer an appeal against the ruling given under Section 98(4). No appeal is provided against rejection of the application under Section 98(2) of the CGST Act. The application of the petitioner was ousted at threshold under Section 98(2) as not maintainable. Section is unambiguous that an appeal can be filed only against the orders pronounced under Section 98(4) of the CGST Act.
The Kerala High Court has dismissed the writ petition filed by the Indian Medical Association challenging the levy of GST on supply of goods and services to its members.
The bench of Justice Dinesh Kumar Singh has observed that the Parliament/State Legislature has amended Section 7(a) by inserting Section 7(aa) by the Finance Act, 2021. The amendment is neither beyond legislative competence nor offends any of the fundamental rights guaranteed under Part III of the Constitution of India nor is manifestly arbitrary or capricious. Therefore, the amendment brought in Section 7(a) by inserting Section 7(aa) is well within the legislative competence and not ultra-virus.
The Kerala High Court has held that when a property kept not for trade but for investment purposes is sold, the gain has to fall under the head 'capital gains' and such a transaction is only taxable under capital gain and not under adventure of trade.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. has observed that the burden is upon the Department to show that a transaction effected by the assessee is an adventure in the nature of trade. Merely because the assessee makes some profit in a particular transaction, it cannot be treated as an adventure in the nature of trade so long as the initial intention or reason for investing money was to hold the property and use it for a different purpose.
The Bombay High Court has held that the expression 'built up area' introduced with effect from April 1, 2005, could not be applied retrospectively, and the Tribunal was justified in holding that up to April 1, 2005, the expression 'built up area' would exclude the balcony area.
The bench of Justice G. S. Kulkarni and Somasekhar Sundaresan has observed that for the first time, the Legislature has defined the expression 'built up area' in Section 80IB(10) by introducing clause (a) to Section 80IB(14) by Finance (No. 2) Act, 2004 with effect from April 1, 2005.
In a notable ruling relating to the Customs Act of 1962, the Supreme Court on Tuesday (July 23) held that the importer would be liable to pay customs duty in addition to fines and other charges upon redeeming the confiscated goods.
Non-Filing Of GST Return Due To Technical Glitch, Bank Can't Be Penalised: Telangana High Court
The Telangana High Court has held that the petitioner bank could not file its return in the GST portal because of a technical glitch and cannot be saddled with demand, penalty, and interest.
The bench of Justice Sujoy Paul and Justice Namavarapu Rajeshwar Rao has observed that it was the duty of the department to keep their portal functional. If the portal was not functional or had a technical glitch, and because of that, the petitioner was compelled to file a return in the portal of Telangana. The department cannot take advantage of its own wrong.
The Delhi High Court held that a custom broker cannot be held guilty of having failed to discharge the obligation placed in terms of Regulation 10(n) of CBLR 2018, simply because he has not carried out physical verification of the veracity of the exporter.
The Division Bench of Justice Yashwant Varma and Justice Ravinder Dudeja Observed that “the CB would not be in violation of its obligations if he has relied on “reliable, independent, authentic documents, data, or information” such as the IEC and GSTIN which are issued by the Director General of Foreign Trade and GST Officers respectively”.
The Calcutta High Court held that no service tax will be levied on activities such as cutting or mineral extraction which are part of mining operations, if mining operations are itself not subjected to service tax on the date of levy.
The High Court clarified that if the State seeking to recover tax, cannot bring the subject within the letter of law, then it goes without saying that the subject is free.
The Division Bench of Chief Justice T.S Sivagnanam and Justice Hiranmay Bhattacharyya observed that “Coal cutting or mineral extraction and lifting them up to the pithead: These activities are essential integral processes and are part of mining operations. As stated earlier, mining activity has been made taxable by legislation under the Finance Act, 2007(w.e.f.1.06.2007). Prior to this date, such activities, being part of mining operations itself are not subjected to service tax. Therefore, no service tax is leviable on such activities prior to the said date.”
The Supreme Court has recently held that regular entries under List I and II of the 7th Schedule of the Constitution cannot be given a wider interpretation to include taxation powers which are covered under the domain of specific tax entries under the 7th Schedule.
The 9 Judge Constitution Bench led by CJI DY Chandrachud observed this while holding that States have the power to levy tax on mineral rights under Entry 50 List II and that the Union law - Mines and Minerals (Development and Regulation) Act 1957 (enacted under Entry 54 List I) - do not limit such power of the States.
Interest Can't Be Demanded When Entire Stamp Duty Paid During Pendency Of Appeal: Madras High Court
The Madras High Court has held that interest cannot be demanded when the entire amount as demanded by the authorities has been paid even during the pendency of the appeal.
The bench of Justice R. Vijayakumar has observed that the present appeal has been filed under Section 47-A(10) of the Indian Stamp Act, 1899. Only after orders are passed by the Court will the liability get fastened upon the purchaser to pay interest on the belated payment. The entire amount as demanded by the authorities has been paid even during the pendency of the appeal. The interest cannot be demanded because the belated payment does not arise.
The Delhi High Court has held that the receipts from Indian customers for services provided outside' Indian Territory in connection with use or right to use of process or equipment by the assessee company cannot be taxed as royalty.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav, while dismissing the department's appeal, held that a person who is provided mobile communication services or access to the internet does not stand vested with a right over a patent, invention, or process. The consideration that the service recipient pays also cannot possibly be recognized as being intended to acquire a right in respect of a patent, invention, process, or equipment. The word “process” being liable to be construed ejusdem generis is lent added credence by clause (iii) employing the expression “or similar property,” which follows. It thus clearly appears to be intended to extend to a host of intellectual properties.
The Delhi High Court has held that the assessee is carrying on educational activities that are covered by the provisions of Section 2 (15) of the Income Tax Act, and it is neither business nor profession of the assessee.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja observed that the mode and manner in which education is imparted would be a concept that would have to necessarily be evaluated bearing in mind the march of technology and the myriad modes of imparting instruction that now exist and have enabled institutions to overcome barriers of distance and time. Imparting education through a virtual mode or by the adoption of new technologies would not detract from the said activity, otherwise fulfilling the requirements of structured education.
Dismissing a petition filed by the Income Tax Department, the Supreme Court recently upheld the view that Vodafone Idea is not liable to deduct TDS (tax deducted at source) on interconnectivity usage and bandwidth charges paid to non-resident telecom operators.
A bench of Justices BV Nagarathna and N Kotiswar Singh observed that the case was covered by the 2021 decision in Engineering Analysis Centre for Excellence Private Ltd v. The Commissioner of Income Tax and Anr., where it was held that payments made by Indian companies to non-residents for use of software cannot be taxed as 'royalty'.
The Rajasthan High Court has allowed the application seeking condonation of delay under Section 119(2)(b) of the Income Tax Act in order to claim a refund for the assessment year 2009-10 to 2014-15 on the grounds of genuine hardship.
The bench of Justice Pushpendra Singh Bhati and Justice Munnuri Laxman has observed that the depression, old age, long pendency of the issue, and the petitioner's status as a small-scale surveyor with no negativity in revenue collection by the tax authorities (like scrutiny) attached have to be considered as genuine hardship.
University Income From Rentals, Not Exempted From Service Tax: Karnataka High Court
The Karnataka High Court has held that the university is liable to pay service tax on the income earned from the rentals of buildings leased or licensed for banking facilities.
The bench of Justice Krishna S. Dixit and Justice Ramachandra D. Huddar has observed that when the university rents out its property for running a bank, the profit motive is abundant. It is not the case of the university that the banking services are agreed to be provided on a 'no profit, no loss basis' by prescribing a license fee as contradistinguished from rentals. However, providing banking facilities by no stretch of imagination can be held to be incidental to education. The term 'educational services' has been employed in these exemption notifications in a reasonable sense, if not restrictive.
The Punjab & Haryana High Court recently upheld the revisional order passed by the Principal CIT u/s 263 by setting aside the assessment wrongly passed by the AO u/s 44ADA.
The Division Bench of Justice Sanjeev Prakash Sharma and Justice Sanjay Vashisth observed that “the assessee had neither got his accounts audited from the accountant nor furnished report of such audit as per provisions of section 44AB. The assessee's case, prima facie was covered u/s 44ADA but the return of Income filed was not in accordance with the provisions of section 44ADA”.
The Delhi High Court has held that the power to assess the block period of ten years would clearly not be attracted in the case of a search that had taken place prior to April 1, 2017.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that since the date of search was April 7, 2016, the amendments that came to be introduced in Section 153C by virtue of the Finance Act of 2017 would not be applicable. The provisions stood prior to the Finance Act, 2017, and the assessment years that could be thrown open pursuant to a search stood at six assessment years.
By virtue of the Finance Act of 2017, the block period for search assessment was extended to ten assessment years on account of the introduction of the concept of “relevant assessment year or years." The expression came to be defined by Explanation 1 to Section 153A as extending to the period that falls beyond six assessment years but not later than ten assessment years from the end of the AY relevant to the previous year in which the search was conducted or a requisition made.
The Chhattisgarh High Court reiterated a settled position of law that the assessee would be liable to pay the income tax on the unexplained cash credited into its books if the assessee fails to prove the source of a sum of money found to have been received by an assessee.
The Court said that under Section 68 of the Income Tax Act, 1961 the initial onus to prove the genuineness of the money credited into the assessee's books of account falls on the assessee, and if the assessee fails to discharge the onus than the unexplained cash credited into the assessee's books of account would be deemed as a taxable income being earned from the previous year.
The Bombay High Court has held that it is not mandatory for assessment orders to contain reference and/or discussion to disclose its satisfaction in respect of each and every query raised.
The bench of Justice K.R. Shriram and Justice Jitendra Jain has observed that since there is no discussion or finding on the issue of hazardous waste in the order, the respondent department should be taken as having accepted the petitioner's explanation.
While Interpreting the definition of the 'Purchase Price' under the Gujarat Value Added Tax Act of 2003 (“GVAT”), the Supreme Court on Friday (August 2) observed that the value-added tax would not be included in the definition of the purchase price.
The Court held that no value-added tax would be added to the purchase price to calculate tax as the same is not mentioned in the categories of tax/duties enumerated under Section 2(18) of the GVAT.
The Madurai Bench of Madras High Court while quashing the detention order held that if an invoice, bill of supply, delivery challan, or bill of entry and a valid e-way bill in physical or electronic form for verification are available, then action may not be initiated.
The bench of Justice S.Srimathy has observed that the respondent department issued the notice, carried out the inspection on the same day, and also passed the order on the same day. As per the provisions prescribed, the respondents department ought to grant time for seven days to reply. Since the inspection, notice, and orders were passed on the same day, there is a clear violation of the principles of natural justice.
The Gauhati High Court has held that the State GST Authorities cannot take the benefit of Notification No. 56/2023-CE, which is also otherwise ultra vires the CGST Act, 2017.
The bench of Justice Devashis Baruah has noted that the GST Council has not made any recommendation till date, and in spite of that, the Central Board of Indirect Taxes and Customs issued a Notification bearing No. 56/2023-CE dated 28.12.2023, thereby extending the period to pass the order under Section 73(9) of the CGST Act, 2017 for the Financial Year 2018-2019 up to the 30.04.2024 and for the Financial Year 2019-2020 up to the 31.08.2024.
The Punjab and Haryana High Court has held that the construction of public libraries forms part of a charitable function and is eligible for the exemption under Section 80G of the Income Tax Act.
The bench of Justice Sanjeev Prakash Sharma and Justice Sanjay Vashisth has observed that the ancillary work, which may be carried out by the society for the purpose of enhancing education, would also be treated as work done for charitable purposes. The amount of Rs. 30,00,000/- has been utilized for construction of the public library, and it would have to be treated as work done for charitable purposes.
Finding major flaw in the fundamental premise of the Revenue Department that the investment made by the taxpayer in shares amounted to “income” which has escaped assessment, the Delhi High Court quashed the reopening proceeding initiated u/s 148A.
Observing that foundational material alone would be relevant for the purposes of evaluating whether reassessment powers were justifiably invoked, the High Court clarified that Revenue Department cannot take a fresh ground while passing order u/s 148A(d).
Resolution Plan Approved Under IBC, Income Tax Reassessment Not Sustainable: Delhi High Court
The Delhi High Court has quashed the income tax assessment order and held that the statutory injunct which would operate in respect of any claim which may pertain to a period prior to the Resolution Plan being approved.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that if a company is unable to pay its debts, which should include its statutory dues to the Government and/or other authorities and there is no plan which contemplates dissipation of those debts in a phased manner, uniform proportional reduction, the company would necessarily have to be liquidated and its assets sold and distributed in the manner stipulated in Section 53 IBC.
The Delhi High Court has held that the assessee to be eligible and entitled to exemptions under Section 11(1) and 11(2) of the Income Tax Act and the alleged ground of non-filing of audit report along with return of income, which was at the best procedural omission, could never be an impediment in law in claiming the exemption.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that the electronic submission of Form 10B is essentially a matter of procedure as opposed to being a mandatory condition that may be recognized to form part of substantive law.
The Allahabad High Court has held that order Section 73 of the Goods and Service Tax Act, 2017 cannot be passed a company which is under the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016.
Section 73 of the Goods and Service Tax Act, 2017 empowers a proper officer to initiate proceedings if he is satisfied that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any willful-misstatement or suppression of facts to evade tax by any assesee.
Petitioner approached the High Court against the order passed by the respondent authority under Section 73 of the GST Act. The Court observed that show cause notice under Section 73 was issued to the petitioner on 10.04.2024. Petitioner, in its reply dated 12.04.2024, informed the authority that petitioner was under CIRP and requested authority for time for seeking instructions from the Interim Resolution Professional.
The Delhi High Court held that a decision to reopen or reassess cannot be based or sought to be justified either on additional reasons or those which may be supplied subsequently while disposing of objections preferred by an assessee.
At the same time, the High Court clarified that 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.
Purchaser Can't Be Punished For Failure Of Seller To Deposit Tax: Gauhati High Court
The Gauhati High Court has held that a purchasing dealer cannot be punished for the act of the selling dealer in case the selling dealer had failed to deposit the tax collected by it.
The bench of Chief Justice Vijay Bishnoi and Justice Suman Shyam has observed that the Department is precluded from invoking Section 9(2)(g) of the DVAT to deny ITC to a purchasing dealer who has bona fide entered into a purchase transaction with a registered selling dealer who has issued a tax invoice reflecting the TIN number. In the event that the selling dealer has failed to deposit the tax collected by him from the purchasing dealer, the remedy for the Department would be to proceed against the defaulting selling dealer to recover such tax and not deny the purchasing dealer the ITC.
The Delhi High Court has held that the settlement consideration is liable to be recognized as capital gains and not “profits in lieu of salary.”.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that the fundamental mistake which the Tribunal committed was failing to bear in mind the distinction between a “perquisite” and “profits in lieu of salary," both of which are dealt with separately in Section 17 of the Income Tax Act, 1961. “Profits in lieu of salary," which is spoken of in Section 17(3), deals with compensation received by an assessee from his employer or former employer in connection with the termination of his employment or on a modification of terms and conditions of service. However, the Tribunal has fundamentally erred in ignoring the indubitable position of the employment of the assessee having been brought to an end on 24 August 2010 itself and thus before the action came to be even laid or instituted before the Company Law Board (CLB).
'We Can't Run GST Administration' : Supreme Court Dismisses Plea For Rating Mechanism For GST Payers
The Supreme Court on Friday (September 6) dismissed a Public Interest Litigation seeking directions to the Union to formulate and implement a centralized rating mechanism of taxpayers under the Central Goods and Services Tax Act 2017 (CGST Act).
The bench led by CJI DY Chandrachud comprising Justices JB Pardiwala and Manoj Misra refused to entertain the PIL since such a relief would fall outside the scope of the Writ Jurisdiction.
The Punjab & Haryana High Court held that cash seized from possession of another person cannot be adjusted against Assessee's tax liability as advance tax paid by him.
The Division Bench comprising Justice Sanjeev Prakash Sharma and Justice Jagmohan Bansal observed “From sub-section (3) of Section 132B, it is evident that person from whose custody assets is seized is entitled to adjustment thereof against the tax liability. As per explanation, existing liability does not include advance tax”.
The Madurai Bench of Madras High Court has held that the taxpayer cannot be mulcted with an unjust penalty due to a minor discrepancy in the PIN code in the GST registration, and the tax invoices are to be construed as a minor violation of the provisions of the respective GST enactments.
The bench of Justice C. Saravanan has observed that the imposition of a penalty for technical venial breach of the provisions or the minor discrepancy in the variance in the address in the tax invoices and the e-way bill would not justify the penalty under Section 129(5) of the GST enactments.
NRIs Not Exempted From Mandatory Faceless Procedure: Telangana High Court
The Telangana High Court has held that the NRIs are not exempted from following mandatory faceless procedure.
The bench of Justice Sujoy Paul and Justice Namavarapu Rajeshwar Rao has observed that the taxpayer is nowhere distinguished between NRIs and Indian citizens. The reassessment notice issued under Section 148 must comply with the requirement of the scheme whether or not the taxpayer is an NRI or Indian citizen.
The Telangana High Court has held that GST is not payable on consideration received towards 'works contract service of construction' executed in the Maldives.
The bench of Justice Sujoy Paul and Justice Namavarapu Rajeshwar Rao has observed that the location of immovable property is located in the Maldives or outside India. Hence, the place of supply shall determine the 'location of the recipient'. The place of supply of services is Addu, Maldives. The 'location of recipient' is already interpreted by holding that, as per Section 2(14)(b), it will be the 'fixed establishment' of National Buildings Construction Corporation Ltd. (NBCCL), which will be the location of the recipient.
The Bombay High Court recently held that contribution to public welfare fund, if connected with or related to carrying on assessee's business, or if it results in benefits to assessee's business, should be allowable deduction u/s 37.
The High Court held so while deciding on the taxability of the contribution made by the employer/assessee (Tata Engineering & Locomotive) to its workers union under a memorandum of settlement.
The Allahabad High Court has held that if the goods in transit are not accompanied by proper documentation, including e-way bill, the authorities can survey the business premises of the assesee to determine the correctness of the transaction. However, it was held that if the e-way bill was produced before passing of seizure order under Section 129 of the Goods and Service Tax Act, 2017, then contravention of the Act or Rules thereunder could not be claimed by the Department.
VSV Scheme Is Non-Tax Benefit Applicable Even To Medium Enterprise, Clarifies Bombay High Court
While granting benefit under the 'Vivad Se Vishwas I-Relief for MSMEs Scheme' (VSV Scheme) to the Assessee, even when it was re-classified as 'not an MSME', the Bombay High Court held that even though the Petitioner was re-classified as “not an MSME” for a period of three years from May 09, 2023, it was entitled to avail of all non-tax benefits available to a Medium Enterprise. Since the VSV Scheme is a non-tax benefit applicable even to a Medium Enterprise, the High Court clarified that the Petitioner was entitled to make a claim under the VSV Scheme”
The Division Bench comprising Justice B. P. Colabawalla and Justice Firdosh P. Pooniwalla observed that the VsV scheme proposed to refund 95% of the liquidated damages deducted under contracts entered into with the Government/PSUs on the fulfilment of the specified eligibility conditions.
Finding that the AO has arbitrarily exercised jurisdiction by granting an extension of only two days to the Assessee in filing reply to the SCN, the Bombay High Court quashed the assessment and remanded the proceedings for passing fresh assessment order u/s 144 read with Section 144B.
The Division Bench comprising of Justice G. S. Kulkarni and Justice Somasekhar Sundaresan observed that “approach on the part of the Respondents was clearly in breach of the SOP, which has also resulted in breach of the principles of natural justice, which guaranteed to the Petitioner a fair and reasonable opportunity to respond to the SCN under the procedure
prescribed, in undertaking the assessment proceedings”.
Taking note of Section 35G of the Central Excise Act, the Calcutta High Court clarified that an appeal shall lie to the High Court from “every order” passed in appeal by the Appellate Tribunal, though the maintainability thereof would be dependent on certain statutory limitations.
Single Judge Bench of Justice Raja Basu Chowdhury observed that “it cannot be said that the order passed by the Tribunal on 5th January, 2024 does not qualify as an order for preferring an appeal before the High Court, simply because the same does not seek to adjudicate the rights of the parties”.
The Bench went on to observe that it is altogether a different question whether the High Court would admit the appeal having regard to involvement of substantial questions of law.
Compensation To Discontinue Commodity Brokerage Business Chargeable To Income Tax: Kerala High Court
The Kerala High Court has held that the amount received by the assessee is under an agreement for not carrying out any activity in relation to any business that was carried on by the assessee; it would attract the provisions of Section 28(va)(a) of the Income Tax Act and make the receipt chargeable to income tax under the heading of “Profits and gains of business or profession.”.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. has observed that Section 28(va)(a) of the Income Tax Act does not restrict the operation of the provision to only amounts received by way of non-compete fee. The words used in the said provision do not admit any restricted meaning. So long as the amount received by the assessee was received for not carrying out any activity in relation to any business and the amount received was not on account of the transfer of the right to manufacture, produce, or process any article or thing or on account of the transfer of the right to carry on any business, which receipts would have been chargeable under the head “capital gains," there was no reason to interfere with the order of the Assessing Authority that brought the amounts received by the assessee from BNP Paribas to tax under the head “Profits and gains of business or profession”.
The Delhi High Court has held that the assessee was entitled to claim deductions even where the audit report had not been filed with the return but was submitted before the assessment was completed.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that Section 10B(8) is clearly couched in terms more imperative than Section 80-IA(7). This becomes manifest from a reading of that provision, which requires the assessee to furnish a declaration before the AO that it chooses not to be assessed in accordance with that provision, and the said declaration is liable to be furnished before the due date for furnishing a return of income under Section 139(1). The requirement has always existed in Section 10B since its inception and since its insertion by virtue of the Finance Act of 1988. It is a significant distinguishing feature, bearing in mind that the indisputable position of the audit report being tied to the specified date contemplated in Section 44AB was a stipulation that came to be introduced for the first time and with sufficient certitude by virtue of the Finance Act, 2020.
The Delhi High Court has quashed the reassessment proceedings initiated against the Assessee on the ground that interest income on Non-convertible debentures (NCDs) derived from Indian AE had been mischaracterized as interest instead of dividend.
While holding so, the High Court rejected the argument put forth by the Department that although the funds were taken out in the form of interest payments, they were in fact liable to be declared as dividend and was subjected to Dividend Distribution Tax (DDT).
Pointing out that the Assessee was merely the recipient of the interest income and it was clearly not the entity which had either declared or paid the dividend, the Division Bench comprising Justice Yashwant Varma and Justice Ravinder Dudeja observed that DDT is liable to be paid by the company which declares, distributes, or pays the dividend.
While emphasizing that no tax can be levied on notional income, the Delhi High Court held that Valuation Report obtained by employer could have no application to a share which was subject to a lock-in stipulation and could not be sold in the open market. Since there was a complete embargo on the sale of those shares, the High Court held that value of shares allotted to the appellant under the Employees Stock Purchase Scheme (ESPS) cannot be treated as perquisite in terms of Section 17(2)(iiia).
The Division Bench of Justice Yashwant Varma and Justice Ravinder Dudeja observed that “in light of the restriction with respect to marketability and tradability of the stock in question, the FMV could not have been recognized to exceed the face value of the shares and thus the determinative being INR 15”.
Finding that the order of sanction passed by the Competent Authority is a general order of approval for 111 cases, and there was not even a whisper as to what material had weighed in the grant of approval u/s 151, the Delhi High Court held that although the PCIT is not required to record elaborate reasons, he must record satisfaction after application of mind.
Since the sanction order does not refer to the substantial material of any of the 111 cases, the High Court clarified that approval u/s 151 is a safeguard and must be meaningful and not merely ritualistic or formal.
The Division Bench comprising of Justice Yashwant Varma and Justice Ravinder Dudeja observed that “the PCIT has failed to satisfactorily record its concurrence and by no stretch of imagination, the approval granted by common order, could be considered to be a valid approval”.
While pointing out that the suspension/ revocation of license would be counterproductive and works against the interest of the revenue, the Calcutta High Court clarified that assessee in such a case would not be able to carry on his business in the sense that no invoice can be raised by the assessee and ultimately would impact recovery of tax.
Single Bench of Justice Raja Basu Chowdhury therefore set aside the order cancelling the registration of the assessee subject to the condition that the assessee files his returns for the entire period of default and pays requisite amount of tax and interest and fine and penalty, if not already paid.
Referring to the decision in case of Dinesh Kumar Pradeep Kumar Vs. Additional Commissioner [Writ Tax No. 1082 of 2022], the Allahabad High Court reiterated that even if excess stock is found at the business premises of the manufacturer, the proceedings u/s 130 of the UPGST Act cannot be initiated.
Single Judge Piyush Agrawal observed that “if excess stock is found, then proceedings under sections 73/74 of the GST Act should be pressed in service and not proceedings under section 130 of the GST Act, read with rule 120 of the Rules framed under the Act”.
The Delhi High Court has held that the deduction under Section 80-IA(7) of the Income Tax Act cannot be denied for the mere failure of the assessee to digitally file an audit report.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that Audit Report was duly furnished to the AO and was available to be scrutinised and examined by that authority during the assessment proceedings, the provisions of Section 80-IA(7), as it stood prior to the amendments introduced in 2020, would be recognized to have been substantially fulfilled. In any event, a failure to digitally file that report cannot be countenanced to be fatal to the claim that may be laid in terms of Section 80-IA(7).
The Delhi High Court has quashed the reassessment order and held that the amount paid for obtaining mining rights in e-auctions cannot be construed as income.
The bench of Justice Yashwant Varma and Justice Tara Vitasta Ganju has observed that the Department of Mines and Geology had merely provided to the AO the total amount paid by the petitioner for obtaining mining rights in the e-auctions that were conducted. The said amount clearly cannot be counted as the income of the assessee for the relevant year. The income of the assessee would only be that which was garnered from the sale of iron ore and other non-ferrous metals.
While pointing out that the payment by FPS was not made towards the ESOPs as the Assessee continues to hold the ESOP (Employee Stock Option Purchase) even after the receipt of the compensation, the Madras High Court held the receipt in hands of Assessee qualifies as perquisite and taxable under the head 'Salaries'.
Hence, the High Court refuses to allow 'Nil' certificate of tax deduction u/s 192 in reference to such compensation, which is to be treated as perquisite in lieu of 'salary'.
No IGST Is Payable On Ocean Freight Under Reverse Charge Mechanism; Madras High Court Directs Refund
The Madras High Court has directed the department to refund the GST paid by the assessee on the ocean freight under the reverse charge mechanism.
The bench of Justice Mohammed Shaffiq has relied on the decision of the Supreme Court in the case of Mohit Minerals Private Limited, in which it was held that no IGST is payable on ocean freight under the reverse charge mechanism for cost, insurance, and freight (CIF) imports.
The Bombay High Court has held that if the party is able to show proof of supply to the Special Economic Zone (SEZ) Unit, then non-submission of the “Bill of Export” cannot be treated as non-discharge of proof of export obligation (EO).
The bench of Justice K. R. Shriram and Justice Jitendra Jain has observed that failure to produce a copy of the assessed bill of export in respect of the supplies made to SEZ would not necessarily result in holding that there was a failure to discharge the export obligation where one is able to establish supplies made to SEZ by the production of copies of ARE-1.
The Gujarat High Court has ruled that the Geo Membrane, a textile fabric used for waterproof lining, is subject to a 12% GST rate rather than the previously applied 18%. The court has directed the GST department to refund the excess 6% GST paid by the petitioner.
The case involved a partnership firm that manufactures Geo Membrane, a type of textile fabric. The firm is registered under the Central and Gujarat Goods and Services Tax Act, 2017. The petitioner contended that Geo Membrane, being a textile product, should be taxed at the rate applicable to textile fabrics. However, the GST department classified the product as a plastic Geomembrane, thus applying an 18% GST rate.
The Allahabad High Court has upheld the Commercial Tax Tribunal, Lucknow's finding that Boro Plus Ayurvedic Cream is a 'medicated ointment' and not an 'antiseptic cream'. It was held that Boro Plus Ayurvedic Cream is taxable at 5% under Entry 41 Schedule II of the Uttar Pradesh Value Added Tax Act, 2008.
Heading “Drugs and Medicines” in Entry 41, with effective from October 11, 2012, excludes medicated soap, shampoo, antiseptic cream, face cream, massage cream, eye jel and hair oil but includes vaccines, syringes and dressings, medicated ointments, light liquid paraffin of IP grade; Chooran; sugar pills for medicinal use in homeopathy; human blood components; C.A.P.D. Fluid; Cyclosporin.
Justice Shekhar B. Saraf held that “even though antiseptic creams are excluded from Entry 41, medicated ointments would be included due to the use of the word “but”. The word “but” is a clear indication that the legislature intended to include, as an exception, medical ointment, even though certain medicated ointments may be categorised as antiseptic creams. If a product is more than just an antiseptic cream and qualifies as a medicated ointment, it will be included in Entry 41.”
The Bombay High Court held that the faceless mechanism would be applicable to all cases of Central Charges and International Taxation charges. However, the High Court clarified that it is only the assessment proceedings which would be required to be undertaken outside the faceless mechanism.
The Division Bench of G. S. Kulkarni and Somasekhar Sundaresan observed that “mandatory faceless procedure for issuance of notice u/s 148 falling within the purview of the scheme notified by the Central Government dated 29 March, 2022 would not exclude the Central charges and international taxation charges from the application of the faceless mechanism as notified u/s 144B read with section 151A of the Act”.
The Allahabad High Court has upheld the finding of the Commercial Tax Tribunal holding that "vitamins and minerals pre-mix" are unclassified goods, do not fall under "ores and minerals", "drugs and medicines" or "chemicals” under Schedule II of the U.P. Value Added Tax Act, 2008.
While overturning the AAR ruling in the case of Tiger Global - Flipkart transaction, the Delhi High Court allowed India Mauritius DTAA (Double taxation avoidance agreement) benefit to petitioner/ assessee on ground that the transaction stands grandfathered by Article 13(3A) of India-Mauritius Treaty.
Simultaneously, the High Court held that Tax Residency Certificate (TRC) issued by a jurisdiction is 'sacrosanct' unless any proof of tax fraud/sham transaction is substantiated by the Revenue Department.
Finding that the Assessee had transactions with certain Indian citizens, who were subject to search operation and whose assessments were centralized with the Central Circle at New Delhi, the Bombay High Court find sufficient reasons for proposing of Assessee's case to be centralised at New Delhi.
The High Court also found that the assessment of such persons would certainly have a bearing on the assessment of the Assessee, as there are inter se transactions between such parties.
Reopening Proceedings In Defiance Of Mandatory Procedure U/s 151A To Be Quashed: Bombay High Court
The Bombay High Court clarified that the Assessing Officer is required to adhere to the provisions of Section 151A read with CBDT Notification dated Mar 29, 2022 for resorting to a procedure u/s 148A and the consequent notice u/s 148.
The Division Bench comprising Justice G.S Kulkarni and Justice Somasekhar Sundaresan observed that “In view of the explicit declaration of the law in Hexaware, the grievance of the Petitioner-Assessee insofar as it relates to an invalid issuance of a notice is sustainable and consequently, the very manner in which the proceedings have been initiated, vitiates the proceedings”.
Finding that Assessee/ Petitioner had raised invoices on its AE (Ameriprise USA) based on cost-plus pricing methodology for the specified products & services provided by the Assessee, the Delhi High Court held that foreign exchange loss directly resulting from trading items could not be considered as a non-operating loss.
The Division Bench comprising Justice Yashwant Varma and Justice Ravinder Dudeja reiterated that “Since the foreign exchange loss directly resulted from trading items, it could not be considered as a non-operating loss”.
Finding that subsidiary company (KIPL) is only undertaking marketing enterprise, whereas contracts are finalized and signed by the assessee (Principal company) outside India, the Delhi High Court held that KIPL cannot be said to be habitually securing and concluding order on behalf of assessee, and hence it is not Dependent Agent PE (DAPE) of Assessee.
The Division Bench comprising Justice Yashwant Varma and Justice Ravinder Dudeja observed that “for an enterprise to be considered as habitually securing orders wholly for the other enterprise, it is essential that the enterprise frequently accepts orders on behalf of the other enterprise or habitually represents to persons offering to buy goods or merchandise that acceptance of an order by such enterprise constitutes the agreement of the other enterprise to supply goods or merchandise”.
The Allahabad High Court recently reiterated that once working capital adjustment is granted to assessee, there is no need for further imputation of interest on outstanding receivables at the end of the year, as the same gets subsumed in working capital adjustment.
The Division Bench comprising Justice Shekhar B. Saraf and Justice Manjive Shukla reiterated that “In respect of bills raised on or after Apr 01, 2010 to its AEs, what was the date of realization and whether the same has been realized within the credit period allowed of 70 days. If not, interest is to be imputed on those bills also”.
Since the TPO has failed to answer the issue of international transactions bearing in mind Explanation (i)(c) of Section 92B, the Delhi High Court reiterated that no transfer pricing addition of arms' length interest is warranted on account of delayed receivables. Section 92B of the Income Tax Act lays down the method for computing the income arising from international transactions or specified domestic transactions.
Explaining on the issue of interest on outstanding receivables on account of debt due to AEs, the Division Bench comprising Justice Yashwant Varma and Justice Ravinder Dudeja reiterated that “the entire focus of AO was on just one assessment year and the figure of receivables in relation to that assessment year can hardly reflect a pattern that would justify a TPO concluding that the figure of receivables beyond 180 days constitutes an international transaction by itself”.
The Delhi High Court held that when the determination as carried out by the Designated Authority has finality, it cannot possibly be reopened or revised by any authority under the Income Tax Act by taking recourse to a power u/s 154 which may otherwise be available to be exercised.
The High Court held so after finding that the Revenue initiated the rectification action after the Assessee had already obtained a settlement of all disputes pertaining to Income Tax for the relevant AY by virtue of Direct Tax Vivad Se Vishwas Act, 2020 (VsV Act).
The Punjab and Haryana High Court stated that merely having information that suspicious suppliers are not located in the same state would not be ground to transfer proceedings from the state to the centre.
The Bench consists of Justices Sanjeev Prakash Sharma and Sanjay Vashisth stated that “merely because the DGGI has information relating to similar fraudulent availment of ITC by other firms who may be related to the firm against which the proceedings have been initiated under Section 74 of the HGST Act by the State authority itself would not be a sufficient ground to presume that the State GST authority would not be able to conduct the proceedings or examine the culpability of the firm against whom proceedings under Section 74 of the HGST Act have been initiated. Merely because there may be other firm also against whom proceedings are initiated, there is no concept of joint proceedings.”
The Madras High Court stated that the Tax Concession cannot be denied just because the vehicle is registered in the name of Trust and not school.
The Bench consists of Justice G.K. Ilanthiraiyan observed that “the Regional Transport Officer, Chennai failed to see the objects of the assessee/petitioner Trust, it is an educational Trust. That apart, the Regional Transport Officer made demand with retrospective effect. The permits of the assessee/petitioner buses were already renewed under the caption of Educational Institution Bus.”
Finding that Assessee has satisfied conditions for reduced rate of tax u/s 115BAA, the Gujarat High Court pointed that the Revenue Department should have condoned delay in filing of Form 10-IC instead of rejecting it on technical ground.
The Division Bench comprising Justice Bhargav D. Karia and Justice Niral R. Mehta “the petitioner has exercised option merely because in absence of any provision for exercising the option in Column (e) as per the Circular No. 19/2023, the petitioner cannot be deprived of lower rate of tax”.
Estimation Report By DVO Alone Can't Form Basis For Reopening Completed Assessment: Delhi High Court
The Delhi High Court held that the sole ground for re-opening of assessment u/s 148 by AO being the report/estimate of the Valuation Officer is unsustainable.
Proximity of the reasons with the belief of escapement of income is the determinative factor for re-opening of the assessment, as absence of reasons would obviate the possibility of a belief and would bring the case in the realm of mere suspicion which cannot be a ground for reopening of assessment. added the Court.
The Division Bench comprising Justice Ravinder Dudeja and Justice Yashwant Varma observed that “There is no statement or discussion by the AO as to what was the basis and why he should proceed on the valuation report, its contents and why he should rely on the same. The reasons do not reflect that AO has applied his mind to the facts of the case to ascertain as to whether in fact the assessee had already declared the value of the aforesaid property under “Fixed Assets and Capital WIP” or whether such valuation is correct and proper and not”.
While examining the ratio laid down by the Apex Court in landmark judgment of Union of India and Ors. vs Ashish Agarwal [(2023) 1 SCC 617], the Delhi High Court clarified that the said decision was principally concerned with the correctness of judgments rendered by various High Courts on challenges raised by Assessees to the initiation of reassessment in accordance with the unamended procedure and which had existed prior to April 01, 2021.
Opining that Ashish Agarwal case neither intended nor mandated concluded assessments being reopened, the High Court held that the Respondent/ Revenue clearly erred in proceedings along lines contrary to the above as would be evident from the reasons which follow.
Firstly, Ashish Agarwal case was principally concerned with judgments rendered by various High Courts' striking down Section 148 notices holding that the Revenue had erred in proceeding based on the unamended family of provisions relating to reassessment, added the Court.
The Division Bench comprising Justice Yashwant Varma and Justice Ravinder Dudeja observed that “The directions in Ashish Agarwal case intended to resolve the impasse which ensued in light of the conflicting views expressed by different High Courts, the assessees being deprived of the salutary safeguards which Finance Act, 2021 had introduced in respect of reassessment as well as the element of public interest which warranted the Revenue being enabled to take curative action and thus saving the reassessment notices which High Courts had struck down”.
The Punjab and Haryana High Court ruled that local sales assessment does not exempt assessee from inter-State Sales tax claims.
The Bench consists of Justices Sanjeev Prakash Sharma and Sanjay Vashisth observed that “merely because the concerned respective States has assessed the assessee/petitioner for the local sales, it cannot absolve itself from the claim raised by the State of Bihar and the assessee/petitioner was required to pay the same.”
Income Tax Refund Can't Be Denied To Taxpayer For Discrepancy In Form 26AS Filed: Delhi High Court
While observing that tax was duly deducted by the Land Acquisition Collector but was not disclosed for some reasons and hence the credit was not reflected in Form 26AS, the Delhi High Court held that the assessee/ petitioner cannot be penalized for the mere reason that the Form 26AS suffered from a discrepancy.
Therefore, condoning the delay u/s 119 of the Income tax Act, the High Court quashed an order, by which the Revenue Department had rejected the Assessee's application to submit a revised return for the relevant AY.
The Delhi High Court held that the Proper officer under Customs Act cannot detain the goods or stall the process of importation, without forming a requisite opinion regarding any forgery in import.
The High Court clarified that the proper officer does not have any unfettered power to initiate a verification process, and it is incumbent upon him to form a requisite opinion in support of a suspicion that he had regarding the issue of Country-Of-Origin (COO) certificate or the origin of the imported articles.
Since upon the completion of Corporate Insolvency Resolution Process (CIRP), the Assessee has changed hands and commenced under a new ownership and management, the Bombay High Court held that tax proceedings pertain to period prior to the CIRP, and consequent to the approval of the resolution plan, the tax proceedings stand extinguished.
The Division Bench of Justice G. S. Kulkarni and Justice Somasekhar Sundaresan observed that “provisions outlined in Section 31(1) of the Insolvency and Bankruptcy Code (IBC) stipulates that approval of resolution plan by the adjudicating authority is binding on Central Government and its agencies in respect of any statutory dues arising under any law for the time being in force, thus binding tax authorities and their enforcement actions”.
Referring to Article 7 of the Double Taxation Avoidance Agreement (DTAA) entered into between the Government of United Arab Emirates and the Republic of India, the Delhi High Court held that the right of the Holding company (source State) to allocate or attribute income to the Permanent Establishment (PE) cannot be restricted on the basis of the global income or loss that may have been earned or incurred by a cross-border entity.
If an enterprise is carrying on business through a PE situated in the other Contracting State, then its profits is liable to be taxed in the other State, subject to the extent of profits attributable to that PE, clarified the Court. The High Court explained that Article 7(1) of the Indo-UAE DTAA clearly casts a dichotomy between the profits that may be earned by an enterprise on a global scale and those which are attributable to a PE situate in the Contracting State.
Finding that the Show cause notice (SCN) issued to the petitioner/assessee did not set out any intelligible reasons for cancellation of its GST registration, the Delhi High Court quashed the said SCN.
The High Court found that the SCN issued to the petitioner, simply mentioned the provisions of Section 29(2)(e) of the CGST Act, 2017 which authorises the proper officer to cancel the taxpayer's GST registration if it is obtained by means of fraud, wilful mis-statement, or suppression of facts, without pointing any specific fact of allegation.
The Madhya Pradesh High Court stated that GST authorities cannot bypass the procedural safeguards under the GST Act by directly invoking IPC provisions without first applying the penal provisions of the GST Act.
The Division Bench of Justices Sushrut Arvind Dharmadhikari and Duppala Venkata Ramana observed that “GST Act, 2017 is a special legislation which holistically deals with procedure, penalties and offences relating GST and at the cost of repetition this court cannot emphasise more that the GST Authorities cannot be permitted to bypass procedure for launching prosecution under GST Act, 2017 and invoke provisions of Indian Penal Code only without pressing into service penal provisions from GST Act and that too without obtaining sanction from commissioner under Section 132(6) of GST Act especially when the alleged actions squarely fall within the precincts of offence as enumerated under GST Act, 2017.”
The Kerala High Court held that income tax authorities have the power to seek interim custody of currency notes seized and produced before the jurisdictional magistrate by any other officer or authority if there is any reason to believe that the seized currency is part of any asset that has not been disclosed for the purpose of the Income Tax Act.
The Division Bench of Justice P. B. Suresh Kumar and Justice C. Pratheep Kumar was answering a question referred to it by the Single Bench. The Single Bench had noted that there is contradiction in the High Court decisions in Union of India v State of Kerala (2022) and R. Ravirajan v State of Kerala (2023).
The Himachal Pradesh High Court stated that the State and Central Governments have been extended the same powers under the CGST and SGST Act and if one of the officers has already initiated proceedings, the same cannot be transferred to another and he alone is to issue process under the Act and take it to its logical end.
The Bench of Justice Tarlok Singh Chauhan observed that “….where a proper officer under the CGST Act had initiated proceedings on a subject matter, no proceedings would be initiated by proper officer authorized under the SGST Act or UGST Act on the same subject matter.”
The Orissa High Court has held that tractor trailer/trolley is not a 'motor vehicle' as per Section 2(h) of the Orissa Entry Tax Act, 1999 ('OET Act') and therefore, not amenable to entry tax as per the said statute.
Interpreting the meaning of 'motor vehicle' as per the Motor Vehicles Act, 1988 ('MV Act') as well as the OET Act, the Division Bench of Justice Arindam Sinha and Justice Mruganka Sekhar Sahoo held: “We have already seen definition given of 'motor vehicle' and 'vehicle' in section 2(28) (Act of 1988). Section 2(h) in the Entry Tax Act defines only motor vehicle to mean the same as defined in clause (28) of section 2 (Act of 1988) excluding, inter alia, tractor.”
The Supreme Court allowed a Special Leave Petition (SLP) filed by the assessee/accused, granting bail in a case registered under Section 132(1)(b), 132(1)(f), and 132(1)(i) of the Central Goods and Services Tax Act, 2017.
The Bench of Justices J.K. Maheshwari and Rajesh Bindal granted bail on the basis that the department failed to file any documentary evidence against the assessee/accused to substantiate the allegations made in the case, despite the court's direction.
The Andhra Pradesh High Court stated that National Company Law Tribunal (NCLT) order prevails over Goods and Services Tax (GST) demand, even if the state government is not notified about the pending NCLT proceedings.
The Division Bench of Justices R. Raghunandan Rao and Harinath N. observed that “the contention of the department that the order of NCLT is not binding on the State of Andhra Pradesh in view of Section 88 of the GST Act would have to be negatived in as much as Section 238 of the Insolvency and Bankruptcy Code provides for a non-obstante clause overriding all other laws.”
The Delhi High Court held that consideration received by Assessee from aircraft leasing activity is not taxable as royalty either u/s 9(1)(vi) of Income Tax Act or under India-Ireland DTAA.
Pointing out that the treaty provisions would override Income tax Act being more beneficial to the assessee, the Division Bench comprising Justice Yashwant Varma and Justice Ravinder Dudeja observed that “it would be wholly impermissible for the AO to invoke Section 9(1)(vi) of the Act in light of the express exemption under the DTAA”.
The Andhra Pradesh High Court stated that when the assessee files an appeal against an order of assessment, the enforcement actions that have been taken, such as property attachment and garnishment notices, should not continue.
The Division Bench of Justices R Raghunandan Rao and Harinath. N observed that the assessee has preferred an appeal and has paid 10% of the disputed tax, as required under Section 107 of the CGST Act, no further tax can be recovered from the assessee, in pursuance of the order of assessment under appeal.
The Andhra Pradesh High Court has dismissed a petition alleging that cess levied by State's Agricultural Market Committee on sale of 'Basmati rice' amounts to “double taxation”.
One of the petitioners, a trader of Basmati rice, claimed that it sources the rice from Punjab where it already pays agricultural market committee tax and thus contended that if the State of Andhra Pradesh imposes tax on the very same stock, it amounts to double taxation.
The Market Committee argued they are not collecting any tax from the petitioners and they are only collecting fee under Section 12 of the AP (Agricultural Produce and Live Stock) Markets Act 1966, for providing services to the petitioners.
Agreeing with the Committee, Justice Tarlada Rajasekhar Rao held, “The respondents herein have levied fee for service rendered to the petitioners...The judgments relied by the learned counsel for the petitioners relates to imposing double taxation and the said judgments are not applicable to the facts in these cases and it trite that levy of tax is for the purposes of general revenue which when collected forms part of the public revenue of the State, that a fee is generally defined to be a charge for a special service rendered to individuals by some Governmental agency.”
The Punjab and Haryana High Court ruled that an institute registered as an educational trust, using its earnings solely for educational advancement, should not be denied the benefits of Section 12AA of the Income Tax Act, 1961.
The Bench of Justices Sanjeev Prakash Sharma and Sanjay Vashisth observed that “the institute is a duly registered educational trust and whatever earnings it receives are also utilized for the purpose of advancement of education, the institution could not have been denied the benefit of Section 12AA.”
The Bombay High Court recently clarified that just because the verification of input-output ratio was not submitted before the export of goods, it does not mean that same cannot be verified post export of goods.
While giving such relaxation, the Division Bench of Justice K. R. Shriram and Justice Jitendra Jain observed that the procedure for submitting input-output ratio is inconsequential for claiming rebate under Central Excise Act when the claim of petitioner/ assessee is only qua excise duty paid on chassis purchased and used in the manufacture of buses which are exported.
The Himachal High Court held that once the corporate debtor is directed to be liquidated by the NCLT u/s 33(5) of Insolvency & Bankruptcy Code (IBC), no legal proceeding could be instituted by or against him by the Tax Authorities.
Thus, the High Court clarified that the red entry/charge created by the Revenue Department on the property of the petitioner-company during the currency of the moratorium imposed by the NCLT, would be void in law.
Emphasizing that shares which is subject to a lock-in stipulation, could not be sold in an open market, the Delhi High Court held that valuation report obtained by the employer for ascertaining its withholding tax obligations during allotment of such shares to its employees as a perquisite, cannot be considered for purpose of Fair Market Value (FMV) of those shares.
Referring to the decision in case of Principal Commissioner of Income Tax vs. M/s Religare Securities Ltd. [ITA 311/2018], the Division Bench of Justice Yashwant Varma and Justice Ravinder Dudeja reiterated that Staff Welfare expenditure incurred by the assessee/employer in respect of Employees Staff Option Plan (ESOP) and Employees Staff Purchase Scheme Guidelines, is allowable expenditure.
The Punjab and Haryana High Court held that a society that imparts knowledge or skills qualifies for the 'education' label under the Income Tax Act, making it eligible for tax exemptions under Section 12A of the Income Tax Act, 1961.
The Division Bench of Justices Sanjeev Prakash Sharma and Sanjay Vashisth observed that “……Vocational training has been now recognized to be an important as any other filed of education, and it is for this reason that National Council for Vocational Training has been established to streamline and lay down a systematic pattern of providing education.”
Continuation Of Proceedings On Ceased Entity Is Not Curable U/s 292B: Delhi High Court
While following the decision of Apex Court in Principal Commissioner of Income Tax, New Delhi vs Maruti Suzuki (India) Limited [(2020) 18 SCC 331], the Delhi High Court held that the initiation or continuation of assessment or reassessment proceedings after a company cease to exist due to merger pursuant to a Scheme of Arrangement, is not sustainable, and cannot be cured by applying Section 292B.
The Division Bench comprising Justice Yashwant Varma and Justice Ravinder Dudeja observed that “the factum of merger had been duly brought to the attention of the AO. The merger was taken into consideration at more than one place in the order of assessment that came to be framed. Despite the above, the AO proceeded to draw the order in the name of an entity which had ceased to exist”.
The Bombay High Court held that deduction claimed by bank u/s 36(1)(vii) in respect of write off bad debts is allowable without any adjustment to the credit balance in the provision for bad and doubtful debts u/s 36(1)(viia) which was adjusted with the bad debts claimed in the subsequent AY.
The High Court held so after finding that the taxpayer had utilized the opening balance in the “bad and doubtful debts account” to reduce the total bad debts written off in claiming the deduction u/s 36(1)(vii).
The Division Bench of Justice G. S. Kulkarni and Justice Somasekhar Sundaresan observed that “It is inconceivable that the amount of bad debts claimed as deduction u/s 36(1)(vii) could have any bearing so as to require any deduction/ subtraction from the provision for bad debts, made by the assessee u/s 36(1)(viia)”.
The Delhi High Court held that the once the relief is already accorded to assessee in the original assessment order, then Designated Authority (DA) can rectify the mistake apparent on record by allowing the assessee to file a fresh Form 3 under VSV Act.
On examination of the relevant provisions outlined under Vivad Se Vishwaas Act (VSV Act), the Division Bench comprising Justice Yashwant Varma and Justice Ravinder Dudeja observed that the legislation takes into consideration the time and resources consumed on account of tax disputes, which acted as a burden for both the Government and taxpayers, and hindering the timely collection of Revenue.
The Kerala High Court held that taxpayer cannot be prosecuted u/s 276B of Income tax Act simply because of failure to deduct and pay TDS to the government, once the non-compliance was sorted out and the tax along with penalty was sufficiently deposited to the government, after being informed of the delinquency.
Single Bench of Justice P.V. Kunhikrishnan observed that “the entire amount with penal interest is already paid by the petitioners. If that be the case, the continuation of prosecution is not necessary against the petitioners”.
Technological impediment cannot be a reason to harass an assessee, said the Supreme Court while asking the Income Tax Department to upgrade its software to ensure that mistakes do not occur in the future. The Court directed that the Central Board for Direct Taxes should also take necessary steps for rectifying the software.
A bench comprising Justices PS Narasimha and Sandeep Mehta was hearing an appeal filed by an assessee questioning the imposition of surcharge on Rs. 1.57 Crores and demanding Rs. 2.01 Crores for the Assessment Year 2022-23.
The Delhi High Court recently clarified that the TOLA [Taxation and Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020] authorisation merely enables the competent authority to take action within the extended time period which would have otherwise been regulated by Sections 148 and 149, but does not amend the structure for approval which stands erected by virtue of Section 151.
“Sanction”, when used in Section 3 of TOLA caters to those contingencies where a specified Act may have prescribed a particular time limit within which an action may be approved, observed the Division Bench of Justice Yashwant Varma and Justice Ravinder Dudeja.
The Bench added that once it is conceded that the notice came to be issued four or three years after the end of the relevant AY, the approval granted by the JCIT would not be compliant with the scheme of Section 151.
The Patna High Court has held that failure on part of the customs officer to record reasons for confiscating goods under Section 110 of Customs Act, renders the provisional attachment “illegal”. The provision empowers a customs officer to seize goods if he has 'reason to believe' that such goods are liable to confiscation under the Act, and prescribes subsequent procedure.
Bench of Justices PB Bajanthri and Alok Kumar Pandey observed, “For seizure of goods, unless there are strong and compelling reasons to believe that goods are 'imported', one cannot draw inference that officer who had seized goods believe it to be foreign goods etc. It will be an instrument of oppression, misuse, and arbitrariness clothing officers with uncanalized, draconian and arbitrary powers thereby rendering opinion itself violative of Article 14 of the Constitution.”
The Calcutta High Court has held that an enterprise contracting with the assignee of a government recognised concessionaire for infrastructure development can, based on facts and circumstances of the case, be given the benefit of deduction under Section 80IA(4) of the Income Tax Act 1961.
The provision prescribes deductions in respect of enterprises engaged in infrastructure development. Sub-section (b) of the provision stipulates that the enterprise claiming deduction must have entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility.
In the case at hand however, the Respondent (assessee) had entered into agreement with Kakinada Sea Port Limited (KSPL), special purpose company of ISPL, which had in turn contracted with the Andhra Pradesh government for development of the Kakinada Deep Water Port.
In its appeal against an ITAT order allowing the assessee to claim deduction, Revenue claimed that assessee never had an agreement either with the Government or even with the entity having such an agreement with the Government.
After perusing all the agreements involved in the matter, the division bench of Chief Justice TS Sivagnanam and Justice Hiranmay Bhattacharyya pointed that Andhra Pradesh government had, in agreements with International Sea Ports Limited (ISPL), agreed that KSPL (formerly CPCL) would be the assignee of ISPL and shall be treated as successor to ISPL's rights, duties and obligations under the concession agreement.
The Gauhati High Court recently held that the recourse to Sub-Clauses (b) & (c) of Clause 37C (1) of the Central Excise Act, is not permitted if the show cause notice was not sent at the proper address of the registered taxpayer.
The High Court also clarified that Sub-Clause (b) and Sub-Clause (c) of Section 37(C)(1) of the Act of 1944 can only be pressed into service, if the service of notice under Sub-Clause (a) cannot be affected.
The Delhi High Court has held that merely because an assessee made self-assessment under Section 143(1) of the Income Tax Act 1961, is not reason to preclude reassessment proceedings initiated by the Department. “The assessment of tax under Section 143(1) of the Act is a self-assessment and in a strict sense cannot be stated as assessment framed by the AO,” observed a bench of Justices Vibhu Bakhru and Swarana Kanta Sharma.
The Delhi High Court has made it clear that non-payment of dues in the form of tax, interest or penalty, by a registered entity to the account of Central/State Government beyond a period of three months after due date, is not a ground to cancel its registration under the Central Goods and Services Tax Act.
A bench of Justices Vibhu Bakhru and Sachin Datta took note of Section 29 of CGST Act which prescribes for cancellation of a tax payer's GST registration and observed, “The only reason set out in the said SCN for proposing to cancel the petitioner's GST registration is failure to pay tax, interest or penalty within a period of three months from the date on which the said amount became due. However...non-payment of dues for a period of three months is not a prescribed ground for cancelling the petitioner's GST registration.”
The Delhi High Court held that once the PCIT in the revisionary proceeding u/s 263, had decided in favour of assessee after having considered its reply, then AO had no authority to reassess and reopen the assessment u/s 148.
The High Court held so, after finding that the reasons for issuing notice u/s 148A(b) were exactly similar to the reasons on which the PCIT had invoked Section 263. Section 263 of Income tax Act is a proactive step taken by tax authority to rectify potential errors in the original assessment, where the Commissioner issues a notice to taxpayer, informing them of the intention to revise the order.
The Division Bench of Justice Yashwant Varma and Justice Ravinder Dudeja observed that “at the time of initial assessment, as also while conducting proceedings u/s 263, the authorities were aware of shares held by the assessee for a consideration which was considered to be less than fair market value. However, Revenue still proceeded further to purpose initiation of reassessment proceedings by issuing notice u/s 148A(b)”.
The Delhi High Court held that the amount of debit to be disallowed from the Electronic Credit Ledger (ECL) should not be more than the amount of the Input tax credit (ITC), which is believed to have been fraudulently availed by taxpayer.
At the same time, the High Court clarified that Rule 86A of CGST Rules 2017 is an emergent measure for protection of revenue by temporarily not allowing debit of available ITC in the ECL, which the Commissioner or an officer authorized by him has reasons to believe has been wrongfully availed.
While explaining that Section 43A is a non-obstante provision, which positively imposes an obligation notwithstanding anything contained in the Income tax Act, the Bombay High Court held that losses due to exchange rate changes on a foreign currency loan taken for import of a capital asset must not be treated as revenue expenditure.
The Division Bench comprising Justice G.S. Kulkarni and Justice Somasekhar Sundaresan explained that just because the assets were not imported into India from abroad, any loss on exchange rate fluctuation on a foreign currency loan taken for acquiring capital assets would necessarily not be a capital expenditure.
While expounding on the positive mandate of 43A as against the negative caveat in 37(1), the Bench observed that the essential jurisdictional fact for the mandatory capitalization of such an expense u/s 43A is that the capital asset financed by the foreign currency loan in question, must have been brought into India from a country outside India.
Referring to the decision of Shanta Mani Hand Made Paper Industries Vs. The State of Bihar & Ors [CWJC No. 2941 of 2010], the Patna High Court reiterated that supplementary bills which are punitive in nature, cannot be raised upon taxpayer and benefit granted by State government cannot be withdrawn based on mere audit objection.
The High Court reiterated so after finding that the subsidy granted to the petitioner by the State government in the form of Industrial Incentive policy was withdrawn simply based on an audit objection.
Single Bench of Justice G. Anupama Chakravarthy observed that “the Intensive Policy, which was being extended to the petitioner cannot be withdrawn based on the audit report”.
The Delhi High Court held that fees received by the foreign branch of banking company for extending a credit line to the account holder outside India, would not be taxable in India.
While noting that the amount payable by the credit card holders would clearly be a debt incurred outside India, the Division Bench of Justice Yashwant Varma and Justice Ravinder Dudeja observed that fee in respect of such transactions would not be taxable in India.
The Supreme Court on Thursday (October 3) outlined the principles governing the interpretation of taxation statutes in the context of the Central Goods and Services Tax (CGST) Act, 2017.
A bench of Justice Abhay Oka and Justice Sanjay Karol summarised the principles of interpretation while dealing with a case involving the interpretation of Section 17(5)(d) of the CGST Act, which disallows Input Tax Credit (ITC) on goods and services used in the construction of immovable property, except for "plant or machinery."
Unexplained Cash Credit In Bank Account Would Be Treated As Income : Chhattisgarh High Court
The Chhattisgarh High Court recently upheld an ex-parte assessment under Section 144 of the Income Tax Act, 1961, against an assessee who failed to participate in assessment proceedings or explain the source of a cash deposit of ₹11,44,070 in his bank account.
The bench comprising Justices Sanjay K Agrawal and Amitendra Kishore Prasad noted that under Sections 68 and 69A if an assessee does not provide a satisfactory explanation for unexplained credits, those amounts can be treated as taxable income. Despite multiple notices from the Assessing Officer, the appellant did not respond or appear before the authorities, leading to an ex-parte assessment order being issued.
The Kerala High Court held that the 'interest income' on the short-term deposits of the funds infused by the Government, which are sanctioned for purpose of setting up of business, are in nature of 'capital receipt' and not 'revenue receipt'.
The Division Bench of Justice Sathish Ninan and Justice Johnson John observed that “if the funds invested are not surplus funds as such, and the funds and interest accrued thereon are inextricably linked to them setting up of the business, then the 'interest income' from such funds would be in the nature of capital receipts”.
The Jammu and Kashmir and Ladakh High Court has held that the time limit for refund of GST is to be determined from the date the original application is filed by an assessee, and not from the date of follow-up application. In the case at hand, the Petitioner, a garment manufacturer, was issued a deficiency memo and the follow up application, which it had filed for GST refund at the advice of the Department, was rejected as time barred.
The Supreme Court held that if construction of a building is essential for supplying services such as renting out, it could fall into the "plant" exception to section 17(5)(d) of CGST Act which provides that Input Tax Credit cannot be claimed for construction material (other than plant or machinery) for immovable property construction.
“If the construction of a building was essential for carrying out activity of supplying services such as renting or giving on lease or other transactions in respect of the buildings or part thereof which are covered by clauses 2 and 5 of the Schedule 2 of the CGST Act, the building could be held as a plant. Functionality test will have to be applied to decide whether building is a plant”, the Court held.
A bench of Justice Abhay Oka and Justice Sanjay Karol held that the functionality test will have to be applied to the facts of each case to decide whether a building is a plant.
The Court further held that it is not necessary to read down Section 17(5)(d) of the CGST Act so that it does not apply to cases where immovable property is constructed for the purpose of letting out on rent. The bench held that the challenge to Section 17(5)(d) of the Central Goods and Services Tax (CGST) Act 2017 was rejected.
The Supreme Court set aside the judgments of the High Courts which held that the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions Act) (TOLA) 2021 will not extend the time limit for issuing notices for re-assessment under the Income Tax Act.
A bench comprising Chief Justice of India DY Chandrachud, Justice JB Pardiwala and Manoj Misra delivered the judgment allowing a batch of 727 appeals filed by the Income Tax Department against the various orders passed by the High Courts.
Observing Cash Credit account or overdraft is capable of being attached u/s 226(3) of Income tax Act, the Himachal Pradesh High Court turned down the decision of Tax recovery officer in passing the order of attachment of Cash Credit Account.
Explaining the relationship between debtor & creditor, the High Court clarified that bank does not become a debtor to its customers and cannot hold money for account of its customers merely because it has provided a facility of overdraft to its customers.
The Gauhati High Court has held that Summary of Show Cause Notice in Form GST DRC-01 along with an attachment of the 'determination of tax' does not constitute a valid Show Cause Notice (SCN) under Section 73 of the Central Goods and Services Tax (CGST) Act, 2017.
“The Summary of the Show Cause Notice in GST DRC-01 is not a substitute to the Show Cause Notice to be issued in terms with Section 73(1) of the Central Act as well as the State Act. Irrespective of issuance of the Summary of the Show Cause Notice, the Proper Officer has to issue a Show Cause Notice to put the provision of Section 73 into motion,” said a single-judge bench of Justice Devashis Baruah.
The Delhi High Court exempted members of Taxation Bar Association from the Court appearance requirement.
The Bench, consists of Chief Justice Manmohan and Justices Vibhu Bakhru and Yashwant Varma, noted that, in light of the judgment in Lalit Sharma and Ors. v. Union of India and Ors. [W.P.(C) 10363/2021], dated 19th March 2024, a majority of the advocate members of the Delhi Tax Bar Association, despite active practice, have now become ineligible to contest, vote, or participate in the election process for the selection of the Executive Committee, scheduled for 19th October 2024.
The Delhi High Court has held that GST exemption on foreign reinsurance services in relation to government insurance schemes applies with retrospective effect, from July 1, 2017 onwards.
This was in light of the fact that though the exemption was notified only on July 27, 2018, the government regularized GST liability on such services for the period from July 01, 2017 till July 26, 2018. Entry 40 in Notification No.12/2017 exempts GST liability on reinsurance services provided to the Government under insurance schemes for which total premium is paid by the Government.
A division bench of Justices Yashwant Varma and Ravinder Dudeja said though Entry 40 was included in the above notification dated 28 June 2017, only with effect from July 27, 2018, “The GST Council as well as the Union Government…appear to have taken a conscious decision to regularize the period between 01 July 2017 and 26 July 2018.” Significant to note that Entries 35 and 36 of the said notification exempt certain specified general insurance and life insurance schemes from GST.
S.107 CGST Act | Appellate Authority Cannot Suo Moto Enhance Tax Liability: Calcutta HC
The Calcutta High Court recently set aside an order of the GST Appellate Authority, suo motu enhancing tax liability on an assessee, without following the procedure under Section 107(11) of the CGST/ WBGST Act.
Pankaj Bajpai 6 Oct 2024 12:41 PM Listen to this Article The Karnataka High Court held that voluntary determination by the assessee himself as regards the liability of tax, is sine qua non for 'self-ascertainment of tax' under CGST Act.
The High Court therefore clarified that when notice sought to be issued u/s 74(1) indicate a fresh and complete adjudication and does not refer to short fall of actual tax required to be paid as contemplated u/s 74(7), the State itself is estopped from contending that there was self-ascertainment by the assessee.
The Madhya Pradesh High Court has dismissed a petition moved by the Customs and Central Excise Department seeking priority over other secured creditors, for recovery of dues from an assessee's property.
Justices Vivek Rusia and Binod Kumar Dwivedi relied on Punjab National Bank V/s Union of India and others (2022) where the Top Court had held that SARFAESI Act will have an overriding effect on the provisions of the Central Excise Act and therefore, dues of the secured creditor will have priority over the dues of the Customs and Excise Department.
The Andhra Pradesh High Court has prima facie held that Section 81 of the Central Goods and Services Tax Act, 2017 cannot be invoked to declare transfer of property void, unless there is a specific finding regarding sham nature of transaction.
The Madhya Pradesh High Court has held that merely because payment is deferred by the State in terms of the works contract, the same cannot be grounds for a dealer to seek exemption from payment of taxes under the MP Commercial Tax Act, 1994 and MP Entry Tax Act, 1976.
In the case at hand, the Petitioner-company had entered into Build, Operate and Transfer (BOT) contract with the government for development of a by-pass road. As per the agreement, no explicit consideration was to be paid by the State but, the dealer was permitted to recover toll for next 10 years, following which the road would be transferred to the State Government.
The Kerala High Court held that tax/ penalty under Section 129(1)(a) or 129(1)(b) of the CGST/ SCGST can be imposed only for violations which may lead to evasion of tax or which was done with the intention to evade or in case of repeated violations.
Justice P. Gopinath observed: “It is declared that the provision of Section 129 of the CGST/ SGST Acts do not authorize the imposition of tax/ penalty as contemplated by the provisions of Section 129(1)(a) or Section 129(1)(b) in cases where only minor discrepancies are noticed and such penalty can be imposed only for violations which may lead to evasion of tax or where the transport was with the intention to evade tax or in cases of repeated violations (even of a minor nature)”
The Supreme Court in its recent decision allowed the revenue authorities to issue notices for reassessment under the Income Tax Act for the period between 01.04.2021 and 30.06.2021 by granting the benefit of time extensions under Taxation and Other Laws (Relaxation and Amendment of Certain Provisions Act) (TOLA) 2021.
The Kerala High Court stated that provisions of section 74 of CGST Act can be invoked if assessee fails to report actual sales to evade tax.
The Bench of Justice Gopinath P. observed that “It is for the assessee to get his claim adjudicated by the statutory authorities under the CGST / SGST Acts. The procedure under Article 226 of the Constitution of India cannot be invoked to determine disputed questions of fact especially on account of the procedure adopted in this Court in respect of writ petitions under Article 226 of the Constitution of India.”
The Gujarat High Court stated that there cannot be any blocking of the credit in electronic credit ledger if there is no sufficient balance available.
The Division Bench, comprising Justices Bhargav D. Karia and Niral R. Mehta, was hearing a case where the assessee contested the blocking of Input Tax Credit (ITC) amounting to ₹2,44,05,567 in its electronic credit ledger.
The Gujarat High Court stated that there cannot be any income escapement by the assessee if there is no unexplained amount in the bank statement on record.
The Bench of Justice Bhargav D. Karia and Mauna M. Bhatt observed that “the reason given by the Assessing Officer for alleged escapement of Rs.3,25,00,000/- is not sustainable since there is no unexplained amount in the bank statement on record since the assessee did not retain the amount of Rs.3,25,00,000/- and as such the ingredients of Section 68 are not attracted……”
Pointing that the Department has delayed the refund on customs duty that was due & payable to assessee for almost ten years, the Bombay High Court ruled that such action of Department in avoiding the payment of interest on delayed refund by raising frivolous pleas, cannot be sustained.
Referring to Supreme Court decision in Union of India Vs. Hamdard (Waqf) Laboratories [AIR 2016 SC 1124], the High Court reiterated that the liability of the Revenue to pay the interest u/s 11BB, which corresponds to Sec 27A of the Customs Act, commences from the date of expiry of 3 months from the date of receipt of the application for refund or on the expiry of the said period from the date of which the order of refund is made.
Finding that the payments were received by the bank from third parties, specifically named in the tripartite agreement, which was backed by a firm irrevocable purchase order, the Delhi High Court ruled that duty drawback could not be denied to an exporter.
Since the e-BRCs were issued by the DGFT after verification from the bank confirming the receipt of payments, the High Court held that payments made to local supplier through banking channels, could not be regarded as non-existence, without carrying out a proper investigation.
The Calcutta High Court recently confirmed the deduction u/s 80IA(4) to an Infrastructural development company, regarding development of a mechanised port handling system by entering into an agreement with a nodal agency recognised by the Andhra Government.
The Division Bench comprising Chief Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya observed that deduction u/s 80IA(4) is legislated to promote industrial undertaking engaged in the infrastructural development, and therefore, its interpretation should advance the object of its introduction and should not frustrate it.
The Gujarat High Court recently allowed an assessee, who failed to claim 'Long Term Capital Loss' in its Income Tax return, to seek revision under Section 264 of the Income Tax Act, 1961.
A division bench of Justices Bhargav D. Karia and Mauna M. Bhatt also reiterated that a Commissioner has to decide an assessee's revision application under Section 264, on merits. The provision empowers the Income Tax Commissioner to revise certain orders. This revision can be initiated by the authority or upon application by the assessee.
The Jammu and Kashmir and Ladakh High Court has upheld the UT government's decision to withdraw the 'Budgetary Support Scheme', notified in the year 2018 for providing budgetary support to manufacturing units in the UT, by reimbursement of Integrated Goods and Service Tax.
A division bench of Justices Sanjeev Kumar and Rajesh Sekhri observed that the Scheme did not create any legitimate expectation in the units nor did it attract promissory estoppel on the government.
Recently, an issue cropped up, where it was emphasized that technicalities created by the Department and not the taxpayer, should not be put forth by the department to defeat the statutory rights and entitlement of the taxpayers.
The Bombay High Court ruled that concerned Revenue officials (Respondent) cannot deny the benefits of accrued ITC (input tax credit) to the assessee (Petitioner) only because the prescribed forms were not filed electronically but were filed manually.
The Kerala High Court stated that assessee cannot claim input tax credit for transportation services if transportation costs are not included in assessable value of goods for payment of central excise duty.
The Division Bench of Justices A.K. Jayasankaran Nambiar and Syam Kumar V.M. observed that “………the assessee did not include the transportation costs in the assessable value of the goods for the purposes of payment of Central Excise duty. Under such circumstances, the assessee cannot claim input tax credit in respect of the transportation services availed by it for the purposes of transporting the goods from the place of removal to the buyer's premises.”
The Supreme Court held that banks can claim tax deductions for broken period interest on held to maturity (HTM) government securities if they are held as trading asset.
“Therefore, on facts, if it is found that HTM Security is held as an investment, the benefit of broken period interest will not be available. The position will be otherwise if it is held as a trading asset”, the Court held.
A bench of Justice Abhay Oka and Justice Pankaj Mithal observed that whether HTM securities are held as investments or stock-in-trade depends on the facts of each case. If a bank holds HTM securities until maturity and values them at cost, they may be considered investments, in which case the broken period interest would not be deductible. If held as trading assets, the deduction would be available
Value Of Free Fuel Can't Be Added To Value Of Taxable Supply U/S 15 Of CGST Act: Uttarakhand HC
The Uttarakhand High Court held that when as per the agreement, the cost of fuel was to be borne by recipient, then such cost cannot be subjected to charge of GST by adding its value in the transaction value of GTA service.
Pointing that the cost of fuel cannot be added in the account of the transporter, as was governed by the GST rules, the Division Bench comprising Justice Ritu Bahri and Justice Rakesh Thapliyal observed that “value of free fuel cannot be added to value of taxable supply under Section 15(1) and Section 15(2)(b) of the CGST Act, 2017”.
The Delhi High Court has held that sale deed is not a document issued by the revenue authorities or any government authority which would certify the agricultural nature of a land.
“A sale deed primarily reflects the transaction between the parties and the terms of sale, but it does not, in itself, verify the land's classification as agricultural for the taxation purposes. Therefore, heavy reliance on the sale deed to establish the agricultural character of the land would be misplaced,” a division bench of Justices Vibhu Bakhru and Swarana Kanta Sharma held.
The Supreme Court today (November 7) held that the officers of the Directorate of Revenue Intelligence (DRI) have the power to exercise powers under the Customs Act, 1962 to issue show-cause notices and recover duties
The Court held that DRI officers are "proper officers" to issue show cause notices under Section 28 of the Customs Act, 1962. "Subject to the observations made in the judgment, the officers of the Directorate of Revenue Intelligence, Commissionerate of Customs-Preventive, Directorate General of Central Excise Intelligence, and Commissionerate of Central Excise and other similarly situated officers are "proper officers" for the purposes of Section 28 of the Customs Act and are competent to issue show-cause notices," the Court held.
A bench comprising Chief Justice of India DY Chandrachud, Justices JB Pardiwala and Manoj Misra allowed the review petition filed by the Customs Department against the 2021 Supreme Court Judgment in Canon India Private Ltd. versus Commissioner of Customs, which had held that officers of the Directorate of Revenue Intelligence do not have powers under the Customs Act ,1962.
The Madhya Pradesh High Court ruled that if an assessee has already included income from an Association of Persons (AOP) or Body of Individuals (BOI) in their taxable income, any post-tax share received from the AOP/BOI cannot be taxed again in the assessee's hands.
The Division Bench of Justices Sushrut Arvind Dharmadhikari and Anuradha Shukla observed that “……the assessee was a member of an association of persons or body individuals, share of members of such association of persons or body individuals were determinate and known. Such association of persons or body individuals were chargeable to tax on their total at the maximum marginal rate or any higher rate……”
The Gujarat High Court on 25th September (Wednesday) held/clarified the Goods and Services Tax (GST) applicable to fly ash bricks and blocks with less than 90% fly ash content. The court ruled that the products qualify for the lower GST rate of 5%, than 18% GST rate on products not meeting the 90% fly ash threshold and quashed and aside the orders of the Advance Ruling Authority and Advance Ruling Appellate Authority.
The Kerala High Court struck down Rule 96(10) of the Central Goods and Service Tax Rules holding that it was ultra vires to the Section 16 of the Integrated Goods and Service Tax Act and was manifestly arbitrary.
Justice P. Gopinath noted that Section 16 has not imposed any restriction in availing refund of taxes paid on input goods and input services or claiming refund of IGST after payment of IGST on the exports. The Court, therefore held that the restriction imposed under Rule 96(10) on claiming refund is ultravires to the Act.
The Bombay High Court held that authorities under MVAT Act while exercising powers under Maharashtra Settlement of Arrears of Taxes, Interest, Penalties or Late Fees Act, 2022, cannot invoke provisions of Section 50 of MVAT and that too in review proceedings under Settlement Act.
The Division Bench of Justice M. S. Sonak and Justice Jitendra Jain observed that there is no provision under Settlement Act which provides for calculation of outstanding arrears of a particular year to be arrived at after adjustment of refund for another year more so in a case where there is no such adjustment of refund order on date of application or on date of settlement order u/s 13 of Settlement Act.
The Telangana High Court has held that the expenditure incurred by a hotel on replacement of damaged items is a current expenditure, allowable under Section 37 of the Income Tax Act, 1961.
A division bench of Justices Sujoy Paul and Namavarapu Rajeshwar Rao was dealing with a Hyderabad based 5-Star Hotel's plea to decide whether the expenditure incurred by it comes under current expenditure or capital in nature.
The Madras High Court stated that assessee is liable to tax on consideration received from sale of unredeemed articles by auctioneers.
The Division Bench of Justices Anita Sumanth and G. Arul Murugan observed that “the levy of penalty under Section 12(3)(a), in the case of non-filing of returns, is, automatic. Admittedly, the assessee has not filed the returns and hence, the basis of assessment would be irrelevant.”
The Gauhati High Court has made it clear that interest on refund under Section 244A of the Income Tax Act, 1961 applies only to those cases where refund is delayed by the Income Tax Department.
Justice Devashis Baruah thus declined interest to a construction contractor, whose TDS was deposited in the wrong PAN number by the Defence Ministry's Border Roads Organisation. The bench also noted that even if the amount was deposited in the correct PAN number, Petitioner was not entitled to any refunds, rendering the provision inapplicable to the case.
The Allahabad High Court has held that the owner of an electric vehicle which was purchased prior to October 14, 2022 cannot seek refund of tax citing a subsequent notification exempting the payment of One Time Tax.
Petitioner had sought refund of One Time Tax paid in respect of his Hybrid Vehicle purchased on October 13, 2022.
The relief was sought on the strength of a notification issued by the State providing tax exemption for electric vehicles purchased and registered from the date of notification of the Uttar Pradesh Electric Vehicle Manufacturing and Mobility Policy, 2022 i.e. October 14, 2022.
The Himachal Pradesh High Court has dismissed a writ petition challenging notifications issued by the Central government for levy of GST on Royalty paid by a Mineral Concession Holder for mining concession granted by the State.
The Delhi High Court has held that initiation of prosecution under Section 51 of the Black Money (Undisclosed Foreign Income and Assets and Imposition of Tax) Act, 2015 is not dependent on completion of assessment proceedings initiated against an accused under Section 10 to determine tax evasion.
The Black Money Act, 2015 is designed to address "undisclosed assets located outside India" that are held by an assessee either as the owner or as the beneficial owner.
The Delhi High Court has made it clear that incorrect mention of assessee's name in a notice issued to it for default in deduction of tax at source is a mere clerical error.
A division bench of Justices Yashwant Varma and Ravinder Dudeja thus held that show cause notice and penalty order passed under the previous name of a company cannot be rendered void.
“In the light of the fact that there was no change of entity, there being only change of name of the company, Show Cause Notice issued and the Penalty Order passed in the name of M/s. Infovision Information Services Pvt. Ltd. is not such a defect which cannot be cured and is therefore not fatal,” it observed.
The Himachal Pradesh High Court recently directed the Punjab Roadways to clear the interest due upon it for delayed payment of passenger tax and surcharge to the HP government.
A division bench of Acting Chief Justice Tarlok Singh Chauhan and Justice Satyen Vaidya observed that the body first failed to deposit any tax with the authorities of Himachal Pradesh despite the fact that it had been running its buses within its territory, and then disputed liability of interest.
The Bombay High Court recently clarified that an exporter (Petitioner) is entitled to interest u/s 56 of the CGST Act for the period starting from the expiry of 60 days from the date of filing the shipping bill up to the date of grant of refund, although during the interregnum, the exporter's name was red flagged on the Customs' portal.
The High Court held so while considering the prayer for interest on delayed payment of refund of tax as per Section 56 of the CGST Act, 2017.
The Division Bench of Justice M. S. Sonak and Justice Jitendra Jain observed that “Admittedly, the Petitioner has paid the amount of IGST, which the Respondents have utilized up to the date of grant of refund. Having used the money of the Petitioner, there is no justification for denying interest more so when the delay is attributable to the Respondents”.
The Madras High Court recently ruled that the expenditure incurred for payment of foreclosure premium for restructuring loan and obtaining fresh loan at a lower rate of interest is allowable as business expenditure u/s 37(1) of the Income Tax Act.
Such ruling came while dealing with a case where scrutiny proceedings were initiated, leading in revisional assessment u/s 263, based on the assumption that assessment order was prejudicial to the interest of Revenue Department, and resultant disallowance of payment of foreclosure premium as a business expenditure.
The Division Bench of Justice Anita Sumanth and Justice G. Arul Murugan observed that “Though mere disagreement with the view taken by the AO would not be a sufficient ground for invoking power u/s 263, it is quite another matter if the conclusion of the authority is palpably erroneous or contrary to settled law or judgment of the superior Courts”.
The Bench referred to the decision of CIT v Gujarat Guardian, where it was held that the prepayment premium represented present value of the differential rate of interest that would be payable by the assessee if the loan had not been restructured.
The Delhi High Court has made it clear that an investor of 'Capital Gain Tax Exemption Bonds' cannot seek premature withdrawal through judicial intervention.
A single bench of Justice Sanjeev Narula ruled that such an act would defeat the legislative intent behind Section 54EC of Income Tax Act, 1961. The provision stipulates that long-term capital gain will not be charged on an assessee if he invests in certain specified bonds (which come with a lock-in period).
The Delhi High Court has held that 'capital grant subsidy' which may be extended by the National Highways Authority of India to its contractors is not liable to TDS deduction under Section 194C of the Income Tax Act, since such grant cannot be construed as payment for a “work”.
A division bench of Justices Yashwant Varma and Ravinder Dudeja observed, “As we read Section 194C, it becomes evident that the same is principally concerned with the undertaking of a physical or tangible activity as opposed to the mere grant of subsidy or financial assistance…The infusion of equity capital as a measure of financial support, while surely a contractual obligation, cannot consequently be understood to mean the payment for a work undertaken.”
The Telangana High Court has held that for purposes of taxation, “accumulated profits” of a company are to be calculated after adjusting depreciation as per the Income Tax Act, 1961.
In ruling so, a division bench of Chief Justice Alok Aradhe and Justice J. Sreenivas Rao cited two rulings of the Bombay High Court which held that “depreciation as granted in accordance with the rates prescribed by the Income-tax Act would have to be deducted for ascertaining the accumulated profits.”
The Gauhati High Court has held that the words “Turnover” and “Income Tax Return” are different and exemption to a bidder from submitting the former in a tender process would not exempt it from furnishing the ITR, for the prescribed years.
“The primary purpose of reporting Annual Turnover is to provide a clear picture of a company's revenue-generating capacity. It is often a critical criterion for assessing a bidder's financial strength in tender applications. An Income Tax Return serves to comply with tax obligations and inform the government about the taxpayer's financial status, ensuring accurate taxation based on total income,” Justice Michael Zothankhuma held.
The Bombay High Court ruled that the demand for interest u/s 28AA of the Customs Act raised for non-payment of demand, within three months of raising the demand, is properly tenable on the part of the Customs Authority.
Interest u/s 28AA is automatic, when there is a default or delay in payment of duty, added the Court.
The Division Bench of Justice M.S Sonak and Justice Jitendra Jain observed that “since the payment was not made within the time specified in the said demand notice, an order of attachment was passed for failure to make the payment demanded on 18th Oct 2012 and interest payable u/s 28AA for the period commencing after that date, i.e. after 18th Oct 2012 was demanded”.
The Bombay High Court held that assessee had correctly accounted income from leasing out of properties under the head 'income from profits & gains of businesses', and not as 'income from house property'.
The High Held so after finding that income of assessee is derived from letting out of the properties, which in fact, is the principal business of the assessee as seen from its main objectives contained in its memorandum of association.
The Division Bench of Justice G. S. Kulkarni and Justice Firdosh P. Pooniwalla observed that “what must be borne in mind for the Court is to consider the main objective of the assessee as contained in the Memorandum of Association, and that the deciding factor, is not the ownership of land or leases but the nature of the activity of the assessee and the nature of the operations in relation to them”.
The Supreme Court recently ruled that a card issuing bank is not liable to separately pay service tax on the interchange fee when the said tax already stands paid on the Merchant Discount Rate (MDR).
The Three Judge Bench of Justice Sanjiv Khanna, Justice Sanjay Kumar, and Justice R. Mahadevan observed that “the entire amount of the service tax payable on the MDR has been paid to the Government and there is no loss of revenue”.
Section 67 CGST Act | Whether Cash Can Be Seized During GST Search ? Supreme Court To Consider
Taking into account conflicting views of the Delhi High Court and the Madhya Pradesh High Court, the Supreme Court is set to consider the issue as to whether authorities can seize "cash" under Section 67 of the Central Goods and Services Tax Act, 2017.
The development comes as a bench of Justices PS Narasimha and Sandeep Mehta recently issued notice on a petition filed by tax authorities assailing Delhi High Court's direction for refund of seized cash to the respondents.
Assessee Entitled To Charge Depreciation On Purchase Of Goodwill: Delhi High Court
The Delhi High Court has made it clear that goodwill is not 'income' but rather 'expenditure' for acquisition of assets and therefore, an assessee is entitled to charge depreciation on the amount spent towards it.
A division bench of Justices Vibhu Bakhru and Swarana Kanta Sharma cited Commissioner of Income Tax, Kolkata v. Smifs Securities Ltd. (2012) whereby the Supreme Court had held that goodwill could be considered as an intangible asset eligible for depreciation.
The Telangana High Court has held that the capital expenditure made prior to June 1998, for purchasing shares in any 'infrastructure facility', cannot be included in an assessee's total income.
A division bench of Justices Sujoy Paul and Namavarapu Rajeshwar Rao reasoned, “The capital expenditure for purchasing shares falls under the category of infrastructure facilities and shall not be included in total income. This is because merely purchasing shares does not contribute to the income of the respondent/assessee. Since it does not count as income, no amount needs to be paid in taxes.”
Finding that proper officer passed the order cancelling taxpayer's GST registration with retrospective effect, the Delhi High Court clarified that such order does not indicate any reason for cancelling the GST registration much less from retrospective effect.
The High Court found that the only allegation against the assessee was that it was non-existent, which was sufficiently addressed by the assessee in his reply by claiming that he had to go to Rajasthan due to ill health of his father.
Mentioning Proposed Penalty In Declaration Under SVLDR Scheme Not Incorrect: Gujarat HC
The Gujarat High Court has held that Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) is applicable to any show cause notice for penalty/late fee, irrespective of whether it is under adjudication or appeal.
A division bench of Justices Bhargav D. Karia and Mauna M. Bhatt cited FAQs of the scheme as per which, any person who has a show cause notice (SCN) for demand of duty/tax and where the final hearing has not taken place as on June 30, 2019, is eligible to file declaration under SVLDRS.
The Supreme Court in a recent decision held that mobile service providers (MSPs) could avail the benefit of Central Value Added Tax/CENVAT Credit over excise duties paid on items such as mobile towers and prefabricated buildings.
The bench of Justice BV Nagarathna and Justice N Kotiswar Singh observed that since mobile towers and PFBs could be detached and relocated, they qualified as movable properties and accessories in enhancing the functionality of the mobile service antenna attached on top of the tower. Thus, the items qualified as 'capital goods' or 'inputs' which were indispensable to provide effective mobile services (output) and MSPs can get a credit set-off on these items.
“Putting together a structure of plywood sheets cannot be construed as constructing a residential house,” the Delhi High Court has held.
It thus upheld an ITAT order which disallowed capital gains exemption to the appellant-assessee under Section 54 of the Income Tax Act, 1961 on the ground that a mere 'makeshift' structure was raised in the name of residential house.
The Telangana High Court has held that the amount received by the developer of Hepatitis-B vaccine, under a co-marketing agreement with PFIZER Company, is a capital receipt not liable to tax.
A division bench of Chief Justice Alok Aradhe and Justice J. Sreenivas Rao reasoned that the developer-assessee's right to promote, market, distribute or sell the vaccine or a new competitive product to a third party was taken away under the agreement.
The Delhi High Court has held that it is not the technology which is used in the product that decides its HSN classification under the Customs Tariff Heading (CTH) for the purposes of Customs Tariff Act, 1975.
A division bench of Justices Vibhu Bakhru and Swarana Kanta Sharma held that it is rather the product, which may be created using a particular technology, which decides the HSN classification.
The Delhi High Court has held that where enhancement of valuation of goods by the proper officer for the purpose of determining Customs duty is accepted by the importer under protest, for expeditious clearance, it cannot be said that the importer has waived its right to question the reassessment.
Pertinent to note that Section 17 of the Customs Act, 1962 relates to 'Assessment of duty'. Sub-section (5) provides that in a case where the importer confirms his acceptance of the reassessment in writing, the proper officer would stand relieved of the obligation of passing a speaking order in respect of such reassessment. In all other cases where the reassessment is not acceded to, the proper officer is obliged to pass a speaking order.
A division bench of Justices Yashwant Varma and Ravinder Dudeja held, “In our considered opinion, the perceived concession made in respect of the opinion harboured by the proper officer cannot possibly be interpreted or construed as detracting from or depriving the importer of the right to question the decision of the proper officer in accordance with law. The right to question the correctness of the decision of the proper officer, be it with respect to the formation of opinion or even on merits, is one which is protected by statute.”
The Kerala High Court stated that financial grants provided to the assessee for covering daily operational expenses do not qualify as payment (consideration) for any services that the assessee might be providing and are not liable to tax.
The Bench of Justice Gopinath P. observed that “The assessee has only received grants to meet its day-to-day expenses including salary, allowances etc. Such payment cannot be deemed to be a consideration for the alleged services rendered or for goods supplied by the assessee. The revenue has no case that the activity of the assessee falls within Scheduled-I”.
The Delhi High Court has held that a misclassification or an incorrect classification of goods to be imported or exported would not ipso facto amount to collusion, wilful misstatement, or suppression of facts under Section 28AAA Customs Act, 1962. The provision provides for recovery of duties in cases where an instrument issued to a person has been obtained by him by means of collusion; or (b) wilful mis-statement; or (c) suppression of facts.
The division bench of Justices Yashwant Varma and Ravinder Dudeja was dealing with three petitions challenging the action initiated under Section 108 of the Customs Act by the Centre, against the Petitioners, exporters of 'handcrafted articles of stone'.
The Telangana High Court has held that the loss of fixed deposit investments by an assessee does not qualify as a 'trading loss' for the purposes of claiming deduction from income under Section 28 of the Income Tax Act, 1961.
The division bench of Chief Justice Alok Aradhe and Justice Sreenivas Rao agreed with the Revenue, stating, “the principles laid down in the above said judgments are not applicable to the present facts and circumstances of the case on the ground that the deposits made by the assessee were in the nature of fixed deposit investments.”
The Telangana High Court has held that the benefit of exemption under Section 11 of the Income Tax Act, 1961, can be denied only on income from such investments made by charitable or religious institutions, which are in violation of Section 13(1)(d) of the Act.
The Delhi High Court has made it clear that neither Section 160 nor Section 87 of the Central Goods and Services Tax Act, 2017 enable the Department to issue notice in the name of an entity which ceased to exist post amalgamation.
The Delhi High Court has held that an audit report determining liability towards tax dues is not a notice or an order of determination as contemplated under Section 106(1) of the Finance Act, 2013.
A division bench of Justices Vibhu Bakhru and Swarana Kanta Sharma held, “…for the said exception to apply, it would be necessary that an order of determination under Section 72, Section 73 or Section 73A of the 1994 Act had been issued. Clearly, an audit report is not an order of determination under either of the aforesaid sections, as mentioned in the opening sentence of Section 106 (1) of the 2013 Act.”
The Gauhati High Court has dismissed a challenge to an order under Section 148A(d) of the Income Tax Act, 1961, deeming the Petitioners' case fit for issuance of notice for escapement of income assessment under Section 148.
In doing so, it held that the order cannot be faulted merely because the alleged bogus transactions, whose existence the Petitioners (X and Y) did not deny in their reply, were perceived to be that of sale instead of purchase.
The Delhi High Court recently declared that Telecommunications Consultants India Limited, a central public sector undertaking which secured a Project floated by BSNL for laying down Optical Fibre Cable Network, is exempt from service tax since the service is in the nature of setting up a civil infrastructure so as to benefit the defence forces in having a better communication network.
A division bench of Justices Yashwant Varma and Dharmesh Sharma observed, “The said services are clearly exempted from imposition of services tax for the ultimate beneficiary being the Government of India.”
The Supreme Court ruled that the 'subsequent purchaser' of an imported motor car cannot be called an 'importer' to attract the liability under the Customs Act, 1962 to pay customs duty on the import of the vehicle.
The bench comprising Justice BV Nagarathna and Justice N Kotiswar Singh heard the appeal preferred by the subsequent purchaser of a Porsche Car against the High Court's decision upholding the demand of custom duty of ₹17,92,847 from the appellant along with other individuals on the allegation of misdeclaration of the car's model, tampering with its chassis number, and undervaluation to evade customs duty.
Foreign National Wearing Personal Jewellery To India Not Subject To Import Duty: Delhi High Court
The Delhi High Court has held that the jewellery worn to India by a foreign national is not subject to customs duty.
A division bench of Justices Yashwant Varma and Ravinder Dudeja thus declared as illegal the action of the Customs Department, confiscating a Thai national's gold chain and kara.
It observed, “In the present case also, petitioner is a foreign national, who brought a chain and a kara by wearing them on his body while arriving from Bangkok. The same was not brought in a concealed manner…We accordingly hold that the order of confiscation, customs duty and the penalty imposed is without any legal foundation.”
The Telangana High Court recently set aside Moosarambagh RTO's direction imposing 2% additional tax on a resident's purchase of a Mahindra XUV 700 car by labelling it to be his 'second vehicle'. As per the Telangana Motor Vehicles Taxation Act, 1963, vehicles that cost over Rs 20 lakh will be charged 18%. A second vehicle purchased in the name of the owner will be charged an additional 2% tax.
Justice Nagesh Bheemapaka clarified that the additional tax on a second vehicle is applicable only if an individual owns two vehicles at the time of registration of the new vehicle (not at the time of its purchase). It observed, “petitioner annexed the copy of screenshot evidencing transfer of [first] vehicle to a third party as material papers. Hence, it can safely be said that tax [on new vehicle] should be levied at 18% only.”
The Kerala High Court stated that the provisions of the Foreign Trade Policy cannot by itself authorise the levy of interest under Section 28AA of the Foreign Trade (Development and Regulation) Act, 1992, as such levy must be supported by plenary legislation.
The Bench of Justice Gopinath P. was considering a case where the assessee challenged the interest imposed upon him under the provisions of Section 28AA of the Customs Act, 1962 on the amounts repaid by the assessee on the assessee being found ineligible for the benefit of the Scheme introduced by the Foreign Trade Policy.
The Kerala High Court stated that loss in derivatives is not a speculative transaction and can be set off against business income of the assessee. Further, this is not a case where Section 73 of Income Tax Act is attracted since it deals with losses in speculation business.
The Bench of Justice A.K. Jayasankaran Nambiar observed that “……..a loss in the derivative business would consequently be a business loss for the purposes of Section 72, and a set off of such business loss would have to be permitted against profits and gains of business as computed in terms of the I.T. Act……..”
"Personal Jewellery" Of Person Coming To India Not Subjected To Customs Duty: Delhi High Court
The Delhi High Court recently granted relief to a woman whose over 200 gm gold jewellery was confiscated by the Customs on her return from Dubai.
In doing so, a division bench of Justices Yashwant Varma and Ravinder Dudeja held that “personal jewellery” which is not found to have been acquired on an overseas trip and was always a “used personal effect” of the passenger would not be subject to duty under the Baggage Rules, 2016.
The Allahabad High Court has upheld the finding of the Income Tax Appellate Tribunal and Commissioner of Income Tax (Appeals) that when an agreement between parties specifies a direct transfer of money, doing so indirectly by keeping the funds in a distinct account before sending them to the final account, does not place the money under the definition of 'unexplained money' as per Section 69A of the Income Tax Act, 1961.
“The CIT(A) and the Tribunal were justified in coming to the conclusion that only on account of purported infraction of the Agreement between the FRB and the assessee, without there being any dispute regarding the amount collected by the assessee which, in turn, has been deposited with the FRB, the deposits in the bank account of assessee cannot be termed as unexplained cash deposits by the assessee,” held Chief Justice Arun Bhansali and Justice Vikas Budhwar.
The Delhi High Court has held that mobile/ telecommunication towers are movable properties, eligible for availing input tax credit under the Central Goods and Services Tax Act, 2017.
A division bench of Justices Yashwant Varma and Girish Kathpalia further held that telecom towers fall outside the scope of Section 17(5) of the CGST Act which sets out various goods and services which are not liable to be taken into consideration for the purposes of availing input tax credit.
The Supreme Court has held that pure coconut oil, packaged and sold in small quantities ranging from 5 ml to 2 litres, would be classifiable as 'Edible oil' for the purposes of the Central Excise Tariff Act, 1985. It will be classifiable as "hair oil" if it is packaged and sold as a cosmetic.
"we are of the opinion that pure coconut oil sold in small quantities as 'edible oil' would be classifiable under Heading 1513 in Section III-Chapter 15 of the First Schedule to the Central Excise Tariff Act, 1985, unless the packaging thereof satisfies all the requirements set out in Chapter Note 3 in Section VI-Chapter 33 of the First Schedule to the Central Excise Tariff Act, 1985, read with the General/Explanatory Notes under the corresponding Chapter Note 3 in Chapter 33 of the Harmonized System of Nomenclature, whereupon it would be classifiable as 'hair oil' under Heading 3305 in Section VI- Chapter 33 thereof," the Court held.
The Delhi High Court has held that under the Direct Tax Vivad Se Vishwas Act, 2020, an Assessee is entitled to confine the settlement of disputes which were subject matter of its appeal, and exclude the disputes which were subject matter of the Revenue's appeal for the same assessment year.
It thus allowed a real estate company's plea against the certificate issued by Commissioner of Income Tax, whereby the declaration furnished by the Assessee under Section 3 of the DTVSV Act was modified to include settlement of certain disputes that were not the subject matter of appeal preferred by the Assessee.
A division bench of Justices Vibhu Bakhru and Swarana Kanta Sharma cited MUFG Bank Ltd. v. Commissioner of Income Tax 2 & Anr. (2022) whereby the Delhi High Court had held that “Even assuming that the DTVSV Act is a taxing statute, there is no restriction on an assessee to choose an appeal to be settled under the DTVSV Act as Section 2(1)(j) uses the words “any appeal” which even on a literal interpretation would mean any one or more appeals.”
The Allahabad High Court has held that an assesse claiming refund of excess TDS (tax deduction at source) is not required to fill Form 26B under the Income Tax Rules once Form 5 of the Vivad Se Vishwas Act, 2020 has been issued to them.
“A perusal of the Rules would reveal that Form 26B is required to filled up if the assessee claims refund paid under Chapter XXVII-B of the Act, 1961. The Stage of requirement of filling up the Form 26B was long over in the year 2008-09 itself and the present refund was being sought by the petitioner in terms of the provisions of the VSV Act, 2020, which did not require filling up any form, as claimed by the respondents, and as such, the demand made has no sanction in law”, held Chief Justice Arun Bhansali and Justice Kshitij Shailendra.
The Delhi High Court has held that the supply of helicopters by Pawan Hans Ltd. to the Andaman & Nicobar Islands administration, under an agreement executed in the year 2003, is not exigible to tax under the Central Sales Tax Act, 1956.
A division bench of Justices Yashwant Varma and Ravinder Dudeja reasoned that the agreement did not qualify as a 'sale' between the parties. It noted that while Pawan Hans (appellant) was obliged to place a helicopter at the service of the A&N Administration, the right to operate and maintain it remained with the appellant.
The Kerala High Court stated that notice issued against a dead person is invalid and participation of legal heirs of deceased in the proceedings won't make it legal.
The Division Bench of Justices A.K. Jayasankaran Nambiar and K.V. Jayakumar observed that “the consent of the parties cannot confer jurisdiction to the assessing authority for initiation of an action which is otherwise illegal and 'non-est'.”
The Delhi High Court has reiterated that “activities such as market research, promotional activities, training or deployment of software would clearly not breach the threshold of auxiliary functions as are envisaged under the DTAA.”
In its 72-page judgment, a division bench of Justices Yashwant Varma and Ravinder Dudeja noted that the LO was only engaged in activities relating to liaising with governmental authorities, training of personnel and undertaking other peripheral functions in aid of the business of Western Union Financial Services.
“The gamut of activities which it undertook cannot thus be described to be the undertaking of an essential or significant part of the principal business activity of Western Union Financial Services,” it said.
The Delhi High Court has prima facie observed that service tax is not leviable on amounts claimed by an Assessee as commission or performance linked benefit.
A division bench of Justices Yashwant Varma and Dharmesh Sharma cited the decision of a Larger Bench of the CESTAT in Kafila Hospitality & Travels Pvt. Ltd. vs. Commr. Of S.T., Delhi (2023).
The Bombay High Court held that bonafide delay in filing Form 9A on part of trust, has to be construed as procedural lapse and shall be condoned by exercising powers u/s 119(2) of Income tax Act.
The Division Bench of Justice G S Kulkarni and Justice Advait M Sethna observed that that the jurisdictional AO completely lost sight of the fact that at the time when assessee claimed deductions towards depreciation and capital expenditure u/s 11(1) by filing the revised computation, the time limit for submission of Form 9A had lapsed, due to change of procedure.
The Delhi High Court recently accepted that the interest received on borrowed funds, which were temporarily held in interest bearing deposit, is a part of the capital cost and is required to be credited to Capital Work In Progress.
The Division Bench of Acting Chief Justice Vibhu Bakhru and Justice Swarana Kanta Sharma observed that if the interest is earned on the amounts temporarily kept in fixed deposits in course of acquisition of coal mine to set up its business, then interest earned would require to be accounted for as part of capital value of business/ asset.
The Calcutta High Court recently reiterated that when the settlement applications were filed before the date on which the Finance Act 2021 did not come into effect, then taxpayers had vested right of preferring the application in absence of any statute prohibiting the said application.
The Division Bench of Justice Harish Tandon and Justice Hiranmay Bhattacharyya reiterated that retrospective legislation cannot affect the vested rights.
![Supreme Court Annual Digest 2024 [Arbitration And Conciliation Act]](https://www.livelaw.in/h-upload/2024/12/31/500x300_579092-annual-digest-2024arbitration.webp "Supreme Court Annual Digest 2024 [Arbitration And Conciliation Act]")
