SARFAESI Act | Charge Of Secured Creditor Will Precede Over The Charge Based On Dues Of Sales Tax: Gujarat High CourtThe Gujarat High Court has reiterated that the charge of the Secured Creditor will precede over the charge of an Unsecured Creditor.The ruling came in a writ petition whereby the core issue raised was - 'Who will have the first charge over the property in question i.e....
The Gujarat High Court has reiterated that the charge of the Secured Creditor will precede over the charge of an Unsecured Creditor.
The ruling came in a writ petition whereby the core issue raised was - 'Who will have the first charge over the property in question i.e. Secured Creditor or the State / Central Government (Crowns debt) on account of non-payment of dues of the Sales Tax department?'
Therefore, the Court opined, "being the Secured Creditor, the Banks were enjoying priority in terms of Section 26 E of the SARFAESI Act."
While setting aside the order disposing of assessee's objection for re-opening of assessment pursuant to the issue of notice u/s 148 of the Income tax Act, 1961 and the consequent reassessment order, the Madras High Court held that there is no scope for re-opening of the assessment, since the reasons cited for same was inspired from change of opinion of the Assessing officer.
A Single Judge Bench of Justice C. Saravanan observed that “there is no case made out for reopening the Assessment that was completed earlier. Reopening of the Assessment was inspired from a review and a change of opinion by the subsequent officer. Such practice has been deprecated and frowned upon by the Courts.
The Karnataka High Court has held that tax exemption cannot be denied to the government's helicopter pilot trainer merely for non-furnishing goods and service tax identification numbers (GSTIN) initially.
The bench of Justice B. M. Shyam Prasad has observed that the GSTIN of the recipient organization was not furnished initially, is able to be furnished later, and demonstrates that its services of imparting training to the helicopter pilots were totally sponsored and borne by the Central Government or the State Government.
The Delhi High Court has held that the Principal Commissioner Income Tax (PCIT) wrongly invoked jurisdiction under Section 263 of the Income Tax Act and fell in error by taking a U-turn in the fourth assessment year, thereby denying the benefit of Section 80IA of the Income Tax Act.
The bench of Justice Rajiv Shakdher and Justice Girish Kathpalia has observed that no material was brought on record by the PCIT to show that merely by migration from Internet Protocol-Virtual Private Network (IP-VPN) to National Long Distance-International Long Distance (NLD-ILD) license, a new and different “undertaking” of the assessee within the meaning of Section 80IA(4)(ii) came into existence.
Employee Accepted Salary After TDS Deduction, Employer Responsible For Non-Deposit: Delhi High Court
The Delhi High Court has held that the employee accepted salary after TDS deduction and the employer is responsible for non-deposit of TDS.
The bench of Justice Rajiv Shakdher and Justice Girish Kathpalia has observed that the petitioner/employee, having accepted the salary after the deduction of income tax at source, had no further control over it in the sense that thereafter it was the duty of his employer, acting as a tax collecting agent of the revenue, to pay the deducted tax amount to the Central Government in accordance with law.
Service Tax Not Payable On Demat Or Depository Charges: CESTAT
The Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that service tax is not payable on demat or depository charges collected from sub-brokers.
The bench of Ramesh Nair (Judicial Member) and Raju (Technical Member) has observed that demat or depository charges are collected by the sub-brokers and paid to the depository participants who are authorised to levy such charges under the Depositories Act, 1996.
The Delhi High Court has held that investment in shares by a company in its Indian subsidiary is a “capital account transaction” which does not give rise to any income. Therefore, the same cannot be treated as income for taxation.
Placing reliance on the earlier decision of Delhi High Court in Nestle SA v. Assistant Commissioner of Income Tax, the bench comprising of Acting Chief Justice Manmohan and Justice Mini Pushkarna held “It is settled law that investment in shares in an Indian subsidiary cannot be treated as 'income' as the same is in the nature of “capital account transaction” not giving rise to any income.”
The Gujarat High Court has allowed the deduction under Section 80IA(4) of the Income Tax Act to the assessee engaged in developing infrastructure projects like roads, canals, etc.
The bench of Justice Bhargav D. Karia and Justice Niral R. Mehta has observed that the assessee has entered into a development of infrastructure facility agreement and not a work contract.
The Allahabad High Court has held that a minor typographical error in the e-way bill without any other material establishing an intention to evade tax will not attract a penalty under Section 129 of the Goods and Service Tax Act, 2017.
Placing reliance on the decision of Allahabad High Court in M/s. Varun Beverages Limited v. State of U.P. and 2 others, the judgment of Supreme Court in Assistant Commissioner (ST) and others v. M/s. Satyam Shivam Papers Pvt. Ltd. And another, Justice Shekhar B. Saraf held that “Upon perusal of the judgments, the principle that emerges is that the presence of mens rea for evasion of tax is a sine qua non for imposition of penalty. A typographical error in the e-way bill without any further material to substantiate the intention to evade tax should not and cannot lead to the imposition of penalty.”
The Delhi High Court has held that the use of trademarks incidental to advertisement or publicity was held as neither royalty nor fees for technical services (FTS) but as business income.
The bench of Justice Vibhu Bakhru and Justice Amit Mahajan has observed that merely because the extensive services rendered by the assessee in terms of the Strategic Oversight Services Agreements (SOSA) also included access to written knowledge, processes, and commercial information in furtherance of the services, this cannot lead to the conclusion that the fee received by the assessee was in the nature of royalty as defined under Article 12 of the DTAA.
Electricity Qualifies As Input For Grant Of CENVAT Credit: Madras High Court
The Madras High Court has held that electricity qualifies as an input for the grant of CENVAT credit under the CENVAT Credit Rules, 2002 (CCR).
The Bench of Justice Anita Sumanth and Justice R. Vijayakumar have observed that the captive power plant has been set up at substantial cost by the appellant at one of the company locations. The electricity generated has been used as 'input' only within the appellant group of companies, though at different locations. The consumption is in pari materia with the power generation, and there is no inflated claim.
The Delhi High Court has held that as a customs broker, the petitioner cannot be held liable because exporters were not traceable after the issuance of 'Let Export Orders' and the export of the goods out of the country.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that once the Importer Exporter Code (IEC) particulars as mentioned are verified from the system as maintained by the Customs, there is no requirement statutorily placed upon the Custom House Agent (CHA) to undertake an independent exercise in order to verify the details as furnished by the exporter.
Emphasizing that although Section 32 of Income tax Act, 1961 was amended by the Finance Act, 2021 wherein it was stated that 'goodwill' is not an intangible asset eligible for depreciation was applicable prospectively with effect from AY 2021-22, the Mumbai ITAT held that claim of depreciation of goodwill acquired pursuant to slump sale under a Business transfer agreement is allowable under Section 32(1).
The ITAT Member comprising of ABY T. Varkey (Judicial Member) and Amarjit Singh (Accountant Member), observed that “The goodwill in question is thus noted to be in the nature of acquired goodwill and the price paid by the appellant, irrespective of the fact that it was paid to related party, constituted the cost of acquisition in the hands of the appellant, in terms of Section 43(1) of the Act. The aforesaid material information, according to us, is sufficient to entertain the claim for depreciation on the goodwill acquired by the appellant”.
While clarifying that amount received for sale distribution or exhibition of cinematographic films would not fall under the domain of 'Royalty', the Mumbai ITAT deleted the demand/addition for non-deduction of TDS u/s 194J of the Income Tax Act, 1961.
The Member of the ITAT comprising of N. K. Choudhry (Judicial Member) and Prashant Maharishi (Accountant Member) observed that “Explanation-(2) to section 9(1)(vi) of the Act defines 'Royalty' and including certain consideration such as transfer of all or any rights (including the granting of a license) qua any copyright, literacy work or scientific work including film(s) or video tapes for using connection with Television or tapes for using in connection with Radio broadcasting by but carved out the exception by excluding 'the consideration for the sale, distribution or exhibition of cinematographic film(s)' which goes to show that consideration for the sale, distribution or exhibition of cinematographic film(s) has been excluded in the clause of 'Royalty'.”
While relying on the previous order passed by the Co-ordinate Bench under Ravindra K. Reshamwala v/s DCIT in ITA No.2648/Mum/2022, the Mumbai ITAT directed Assessing Officer to allow the claim under Section 35-AC of the Income tax Act, 1961.
The Member of the ITAT comprising Sandeep Singh Karhail (Judicial Member) and B.R. Baskaran (Accountant Member) observed that “except for statement of trustee of the society, we find that there is no positive evidence on record to substantiate the same. There is nothing on record which would show that on the date of donation, the trust did not have valid registration or its registration stood withdrawn. It was only subsequently that the approval was withdrawn. This being so, the deduction could not be denied to the assessee since AO failed to conduct any inquiry before making disallowance and except for mere allegations, he did not bring on record any fact to establish that donation given by the assessee was subsequently returned back in cash”.
Discount Linked To Subsidy Alone Can Form Part Of “Transaction Value”: Madras High Court
The Madras High Court has held that a discount linked to the subsidy alone can form part of the “transaction value.”.
The bench of Justice C. Saravanan has observed that a discount by itself will not qualify as a subsidy. However, a discount offered by a distributor, a supplier, or the manufacturer to the buyer or recipient simplicitor cannot form part of the “transaction value” unless such a discount is offered on account of the subsidy for supplies by a third party.
On finding profits and gains derived from an industrial undertaking within the meaning of an expression under section 80-IB, the Mumbai ITAT directed the Assessing Officer to allow deduction u/s 80-IB of the Income Tax Act, 1961.
The Member of the ITAT comprising of Kavitha Rajagopal (Judicial Member) and Prashant Maharishi (Accountant Member) observed that “the assessee is eligible for deduction u/s. 80IA/80IB of the Act on compensation received due to destruction of goods before sale had taken place. We find that on destruction of raw materials, the assessee was paid insurance claim, the cost of raw material is already considered as 'cost' while working out the profit of eligible undertaking and the claim tantamount to sale of raw materials. As regards to loss of goods at franchisee and the amount paid by such franchisee would also be sale of goods”.
LTCG Not Eligible For Exemption U/s 10(38) If Claimed On Bogus Scrips: Ahmedabad ITAT
On finding the scrips as non-genuine and bogus, the Ahmedabad ITAT confirms the Assessing Officer's and CIT(A)'s decision for denying the LTCG exemption under Section 10(38) of the Income Tax Act, 1961.
The Member of the ITAT comprising Suchitra Kamble (Judicial Member) observed that “The assessee's claim for LTCG cannot be simply proved on the Demat statement but the very effect of the price purchased and price sold of the said scrip determined the same. In fact, the brokers' credibility was also doubted by the Assessing Officer and for which the assessee has not given any explanation before any of the Authorities. Thus, the Assessing Officer and the CIT(A) has rightly denied the LTCG exemption under Section 10(38) of the Act to the assessee.”
Observing that the assessee has only repatriated the amounts invested in the earlier years and hence, no taxability arises during the year, the Delhi ITAT held that there is no escapement of income in the hands of assessee i.e., a Singaporean entity on repatriating Rs.203.56 Cr. arising from redemption of NCDs where Assessee did not file the ITR.
The ITAT Coram comprising Dr. B.R.R. Kumar (Accountant Member) and Astha Chandra (Judicial Member) observed that “the assessee has only repatriated the amounts invested in the earlier years and hence, no taxability arises during the year. In the case of the assessee company, neither has any income accrued or arisen or is deemed to accrue or arise under that for the assessment year 2017-18 nor any claim has been under any DTAA”.
Customs Act | Claimant Entitled To Interest On Delayed Return Of The 'Duty Drawback' : Supreme Court
The Supreme Court on Monday (February 5) observed that if there is a delay in refund of the 'duty drawback' to the claimant under the Customs Act, 1962, then the claimant would be entitled to interest in addition to the amount of drawback at the rate of interest which was fixed by the Central Government at the relevant point of time.
It was contended on behalf of the Directorate General of Foreign Trade (DGFT) that there was no provision for payment of interest on delayed refund of duty drawback.
Rejecting such contention, the Bench of Justices Abhay S. Oka and Ujjal Bhuyan while affirming the findings of the High Court, observed that the claimant would be entitled to receive the interest on the belated refund of the 'duty drawback' by the Director General of Foreign Trade (“DGFT”) under the Customs Act.
'Enemy Property' Not Exempt From Municipal Taxes As It Is Not Vested With Union Govt: Supreme Court
The Supreme Court held that the 'enemy property' vested in the possession of the Union Government-appointed 'custodian', as per the Enemy Property Act, 1968, cannot be considered a property of the Union Government to claim the exemption from the municipal taxes under Article 285 (1) of the Constitution of India.
“Union of India cannot assume ownership of the enemy properties once the said property is vested in the Custodian. This is because, there is no transfer of ownership from the owner of the enemy property to the Custodian and consequently, there is no ownership rights transferred to the Union of India. Therefore, the enemy properties which vest in the Custodian are not Union properties.”, observed Supreme Court Bench Comprising Justices B.V. Nagarathna and Ujjal Bhuyan.
The bench stated that the 'enemy property' is not entitled to claim the exemption available for the properties of the Union Government from State taxes as per Article 285.
The Indore ITAT upheld the assessment framed u/s 144 r.w.s 147 of the Income tax Act as the assessee did not cooperate during the assessment proceedings.
The Bench of Vijay Pal Rao (Judicial Member) and B.M Biyani (Accountant Member) observed that “when the transaction is very much in the name of the assessee then the form of entity is irrelevant as the assessee has not disowned the ownership of the land in question and payment of the consideration through its directors”.
The Bombay High Court has held that exgratia bonuses paid to employees over and above the eligible bonus under the Payment of Bonus Act are allowable as business expenditures.
The bench of Justice K. R. Shriram and Justice Dr. Neela Gokhale has observed that the ITAT was not right in law in holding that the liability for salary and wages arising out of the Justice Palekar Award is not allowable as expenditure in the present year but only in the year in which the agreement between the management and the employees is entered into.
The Himachal Pradesh High Court has declared the levy of water cess by the state government on hydropower generation unconstitutional.
The bench of Justice Tarlok Singh Chauhan and Justice Satyen Vaidya has observed that even the Statement of Objects and Reasons as well as the preamble of the Himachal Pradesh Water Cess on Hydropower Generation Act, 2023, do not lend any guidance to the delegate. The preamble of the Act merely states that it is an act to levy water cess on hydropower generation in the State of Himachal Pradesh, and the Statement of Objects and Reasons merely states that the objective of the Act is revenue generation. Therefore, on account of having delegated power to fix rates of impugned levy to the Government of Himachal Pradesh without any legislative policy or guidance, the Act is unconstitutional.
The Bombay High Court recently held that the interest paid on borrowed funds in respect of investment in shares of two companies was hit by Section 14A of the Act inasmuch as the dividend received on such shares did not form part of the total income
The Division Bench comprising Justice K.R. Shriram and Justice Dr. Neela Gokhale observed that “the fact remains that the dividend income from the two companies is not taxable and in that scenario the expenditure incurred on interest paid on funds borrowed in respect of investment in shares of two operating companies is hit by Section 14A of the Act inasmuch as the dividend received on such shares does not form part of the total income”.
The Bombay High Court in the Harshad Mehta Scam case, while upholding the ITAT's ruling, held that the Assessing Officer could not have assessed additions again since the CIT (A) had deleted the same in the first round of proceedings and the concerned matters have attained finality.
The bench of Justice K. R. Shriram and Justice Dr. Neela Gokhale has observed that various types of additions aggregating to the amount were made by the Assessing Officer in the original assessment proceedings, and in the appeal filed by the assessee, the CIT(A) deleted these additions. The Revenue did not prefer an appeal challenging the order of the CIT (A), and hence, the same has attained finality.
While clarifying the difference between profession and business, the Delhi ITAT reiterated that compensation received under mutual agreement for non-renewal of contract cannot form basis of addition u/s 28(ii)(e) of the Income Tax Act, 1961
The Bench of the ITAT comprising of Yogesh Kumar U.S (Judicial Member) and N.K. Billaiya (Accountant Member) reiterated while considering the decision of Supreme Court in the case of G.K. Choksi & Co. 295 ITR 376 that, “Though the phrase has been used in certain sections as "business or profession", but nowhere has the phrase been used as the "business and profession. In fact, wherever the legislature intended that the benefit of a particular provision should be for both business or profession, it has used the words "business or profession" and wherever it intended to restrict the benefit to either business or profession, then the legislature has used the word either "business" or "profession", meaning thereby that it intended to extend the benefit to either "business" or "profession", i.e., the one would not include the other.”
On finding that the assessee trust is not into the business of publishing, printing, and subscription of the books as the same is not the main object of the assessee trust, the Mumbai ITAT upheld the decision of CIT(A) that the assessee's trust is eligible for exemption u/s. 11 of Income Tax Act, 1961.
The Bench of the ITAT comprising of Kavitha Rajagopal (Judicial Member) and B R Baskaran (Accountant Member) observed while relying on the decision of Supreme Court in the case of CIT vs. Sai Publication Fund [2002] 122 Taxman 437 (SC) that, “As per the proposition laid down by the Apex Court in the above said decision, the onus of proof lies on the Revenue to prove that the assessee was “carrying on business” in respect of the impugned receipt. Even in the case of the present assessee, the dominant purpose was to spread the message based on preaching's which the above decision has held to be not a business activity. It is also observed that in the said decision the term “business” and “carrying on business” has been widely interpreted. To hold the incidental or ancillary activity to be business, the Revenue is put to strict proof.”
Following the Coordinate Bench ruling in IT(IT)A No.2845/Bang/2017, wherein it was held that the payment made by Google India to assessee was not in the nature of royalty/ FTS and consequently it could not be brought to tax in the hands of assessee, the Bangalore ITAT ruled that amount received by Google Ireland (Assessee) from Google India towards marketing & distribution rights of AdWords program is not royalty.
While clarifying the position regarding taxability of receipts from sale of online advertisement space, the Division Bench comprising of George George K (Vice President) and Laxmi Prasad Sahu (Accountant Member) reiterated that “Unless the non-resident, who is engaged in sale of online advertisement space, has a PE in India, no portion of receipts earned by it from sale of online advertisement space in India can be brought to tax in India as Act read with the relevant DTAA”.
The Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the freight or insurance amount is not included in the assessable value of the goods for charging excise duty.
The bench of Ramesh Nair (Judicial Member) and Raju (Technical Member) found no valid reason for disallowing the deduction for the freight and insurance paid inasmuch as the sales are for destination.
The Calcutta High Court has held that payments by supervisors to individual labourers, each not exceeding Rs. 20,000, cannot be disallowed under Section 40A(3) of the Income Tax Act, 1961.
The bench of Justice Surya Prakash Kesarwani and Justice Rajarshi Bharadwaj has observed that the supervisors acted as agents of the assessee to disburse the amount to individual labourers, which in no case exceeded Rs. 20,000/- for any individual labour. Therefore, in view of the circumstances prescribed in the second proviso to Section 40A(3) read with Rule 6DD(l) of the Income Tax Rules, 1962, and the provisions of the Indian Contract Act, the payment of Rs. 1,21,49,190 cannot fall within the scope of Section 40A(3) of the Act.
Service Tax Not Payable On Flats Constructed Prior To 01.07.2010, Having Less Than 12 Flats: CESTAT
The Chennai bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that there is no tax liability on the appellant for the impugned flats constructed prior to July 1, 2010, having less than 12 units or flats.
The bench of P. Dinesha (Judicial Member) and M. Ajit Kumar (Technical Member) has observed that only four residential units or flats were constructed in this case on hand, and hence, by virtue of this alone, the case of the appellant does not get covered under the definition of residential units since the definition covers any complex of a building or buildings having more than twelve residential units.
The Delhi High Court has held that the Income Tax Settlement Commission (ITSC) is entrusted with the power to grant immunity from penalty and prosecution only in cases of full and true disclosure.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that once it is seen that the disclosure was not full and truthful, the ITSC loses its jurisdiction to entertain such an application as well as to provide any immunity to the applicant from prosecution and penalties.
While deleting the enhancement made u/s 56(2)(vii)(a) of the Income Tax Act, the Mumbai ITAT explained that as per the provisions of section 56(2)(vii)(a), any sum of money, the aggregate of which exceeds Rs.50,000, received by an individual without consideration is taxable as income from other sources, and thus, u/s 56(2)(vii)(a), the incidence of taxation is at the stage of receipt of money.
The ITAT clarified that the fact that the money received as a security deposit was subsequently refunded by the assessee to the developer is not relevant for the determination of taxability under section 56(2)(vii)(a) of the Act.
The Bench of the ITAT comprising of Sandeep Singh Karhail (Judicial Member) and Prashant Maharishi (Accountant Member) observed that “under section 56(2)(vii)(a) of the Act, one of the preconditions for the taxability of the money received by the assessee is that the same should have been received without consideration, which, in our considered view, is not fulfilled in the present case, as the amount of Rs.25 lakh was received by the assessee as a security deposit towards the development agreement entered into by the assessee with the developer for development of non-agriculture land.”
Malabar 'Parota' Is Akin To 'Bread', Exigible To 5% GST: Kerala High Court
The Kerala High Court has held that Malabar 'Parota' is akin to 'bread' and is exigible at the rate of 5% GST and not 18% GST.
The bench of Justice Dinesh Kumar Singh has observed that Malabar 'Parota' and Whole Wheat Malabar Parota are exigible at the rate of 5% GST and not 18% as held by the Advance Ruling Authority and Advance Ruling Appellate Authority.
The Telangana High Court holds 'Handling of Cargo in Customs Areas Regulations, 2009' by way of which cost of living expenses were recoverable from the Customs Cargo Service Provider as ultra vires of the Customs Act, 1962.
“In the absence of any special authorization to levy cost recovery charges, appellants have no authority to impose cost recovery charges by means of a Regulation. The inevitable conclusion is that the 2009 Regulations are ultra vires the Customs Act, 1962.”
The order was passed by a division bench comprising, Chief Justice Alok Aradhe and Justice Anil Kumar Jukanti in a Writ Appeal preferred by the Central Board of Excise and Customs against the order passed by a single judge bench, wherein section 5(b) of the Customs Regulations, 2009 was held ultra vires and consequently, it was held that Custom Officers placed at the Rajiv Gandhi International Airport, Hyderabad were not entitled to recover the cost of living expenses from the Custodian of Sea Ports and Air Cargo Complexes (M/s. GMR Hyderabad International Airport Limited, Rep. by its General Manager/ R1) of the RGIA, Hyderabad.
The Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the place of provision of service for outbound shipment shall be outside India. Hence, there will be no service tax on the freight margin recovered by the applicant from the customer.
The bench of Somesh Arora (Judicial Member) and C.L. Mahar (Technical Member) has observed that the place of provision of service for transportation of goods shall be the place of destination of the goods, as per Rule 10 of the Place of Provisioning of Services Rules, 2012 (POP Rules). In the case of outbound shipment, both by aircraft and vessel, the destination of goods shall be outside India.
Receipts From CRM Services Not Taxable In India As Royalty Or FTS: ITAT
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that receipts from Customer Relationship Management (CRM) services are not taxable in India as royalty or Fee for Technical Services (FTS).
The bench of Saktijit Dey (Vice President) and Brajesh Kumar Singh (Accountant Member) has observed that on November 26, 2019, the assessee filed a revised return of income, declaring income of Rs. 2,94,91,40,080 towards the subscription fee from CRM services and Rs. 2,69,11,689 towards interest on the income tax refund. However, while computing the assessee's income in the final assessment order, the assessing Officer erroneously included the interest on the income tax refund in the receipts of CRM services.
Referring to the provision of Article 12 and 7 of the India-France DTAA which demonstrate that interest payment made by the permanent establishment to the head office are not taxable in the hands of the head office, the Mumbai ITAT held that interest received by the overseas head office (HO) from its Permanent Establishment (PE) is not taxable under beneficial provision of DTAA.
The permanent establishment concept creates a minimum threshold of business presence below which the source country doesn't attempt to tax a foreign enterprise's business income. That threshold is set in terms of a minimum physical presence in the jurisdiction.
The Allahabad High Court has held that the franchise agreement granted a non-exclusive licence rather than a transfer of the right to use goods and the transaction does not attract Value Added Tax under the Uttar Pradesh Value Added Tax Act (UPVAT Act).
The bench of Justice Shekhar B. Saraf has observed that the respondent-department had received royalty amount from various dealers under the franchise agreement and service tax has been duly paid by it on the same. If the payments have been subjected to service tax, they cannot be recharacterized as the sale of goods to levy VAT or sales tax.
Option Once Exercised For A Financial Year May Not Be Withdrawn Midway: Allahabad High Court
The Allahabad High Court has held that an option, once exercised for a financial year, may not be withdrawn midway.
The bench of Justice Saumitra Dayal Singh and Justice Donadi Ramesh has observed that the only recourse that applicant may have taken may be to apply to the jurisdictional authority to discontinue the benefit of the compounding scheme from the beginning of the next financial year, i.e., 1.4.1998. For the option to be exercised, the applicant ought to have made that application before the date i.e. 1.4.1998, and in any case before making the deposit of the compounding fee for the month of April, 1998. Having done otherwise, the applicant lost the opportunity to withdraw from the compounding scheme for the financial year 1998–99.
Excise-Duty Not Payable On Trade Discount Offered To Bulk Buyer Of CNG: CESTAT
The Mumbai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that excise duty is not payable on trade discounts offered to bulk buyers of compressed natural gas (CNG).
The bench of S.K. Mohanty (Judicial Member) and M.M. Parthiban (Technical Member) has observed that no evidence is forthcoming that the discount offered by Mahanagar Gas Ltd. (appellant-assessee) to Brihanmumbai Electric Supply and Transport (BEST) was in lieu of the infrastructural facilities extended to them. Hence, the transaction value should be considered the price at which the CNG were supplied by the appellants to BEST, and such a price should be considered the value for the purpose of assessing and discharge of central excise duty liability.
The New Delhi ITAT held that no tax is deductible at source u/s 195 on payments made to overseas logistics company for rendition of logistics services, as such services cannot be treated as fees for technical services (FTS) as defined in Explanation 2 to Section 9(1)(vii).
Finding that the sole basis of the Revenue for holding that the payment made to overseas logistics company is towards consultancy services is that as per one of the terms of contract executed between Assessee and the overseas parties, the said parties advised the Assessee on change into tariff ratio, the ITAT observed that such advice would not partake character of rendering consultancy service and that mere provision of such information would not be sufficient for treating the entire services as managerial or consultancy services.
The Delhi High Court has held that interest received by the Indian PE on deposits maintained with the Head Office/Overseas Branch is not taxable in India.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that the branch office would not partake in the character or attribute of a separate legal personality; the view as taken by the Tribunal is clearly rendered unexceptional. In any event, it would be the exception carved out in the Double Taxation Avoidance Agreement (DTAA) with respect to banking enterprises that would govern.
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.
CENVAT Credit Can Be Availed On Input Services Of Commercial And Industrial Construction: CESTAT
The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the CENVAT credit can be availed of on input services of commercial and industrial construction, fabrication and erection, manpower supply for construction, and Goods Transport Agency for construction materials, etc.
The bench of P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member) has observed that the period of dispute is from April 2008 to March 2011, and hence, the definition of “input service” as it stood prior to the amendment with effect from 1.4.2011 would apply. Rule 2(l) of the Cenvat Credit Rules, 2004 (CCR), as in force prior to April 1, 2011, defined 'input service' to mean any service used for providing an output service or used by the manufacturer in relation to the manufacture of the final product.
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 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.
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, where it was held that “Assessees would not be under a legal obligation to deduct tax at source on the profit component in the payments received by the distributors/ franchisees from the customers, or while selling/ transferring the prepaid coupons 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.
Income Tax Addition Can't Be Made On Cash Deposits During Demonetization Period: Delhi ITAT
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the department is precluded from making any addition under Section 68 of the Income Act in respect of the cash deposits made into bank accounts during the demonetization period.
The bench of Challa Nagendra Prasad (Judicial Member) and Avdhesh Kumar Mishra (Accountant Member) has observed that there cannot be any addition under Section 69A of the Income Tax Act in respect of cash deposits made by the assessee into its bank account as unexplained income in the case of the assessee.
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.
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.
Activity Of Electroplating Amounts To Manufacture, No Service Tax Payable: CESTAT
The Chandigarh Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the activity of electroplating amounts to manufacture and no service tax is payable.
The bench of S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) has observed that electroplating of electrical contacts by the appellant amounts to manufacture, and therefore they are not liable to pay service tax in view of the specific exclusion in the definition of business auxiliary service, which provides that if the process amounts to manufacture, no service tax would be liable to be paid.
Scrip Can't Be Called Penny Stock When Shares Retained For More Than 10 Years; ITAT Deletes Addition
The Mumbai Bench of Income Tax Appellate Tribunal (ITAT), while deleting the addition, held that scrip cannot be called penny stock when shares are retained for more than 10 years.
The bench of Kavitha Rajagopal (Judicial Member) and Amarjit Singh (Accountant Member) has observed that the assessee, being a SEBI-registered FPI, is engaged in investment in various companies out of which the assessee earns income and is also the only source of income for the assessee. The A.O. has failed to substantiate how the assessee is involved with Shri Naresh Jain, alleged to be an accommodation entry provider who has even otherwise not specifically mentioned the assessee as the beneficiary of accommodation entry and the scrip of International Conveyors Ltd. (ICL) as a penny stock.
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.
The New Delhi ITAT held that when the taxpayer company has utilized the service of a company outside India and payment has also been made outside India, then taxpayer company would not be liable for deduction of tax at source u/s 195.
The Bench of B.R.R. Kumar (Accountant Member) and Sudhir Kumar (Judicial Member) observed that “except in two circumstances, firstly, where the fees paid in respect of services utilized in a business carried on by the assessee outside India or secondly fee is paid for the purpose of earning any income from any source outside India, in all other cases the assessee is liable to deduct tax on the amount of technical fee paid to non-residents”.
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.
The Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that co-owners holding immovable property should be treated as independent service providers for the purpose of availing service tax exemption.
The bench of Ramesh Nair (Judicial Member) and C.L. Mahar (Technical Member) has observed the decision in the case of Sarojben Khushalchand versus Commissioner of Service Tax, in which it was held that the rent received by individuals owning property jointly cannot be clubbed to impose service tax.
The New Delhi ITAT held that the assessee is entitled to avail the benefit of carry forward of long-term capital loss on sale of residential property against long term capital gain computed on sale of commercial property.
The Bench of Saktijit Dey (Vice-President) and M. Balaganesh (Accountant Member) observed that “as on the date of the conveyance deed, the value of the property is more than Rs.45 lakhs. Moreover, there is direct evidence on record, which indicates that the assessee, in fact, had paid the consideration of Rs.45 lakhs to Mr. Rajan Chanana through cheques for purchasing the property. Therefore, the cost of acquisition, insofar as the assessee is concerned, has to be taken at Rs.45 lakhs and indexation benefit has to be given to the assessee based on the cost of acquisition of Rs.45 lakhs”.
The New Delhi ITAT held that for purposes of assessment u/s 153C, the date of recording of satisfaction of AO will be deemed date for the possession of seized documents.
The Bench of Challa Nagendra Prasad (Judicial Member) and Brajesh Kumar Singh (Accountant Member) observed that “the date of recording of the satisfaction will be the deemed date for the possession of the seized documents, which is 30.06.2022 in the present case and the date of search and six years period would be reckoned from this date”.
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 Chandigarh Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the promotion and marketing services provided by the Australian company to foreign educational universities and institutions do not fall under the category of “intermediary services,” and the assessee is eligible for the benefit of the export of services.
The bench of S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) has observed that Intermediary Service has been defined by Rule 2(f) of Place of Provision of Service Rules, 2012, which was introduced by Notification No. 28/2012-
ST dated 20.06.2012. The term “intermediary” means a broker, an agent, or any other person, by whatever name called, who arranges or facilitates a provision of service or supply of goods between two or more persons but does not include a person who provides the main service or supplies the goods on his account.
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.
The Division Bench of Justice Yashwant Varma and Justice Ravinder Dudeja observed that “If the ultimate decision to justify initiation of reassessment be based on entirely new or previously undisclosed material or reasoning, it would clearly result in deprivation of a right to effectively object to the proposed action”.
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.
Observing that the order of the NCLAT could not be communicated to the assessing authority in time, the bench comprising of Justice Saumitra Dayal Singh and Justice Donadi Ramesh held that “Clearly once the petitioner was undergoing resolution before the Interim Resolution Professional and the fact of IRP appointment was communicated to the adjudicating authority, it may not have passed the impugned order during pendency of that CIRP. The umbrella of the Insolvency and Bankruptcy Code was lifted only on 15.04.2024.”
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.
Bangalore ITAT Grants TCS Credit To IMFL Dealer Even Though License Was In Name Of Another Person
Referring to the case of Million Traders Bhopal Pvt. Ltd. vs. ADIT [ITA Nos. 124 & 125/Ind/2023], the Bangalore ITAT allowed TCS credit to the entity conducting the business of IMFL, irrespective of the fact that the license was in the name of another person.
The Division Bench of Beena Pillai (Judicial Member) and Chandra Poojari (Accountant Member) observed that “this issue was considered and allowed in favour of assessee based on the declaration given by Prashanth Shetty. The declaration given by Prashanth Shetty is verifiable by the authorities. The DR also could not establish any contrary to what has been stated in the declaration by Prashanth Shetty”.
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.
BOI Entitled Service Tax Refund Paid On Commission Charges For Credit Facility: CESTAT
The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that Bank of India is eligible for refund of service tax paid on commission charges for granting credit facility subject to verification.
The bench of Sulekha Beevi C.S. (Judicial Member) and Vasa Seshagiri Rao (Technical Member) has observed that the appellant bank has satisfied all the conditions for treating the service as an export of service, but there is a need to verify whether the service tax paid has been recovered or not from M/s. Aban Singapore Pte. Ltd. to be eligible for refund. As per the terms and conditions, M/s. Aban Singapore Pte. Ltd. has to pay the commission quarterly in advance along with applicable service tax.
Trading In Securities Is Not A Service, No Service Tax Payable: CESTAT
The Chennai Bench of Customs, Excise and Service Tax appellate Tribunal (CESTAT) has held that the no service tax payable on trading in securities is not a service.
The bench of Sulekha Beevi.C.S. (Judicial Member) and Vasa Seshagiri Rao (Technical Member) has observed that by making an investment, the appellant does not do any activity for another for consideration. The specific exclusion from the definition of'service' is given to transactions involving 'transfer of title in goods or immovable property by the way of sale'. Since trading in securities involves transfer of title in goods, the activity of 'trading in securities' cannot therefore be said to be a service.
Recently, 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 bench comprising Justices Goutam Bhaduri and Rajani Dubey 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.
While interpreting the definition of the 'Purchase Price' under the Gujarat Value Added Tax Act of 2003 (GVAT), the Supreme Court observed that the value-added tax would not be included in the definition of the purchase price.
The bench comprising Justice Abhay S Oka and Justice Augustine George Masih 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.
No Service Tax Payable On Banking Services Rendered By PNB To RBI: CESTAT
The Chandigarh Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that no service tax is payable on banking services rendered by Punjab National Bank (PNB) to the Reserve Bank of India (RBI).
The bench of S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) has observed that the appellant bank is working as an agent of RBI in the discharge of sovereign functions; therefore, whatever exemption is applicable to RBI, that should also be applicable to the appellants who are working as agents in the discharge of statutory/sovereign functions.
The New Delhi ITAT held that non uploading of Form 10B within the date prescribed under the Income tax Act would not be fatal to the claim of exemption u/s 11.
Referring to the decision of Ahmedabad Tribunal in the case of ITO Vs. Takshshila Foundation (NGO) [ITA NO. 118/Ahd/2024], the Division Bench of Anubhav Sharma (Judicial Member) and M. Balaganesh (Accountant Member) reiterated that “requirement of filing of audit report in Form 10B was only procedural requirement of law and as long as the same was made available to the AO before the completion of assessment either u/s 143(1)/ 143(3)/ 144/ 147, the substantive claim of exemption u/s 11 cannot be denied to the assessee.”
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 Division Bench of Justice G S Kulkarni and Justice Somasekhar Sundaresan observed that “merely because commitment to continue welfare measures is recited in Memorandum of Settlement (MoS) with Workmen's Union, payments would not partake character of payments made under MoS or payment required to be made under labour law, or for that matter, payment that is made "as an employer".
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. 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”.
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.
Gift Received From Non-Resident Brother Is Exempt From Taxation In India : Mumbai ITAT
Finding that Assessee has proved identity, creditworthiness and genuineness of the gift received as well as relationship with donor, the Mumbai ITAT held that gift from brother is not chargeable to tax in the hands of the assessee being relative of the donor.
Single Bench of Prashant Maharishi (Accountant Member) observed that “the amount of Rs. 20,00,000/- received by the assessee clearly shows that above amount is not the income of the assessee. Despite above information being available with the lower authorities, an addition is made to the total income of the assessee”.
Referring to the decision of the Bombay High Court in case of Sarfaraz S. Furniturewall [Writ Petion No. 4958 of 2024], the Mumbai ITAT held that rehabilitation allowance paid by the developer to its resident customer who had suffered hardship due to dispossession on account of re-development, cannot be treated as income in hands of recipient.
Single Bench of Prashant Maharishi (Accountant Member) observed that “It is undisputed fact that assessee is also receiving the hardship allowance from the developer. Thus, the amount of hardship allowance received by the assessee of Rs. 25,21,508/- is not income of the assessee”.
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”.
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.
The Delhi High Court has quashed the reassessment proceedings initiated against the Assessee on the ground that interest income on Nonconvertible 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 all the additions made by the Assessing Officer u/s 68 r/w/s 115BBE are in consonance with the Income Tax Statute, the Ahmedabad ITAT quashed the revisional exercise of power by the PCIT u/s 263.
The Division Bench of Suchitra Kamble (Judicial Member) and Narendra Prasad Sinha (Accountant Member) observed that “the PCIT has not pointed out the aspect of Assessment Order being erroneous and prejudicial to the interest of the Revenue”.
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 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 draconian and arbitrary powers thereby rendering opinion itself violative of Article 14 of the Constitution.”
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 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.
Thus, the Bench opined that the objective of the VSV Act was to address the concerns, and subserve the larger public interest of settling disputes, and therefore unburden the Government from pursuing litigation.
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)”.
50. 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 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.
Three Judge Bench of Justice Yashwant Varma, Justice Sanjeev Narula and Justice Purushaindra Kumar Kaurav observed that “where an enterprise carries on business through a PE in the other Contracting State, profits would be liable to be attributed to that PE as if it were a distinct and separate enterprise engaged in similar activities and independent of the enterprise of which it may be a part”. Therefore, the Bench stated that the activities of a PE are liable to be independently evaluated.
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 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.
The Division Bench of Justice M.S. Ramachandra Rao (Chief Justice) and Justice Satyen Vaidya observed that “The plea of the respondents that the tax dues claimed by them will have priority as a “Crown Debt”, therefore, cannot be accepted, and their action in continuing the said red entry/charge on account of dues recoverable from erstwhile management of the 1st petitioner-Company under the H.P. Vat Act, 2005, HPGST Act, 2017 and the CST Act, 1956, would be clearly illegal & arbitrary”.
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.
Payment To Non-Employed Director As Sitting Fees Is Not Salary, Hence Liable To Service Tax: CESTAT
The Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that the payment made to a non-employed director as director's sitting fees is not in the nature of salary; hence, the director's fees are liable to the levy of Service Tax.
The Bench consists of Ramesh Nair (Judicial Member) and Raju (Technical Member), considered the issue of whether the assessee is liable to pay Service Tax under reverse charge mechanism on the Directors remuneration paid to the whole time Director who are employed with the company and also non employed Directors to whom the sitting fees is paid.
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.
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.
Emphasizing that ownership is a sine qua non for availing depreciation, and roads/ bridges are public properties, the Mumbai ITAT held that an infrastructural development company which has laid down roads cannot claim depreciation over same.
The Division Bench comprising Amarjit Singh (Accountant Member) and Sandeep Singh Karhail (Judicial Member) denied depreciation claim on toll road to a company engaged in the business of infrastructure development (assessee), who, in execution of agreement with NHAI had constructed a road on BOT (build, operate and transfer) basis on land owned by the Government.
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.
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 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 that “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 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 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 Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that merely because levy of education cess was abolished does not disqualify an assessee from availing Cenvat Credit on Education Cess and Secondary & Higher Education Cess.
The Bench of Ramesh Nair (Judicial Member) and C L Mahar (Technical Member) has observed that “the abolition of Education Cess does not affect the accumulated Cenvat credit which was availed during the time when the Cenvat credit on Education Cess and Secondary & Higher Education Cess was legally available to the assessee.”
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 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 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 that “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 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”.
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 High Court also directed the Department to take on board the revised return to be filed by the Assessee.
The Division Bench of Delhi High Court comprising Justice Yashwant Varma and Justice Ravinder Dudeja observed that “where amount of tax paid or treated as paid for and on behalf of the assessee if found to be in excess of that which is chargeable, the assessee would become entitled to claim a refund”.
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.
The Division Bench of Justice Yashwant Varma and Justice Ravinder Dudeja observed that “the Customs Administration of the importing Party while initiating a procedure for verification must also specify whether it is required to undertake a verification to rule out forgery, seek minimum required information or verify the determination of origin. None of these circumstances is even remotely alluded to by the respondents while passing the impugned order”.
The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that service charge collected by a medical store in the hospital is covered under “Health Care Services” and are exempted from Service Tax.
The Bench of Binu Tamta (Judicial Member) has observed that “medical aid to the patients who are admitted in the hospital, most of the time requires urgent care and treatment without any loss of time and that is the reason for having a medical store within the vicinity of the hospital. Therefore, the in-house patients are largely dependent on the medicine shop in the hospital. Hence the allegation raised by the revenue that this amount is actually the commission which the hospital is charging from the medicine store is not correct”
Factory Closed Due To Unavoidable Circumstances Not Liable For Excise Duty: CESTAT
The Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that if a factory is closed due to unavoidable circumstances, it is not liable to pay excise duty.
The Bench of Ramesh Nair (Judicial Member) and Raju (Technical Member) has observed that “the closure of the factory was not on the choice of the assessee whereas, they were compelled to keep the factory closed as per the direction of the Gujarat Pollution Control Board. Therefore, closing of the production was beyond the control of the assessee.”
While observing that the Assessee submitted a valid Tax Residency Certificate (TRC) which is certainly statutory evidence, the Delhi ITAT granted India-Singapore DTAA benefit under Article 13(4) on long term capital gains on sale of share of an Indian company.
The Tribunal emphasized that the burden is on the Revenue Department to establish that the entity has been formed and operated in a manner that the only intention was to take DTAA benefit without there being actual intention of an economic activity.
The transaction of sale of shares of Indian company which the AO alleged to be out of tax evasion and treaty shopping was, in fact, a long-term investment decision by the Singapore based Assessee which has sufficient managerial and operational structure to run an entity based in Singapore, added the Tribunal.
The Division Bench of Dr. B.R.R. Kumar (Accountant Member) and Anubhav Sharma (Judicial Member) observed that “the burden is on the Revenue to establish that the entity has been formed and operated in a manner that the only intention was to take DTAA benefit without there being actual intention of an economic activity”.
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”.
While granting exemption on agricultural income u/s 10(1), the Delhi ITAT held that assessee being an agriculturalist, is not supposed to maintain books of account as per Sec 44AA.
Finding regularity and consistency of declared agricultural income over the years and subsequent assessment years, Single Bench of S. Rifaur Rahman (Accountant Member) observed that assessee's income from agriculture falls u/s 10(1).
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 Delhi High Court stated that two adjudication orders against one show cause notice for the same period is not permissible.
The Division Bench of Justices Yashwant Varma and Ravinder Dudeja was dealing with a case where a show-cause notice had been issued to the assessee under Section 74 of the CGST Act, 2017. This notice was duly adjudicated by the department, resulting in an order.
Proceedings U/S 130 Of UPGST Act Not Applicable If Excess Stock Is Found At Time Of Survey: Allahabad High Court
The Allahabad High Court has held that proceedings under Section 130 of the Uttar Pradesh Goods and Service Tax Act, 2017 cannot be initiated where stock is found excess at the time of survey.
Section 130 of the UPGST Act provides for confiscation of goods and penalty in cases where supply, transport of goods has been made in contravention to the provisions of the Act with the intention to evade tax. It also includes penalty when an assesee does not account for the goods on which tax is to be paid.
The Kerala High Court stated that an application for condonation of delay should focus on whether there was sufficient reason to condone the delay under Section 119(2)(B) of the Income Tax Act, rather than on the merits of the assessee's claim.
Section 119(2)(B) of the Income Tax Act, 1961 empowers CBDT to direct income tax authorities to allow any claim for exemption, deduction, refund and any other relief under the income tax act even after the expiry of the time limit to make such claim.
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.
Temporary Suspension Of Business Activity On Account Of Ill Health Does Not Warrant Cancellation Of Taxpayer's GST Registration: Delhi HC
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.
The Delhi High Court has reiterated that entities commanding high profit margins cannot be included as comparables of those working on cost-plus markup basis, to determine Arm's Length Price for international transactions.
A Division bench of Justices Yashwant Varma and Ravinder Dudeja thus ordered the exclusion of TCS E-Serve International Ltd., TCS E-Serve and Infosys BPO Limited from the list of comparables of the Appellant- Cadence Designs.
The Andhra Pradesh High Court stated that the use of chemicals as raw materials would not change their categorisation as chemicals. Therefore, they must be taxed at 8% only.
The Division Bench of Justices R. Raghunandan Rao and Harinath N. was addressing a tax dispute in which the assessee challenged the Revisional Authority's imposition of a higher tax rate of 12% on goods, instead of the 8%.
The Delhi ITAT held that transaction between assessee and its subsidiary cannot be treated as deemed loan u/s 2(22)(e), as they are current transactions that pertain to travelling & other expenses incurred by assessee on behalf of its subsidiary.
Any loan/ advance given by a closely held company to a shareholder holding 10% or more voting power is considered a dividend under Section 2(22)(e) of Income tax Act. Such income is taxable in the hands of the recipient shareholder as income from other sources.
The Bangalore ITAT deleted the disallowance made by the AO u/s 40(a)(ia) on ground of non-deduction of tax at source on sales commission paid by the assessee company/ respondent to its US based subsidiary as well as other AE on account of selling & marketing services.
The Division Bench comprising George George K (Vice-President) and Padmavathy S (Accountant Member) observed that the sales and marketing services rendered to assessee by its US based subsidiary does not fall within the ambit of FTS as defined u/s 9(1)(vi) of Income tax act or Article 12 of India-US DTAA.
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.”
Non-Disposal Of Application For Registration U/S 12AA Of IT Act Within 6 Months Doesn't Result In "Deemed Registration”: Bombay High Court
Referring to decision of CIT vs. Harshit Foundation Sehmalpur, the Bombay High Court reiterated that Sec 12AA(2) does not make any provision, to the effect that non-deciding of the registration application u/s 12AA(2) within a period of six months, brought about a deemed registration.
The Division Bench of Justice G. S. Kulkarni and Justice Firdosh P. Pooniwalla clarified that “non-disposal of application for registration by granting or refusing registration, before the expiry of six months as provided u/s 12AA(2), would not result in a deemed grant of registration”.
Residence Country Can't Deny Credit On Taxes Levied By Source Country: Mumbai ITAT Grants Treaty Benefit To Amarchand Mangaldas
The Mumbai ITAT ruled that tax credit cannot be denied in cases where the interpretation of the residence country about the applicability of a treaty provision is not the same as that of source jurisdiction about the provision and yet the source country had levied taxes directly or by way of tax withholding.
The Bench of Beena Pillai (Judicial Member) and Ratnesh Nandan Sahay (Accountant Member) clarified that that the DTAA provisions eliminate double taxation in all cases where the state of source has imposed its tax by applying to an item of income.
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”.
Bombay HC Holds 'Income From Leasing Of Property' As 'Income From Business', Says Deciding Factor Is Not Ownership But Nature Of Activity
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”.
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.
Delay In Allotting Shares No Basis To Treat Share Application Money In Hands Of Overseas AE As 'Loan': Mumbai ITAT Deletes Notional Interest
The Mumbai ITAT held that when no income had accrued from the transaction of remittance of share application money by assessee to its overseas AE, then such transaction cannot be subjected to the transfer pricing provisions
The ITAT deleted a transfer pricing addition made by the TPO on account of notional interest on share application money paid by assessee to its AEs.
Transaction between assessee/ Appellant and its AE was in the nature of remittance towards share application money and not in the nature of a loan transaction, accepted the Division Bench comprising Narendra Kumar Billaiya (Accountant Member) and Rahul Chaudhary (Judicial Member).
The Delhi ITAT deleted the addition made by AO in the absence of any supporting evidence, which was merely based on assumption and not on any material recovered during search and seizure.
The ITAT further clarified that assessee/ employee doing overtime beyond working hours may be classified as violation of banking rules, but could not form basis for addition, assuming that assessee has received commission from his manager for same.
The Bench of S. Rifaur Rahman (Accountant Member) and Sudhir Kumar (Judicial Member) observed that “the AO has made the addition on the basis that the assessee had helped Rajeev Singh Kushwaha in cash deposits by flouted the banking norms”.
The Supreme Court on Wednesday (October 16) 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.
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.
While considering a case where the Commercial tax department has flagrantly breached the statutory provisions of Sec 23(4) of the MVAT Act, the Bombay High Court ruled that assessment order passed by Commissioner of Sales tax is vitiated by total non-application of mind.
Since a strong prima facie case is made out about manipulating the date of passing the assessment order, the High Court found that such manipulation was to create an impression that the order was made within the prescribed statutory period of limitation.
The Division Bench comprising Justice M.S Sonak and Justice Jitendra Jain observed that “the impugned assessment order is required to be quashed for gross failure to comply with the statutory provisions in Section 23(4) of the MVAT Act and the principles of natural justice and fair play, non-application of mind and legal malafides”.
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”.
Notice Issued U/S 148A(B) Of Income Tax Act Against Dissolved Firm Is Not Valid: Gujarat High Court
The Gujarat High Court stated that notice issued under section 148A(b) of the Income Tax Act, 19861 against dissolved firm is not valid.
The Division Bench of Justices Bhargav D. Karia and Mauna M. Bhatt was dealing with a case where the Assessing Officer/respondent issued an impugned notice under Section 148A(b) of the Income Tax Act, 1961, in the name of the partnership firm and also passed an order under Section 148A(d) of the Income Tax Act against the same firm, which had already been dissolved.
The Delhi High Court held that when the payment of refund was delayed, the assessee automatically becomes entitled to interest u/s 42 of the DVAT Act. After the assessee succeeds in vindicating its stand that its claim for refund was correct, it would follow that that the assessee would be refunded the amount claimed and interest would be payable, added the High Court.
The High Court held so while referring to the statutory time frame constructed by Section 38(3)(a)(ii) of the DVAT Act, as per which the amount becomes refundable within the time frame stipulated u/s 38(3) of the DVAT Act.
The Division Bench comprising Justice Yashwant Varma and Justice Ravinder Dudeja observed that “Once the tax payer succeeds in upsetting the assessments framed u/s 32 & 33 of the DVAT Act, which results in vindicating its claim for refund either in part or as a whole as claimed by either furnishing a return or Form DVAT-21, interest u/s 42(1)(a) of the DVAT Act would be payable from such date as the refund was due to be paid to the tax payer”.
The Hyderabad ITAT ruled that the assessee cannot make a fresh claim of deduction under Chapter VI-A of the Income Tax Act, for the first time, in the return of income filed in response to notice issued u/s 153A, pursuant to search conducted u/s 132 of the Act, in unabated/completed assessment as on the date of search.
However, in case of abated assessments, like the AO who can make an assessment based on incriminating materials and any other information made available to him, including information furnished in return, the assessee may claim all deductions towards any income or expenditure, as if it is a first return of income and fresh assessment, added the ITAT.
The Kerala High Court held that the initiation of an enquiry or the issuance of summons under Section 70 of the CGST Act cannot be deemed to be initiation of proceedings for the purpose of Section 6(2)(b) of the CGST Act.
The Bench of Justice Gopinath P. observed that “The term 'initiation of any proceedings' is no doubt a reference to the issuance of a notice under the provisions of the CGST/SGST Acts and the initiation of an enquiry or the issuance of summons under Section 70 of the CGST/SGST Acts cannot be deemed to be initiation of proceedings for the purpose of Section 6(2)(b) of the CGST/SGST Acts.”
Allotment Letter By Developer Shall Be Treated As 'Construction' For Benefit Of Set-Off Of Capital Gains U/S 54: Kolkata ITAT
Referring to the CBDT Circular No. 872 dated Dec 16, 1993, the Kolkata ITAT clarified that allotment of flats/houses by Cooperative Societies and other Institutions whose scheme of allotment and construction are similar to Delhi Development Authority (DDA) should be treated as 'construction' for purpose of Section 54 and 54F.
While treating the allotment letter by the developer as 'construction activity', the ITAT granted the benefit of set off of capital gain to the purchaser (appellant here).
The Bench of Rajpal Yadav (Vice-President) and Rakesh Mishra (Accountant Member) observed that allotment letter given by the developer to the assessee way back in 2010 would be construed as an agreement of purchase between the developer and the assessee. Thus, the Bench held that the payments made to the developer through account payee cheque would be an agreement to sell and granted benefit of proviso appended to section 56(2)(vii)(b).
Taxpayer Can't Be Denied ITC For Merely Filing GST Form Manually If Functionality Issues Are Attributable To Dept: Bombay High Court
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.
Just because the GST ITC-02 Form was not available for filing electronically, neither the petitioner nor TDN could be faulted for not filing Form GST ITC-02 electronically on the department's common portal, added the Court.
The Division Bench of Justice M.S. Sonak and Justice Jitendra Jain therefore directed the Respondents to consider the manually filed forms by the TDN as expeditiously as possible.
Deduction U/S 80-IA Is Eligible For Industrial Undertakings Even If Infrastructural Development Is Performed With State's Nodal Agency: Calcutta HC
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 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.
The Delhi ITAT ruled that TDS u/s 194-I has no application on the franchise fee, if the franchisee/collaborator does not render any service, and claim of expenditure is nothing but sharing of revenue in accordance to the agreement undertaken by the parties. The ITAT emphasized that sharing of revenue and its impact of taxability vis-à-vis application of TDS provision depends upon the method of accounting adopted by respective assessees.
The Division Bench comprising S. Rifaur Rahman (Accountant Member) and Sudhir Pareek (Judicial Member) observed that “Whatever expenses claimed as share of surplus with the collaborator, it is only sharing of revenue and not the claim of expenditure, as per the terms of agreement, the collaborator does not render any service to the assessee”.
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.
The Division Bench comprising Justice M.S. Sonak and Justice Jitendra Jain observed that the respondent by misconceived construction of Section 27A of the Customs Act, cannot avoid payment of interest at the rate of 6% per annum, having retained and utilised the amount which was ultimately found to be refundable to the petitioner.
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 Division Bench comprising of Justice Yashwant Varma and Justice Ravinder Dudeja observed that the petitioner is entitled for grant of duty drawback and its bank account could not be frozen by Customs authority, once export proceeds were realized within the stipulated period as prescribed under FEMA.
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 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.
The Mumbai ITAT held that capital reserve arising on account of amalgamation is a capital receipt and hence cannot be taxed as a benefit or perquisite arising from business u/s 28(iv).
Pointing that the assessee was the ultimate holding company of the merged entity and in the whole process, does not gain or lose anything, the Bench of Prashant Maharishi (Accountant Member) and Sandeep Singh Karhail (Judicial Member) observed that there is absolutely no benefit or perquisite arising out of the scheme of amalgamation.
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.”
No Service Tax Can Be Levied On Rental Agreements In Name Of Individual Partners For Jointly Owned Property: CESTAT
The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that rental agreements in the name of an individual partner regarding property jointly held by them are not liable to service tax.
The Bench of Dr. Rachna Gupta (Judicial Member) and Hemambika R. Priya (Technical Member) has observed that “post 01.07.2012, the firm was not functional, and the rental agreements are in the name of the individual partner, with regard to the property held by them jointly. So, there cannot be a case of service to oneself. Hence, they are not liable to service tax.”
Explained| Why Supreme Court Allowed Benefit Of TOLA In Extending Timelimits For Issuing Income Tax Reassessment Notices
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 bench comprising Chief Justice of India DY Chandrachud, Justice JB Pardiwala and Manoj Misra had held that “if the legislative intention is clear and the language is unambiguous, full effect must be given to the legislative intention by reading the notification as applying not only to the incomplete assessments but also to assessments that had reached finality because of lapse of the earlier prescribed period.”
Absence Of Controlling Interest Renders Sale Of Shares By Spanish Entity Not Taxable In India As Per Indo-Spain DTAA: Mumbai ITAT
The Mumbai ITAT held that capital gain arising out of transfer of shares of an Indian entity cannot be taxed at hands of foreign entity in India, if foreign entity has less than 10% shareholding in such Indian entity.
The ITAT held so while referring to UN Model Convention commentary, which states that the provisions of Article 14(4) come into effect to prevent the case of indirect transfer of ownership of immovable property by transfer of shares owning these properties.
The Bench of Padmavathy S (Accountant Member) and Sunil Kumar Singh (Judicial Member) clarified that capital gain in hands of Spanish company (assessee/ appellant) from sale of shares of IMI Investments (Indian company) cannot be taxed in India, since assessee has no controlling interest in said Indian company.
Additions Made Under Income Tax Act Have No Bearing Under Black Money Act: Mumbai ITAT
The Mumbai ITAT held that any addition made as undisclosed foreign income and asset under the Black Money Act (BMA), shall not be repeated under the Income Tax Act. However, since there is no corresponding provision under the Income tax Act, the ITAT clarified that additions made under the Income tax Act have no bearing under the BMA.
Single Third Member Bench comprising Narendra Kumar Billaiya (Accountant Member) observed that the entire BMA revolves around taxing only 'undisclosed asset located outside India' and 'undisclosed foreign income and asset', whereas under the Income Tax Act, all income are taxable unless specifically exempt from tax or not included in taxable income.
Taxpayer Can't Claim Credit Against Tax Payable In India If He Has Not Paid Any Tax In Country Where He Sourced Income: Mumbai ITAT
While observing that the assessee is a resident of India in terms of Article 4(2)(a) of the Indo-US DTAA, the Mumbai ITAT held that all his income derived in the USA, is chargeable to tax in India by virtue of the provisions of section 5 of the Income tax Act.
Since the income tax return filed by the assessee in the USA, does not show that he is paid any tax in the USA, therefore, the ITAT clarified that in the absence of any payment of tax in the country of source, no credit is available against tax payable by the assessee in India.
The Bench of Prashant Maharishi (Accountant Member) and Shrianikesh Banerjee (Judicial Member) observed that “assessee is staying in India for the current year for more than 183 days and therefore according to the domestic law, he is considered to be the resident of India”.
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 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 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 Madras High Court ruled that any amount received in advance for services should be treated as the income of the assessee and is, therefore, subject to income tax.
The Division Bench of Justices R. Suresh Kumar and C. Saravanan observed that “if “Accounting Standards” are properly applied by an assessee, the “accounting income” for the payment of income tax will be available. However, if an assessee fails to adopt “Accounting Standards” properly for computation of income, the discretion is vested with the Assessing Officer under Section 145(3) of the Income Tax Act, 1961.”
The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that even if service tax is paid under reverse charge mechanism by service recipient, it is the service recipient who can take credit of tax so paid and not service provider.
The Bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) has observed that “……so long as the service tax is paid on a taxable service and such taxable service is an input service, the service recipient can take credit. There is no provision for the service provider to take credit of the service tax paid on its output service……..”
The Delhi High Court on Thursday ordered the GST Department to refund the service tax paid by certain importers on ocean freight (transportation of goods by vessel).
In doing so, a division bench Justices Yashwant Varma and Dharmesh Sharma cited the Gujarat High Court's judgment in M/s Sal Steel Ltd. & Anr. vs. Union of India (2019) where it was declared that levy of service tax on ocean freight is unconstitutional.
The Gujarat High Court had rendered the decision in connection with 2017 amendments to the Customs Act, 1962 and its decision is pending challenge before the Supreme Court but, no interim orders have yet been passed staying the operation of the judgment.
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 helicopter was to be maintained, flown and operated by the appellant. The appellant was required to ensure that the requirements of the A & N Administration were duly met. However, at no point of time was the helicopter placed in the hands of the latter to be operated as it thought fit,” the Court said.
The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that discounts/incentives received from manufacturer and passed on to customers during car sales constitute sale of goods, not service, hence not liable to service tax.
The Bench of Binu Tamta (Judicial Member) and Rajeev Tandon (Technical Member) has observed that “sale/target incentive/incentive on sale of vehicles and incentive on sale of spare parts received by assessee, could not be considered as rendering of business auxiliary service.”
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.
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.
However, this accounting treatment is or will be applicable only if the nature of the asset is such that requires time for construction or for putting it in use, added the Bench.
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 assessee filed Form 9A though belatedly for reasons not attributable to the assessee, and the Jurisdictional AO wrongly linked up such issue of belated filing of Form 9A with disallowance of the assessees claim of deduction towards depreciation and capital expenditure u/s 11(1), added the Bench.